Teaching English and Minting Money

Image: Michael Nemeth for Forbes

Luis von Ahn and Severin Hacker are after the 99.99999 percent of daily content that remains untranslated

As stars fill the night sky in Veracruz, Mexico, 23-year-old Uziel Alejandro López kicks back at home to play on his Android smartphone. His thumbs breeze over the brightly coloured screen, but this is no casual game. He’s learning English on Duolingo, a free mobile app created 1,700 miles away by a technology startup in Pittsburgh, Pennsylvania. López has passed multiple lessons in one month, faster than his attempts on more than 10 other language-learning apps.

The brain behind Duolingo is Luis von Ahn, 34, a boyish-faced computer science professor at Carnegie Mellon University. Sometimes called the father of crowdsourcing, he’s best known for inventing the CAPTCHA, the squiggly word or words you have to type in on password-protected forms. Google bought his company, reCAPTCHA, and uses your free labour to verify hundreds of millions of words from books that its scanners can’t parse.

A similar kind of crowdsourcing keeps Duolingo in business, in a more sustainable way than an educational non-profit like Khan Academy ever could. Once young López takes a few language lessons on the app, he and perhaps 30 other Duolingo users hone their skills by translating some text on a Wikipedia-style editing page. If they find themselves deciphering a list of ‘The 35 Gayest Moments From Duck Dynasty’, they’ve stumbled upon an article from news site BuzzFeed.

In the autumn of 2013, BuzzFeed and CNN started paying Duolingo to translate several dozen articles a day into Spanish and other languages. Von Ahn and his 29-year-old co-founder, Severin Hacker, say partnerships with more publications are imminent. Users such as López are translating around 600 articles a day, but only 10 percent are revenue-generating for Duolingo, so there’s plenty of room for revenue growth.

Some contend the model is unethical. “The students are working for an abstract value, which is knowledge,” says Michael Thomsen, a multilingual tech writer who got into a heated email exchange with Duolingo after blogging about how its system was exploitative. “There are a lot of services like this from Silicon Valley that come on this plume of idealistic rhetoric, sitting on top of what is basically a proft-and-loss scheme.”

Duolingo, like its client BuzzFeed and other internet businesses like Facebook, is in the business of scale. It needs tens of millions of users to make the same amount of money that an older, traditional competitor might with much smaller numbers. It’s a “cheap and ineffective version” of language learning, says Thomsen.

Hacker can barely contain himself at this suggestion. “Free education will really change the world,” he says. “If we achieve that, then all the other issues are... I don’t know, seem not to matter to me.”

Still, the founders thought “significantly” about making Duolingo a non-profit like Khan Academy in the early days, before Von Ahn realised that wouldn’t be sustainable. “You have to somehow continue convincing billionaires to fund you forever,” he says at a hotel in Mountain View, California. (Khan Academy has raised more than $15 million from the likes of the Gates Foundation and Google.)

Duolingo expects not only to cover its $500,000 in monthly costs but also to book its first profit this year. With around 8 million monthly active users and growing, it’s now the most popular language app, with six languages on offer and Russian, Japanese and Chinese on the way. The startup cites an independent study showing that its users can learn the equivalent of the first college semester of Spanish in 34 hours compared with 55 hours with Rosetta Stone. In December, Apple named it App of the Year 2013.

The company was born after Von Ahn sold reCAPTCHA to Google in 2009 for more than $25 million and started thinking about bigger problems to solve. Hacker was Von Ahn’s PhD student, and it was in their weekly half-hour meetings in Von Ahn’s office between 2009 and 2011 that the two discussed the creation of a project around language.

Von Ahn was born and raised in Guatemala and saw first hand how expensive it was to learn English, while Hacker’s Swiss childhood featured food labels and road signs in four languages. They went on to raise $18.3 million from venture capitalists like Union Square Ventures and Hollywood actor Ashton Kutcher.

“There are 1.2 billion people learning a foreign language in the world,” says Von Ahn. Some 800 million want to learn English so they can get a better job, and it annoys him that many have to shell out $125 each for those yellow boxes of Rosetta Stone software. Free web-based alternatives like Duolingo, Anki and Memrise have already been putting the 22-year-old Rosetta Stone under pressure. Rosetta Stone is now forecasting a third consecutive annual loss, and its shares have halved since its 2009 IPO.
BuzzFeed executive Dao Nguyen says Duolingo’s crowdsourced translations are good but could be better, something the two are working on by passing corrections back to train Duolingo’s algorithm. The translations cost much less than average rates: Five cents a word for inferior ones to 20 cents a word for the best.

Duolingo is now talking with wireless carriers in Latin America about preinstalling the app on new smartphones, and one of the largest translation firms is interested in a partnership deal. “I’m impressed,” says Mark Lancaster, founder of SDL, which grosses $330 million from selling translation software and human services. “The problem isn’t that there’s not enough work to go around,” he says. One study claims that language service providers work on only .000000687 percent of the content created every day. “It’s how efficiently the work can be done.”

Von Ahn has already received buyout offers from big players and said no. Having bought his last two companies, Google seems a likely contender. An acquirer might load the app with ads or translation requests from Nike or Pepsi. Von Ahn is okay with that, as long as the app remains free. If that makes him a capitalist, he’s okay with that, too. “I’m not against capitalism.”