Language-learning software maker Duolingo could get a profit boost by bypassing Apple and Google mobile app stores. but it isn't rushing to do so. That's because the company doesn't want to do anything that harms the user experience, an executive says.
In an interview with Investor's Business Daily, Duolingo Chief Financial Officer Matthew Skaruppa said the company is experimenting with alternative payment methods but will take its time to see what works best.
"We are focused on having a great user experience. And that includes how users go from free to paid," he said. Duolingo offers both a free, ad-supported service as well as paid subscription tiers.
"We want to make sure that it's still a seamless experience and that it's still enjoyable," Skaruppa said of using alternative payment methods.
A court ruling in a lawsuit brought by Epic Games against Apple opened the door for software developers to bypass app stores and avoid their commission fees.
"We suspect that there's some friction that's introduced (by skipping the app stores), but you get a nice gross profit increase from paying less," Skaruppa said. But Duolingo will need to balance the economics with the user experience, he said.
The app stores have a built-in advantage because they already have a user's payment information and it's very easy to make a purchase without leaving the app. But the possibility of avoiding Apple's 30% commission on purchases in its App Store gives developers an incentive to try alternative payment methods.
Duolingo Stock Is On Two IBD Lists
On the stock market today, Duolingo stock dropped 2.4% to close at 486.02. It has sold off for the past three trading sessions.
On Tuesday, Morgan Stanley analyst Nathan Feather reiterated his overweight, or buy, rating on Duolingo stock with a price target of 515. In a client note, he said the market underappreciates Duolingo's likelihood of success.
Feather laid out a "triple-double" bull case for Duolingo to double users, double revenue per user and double profit margin.
Duolingo stock is on two IBD lists: IBD 50 and Tech Leaders.
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