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“Google announced on Thursday that it was introducing a new feature in Google Search that helps users practice speaking and improving their language skills,” explained KeyBanc.
Analysts said the Google Search language capabilities will create the overhang over the coming quarters as investors wrestle with how Google’s expanding features and countries could alter Sector Weight-rated Duolingo’s growth rate. They added that the capabilities seem similar to Duolingo.
“We see three potential risks: 1) engagement – as Google expands this product to more countries and beyond Android, this could weigh on Duolingo’s free user growth and engagement; 2) payer penetration – we could see this limiting conversion among free users and causing trade downs among paid Duolingo subscribers; 3) Duolingo Max – recall Max is the high-end tier that provides personalized feedback and chat experiences. While Google’s service does not fully replicate this, we do believe it could limit Max’s adoption and/or price,” said analysts.
The analysts concluded that while they sense this could be more headline than fundamental risk, we believe the debate will take time to resolve, and there will be further questions on how Duolingo’s Max premium tier monetizes.
