how-does-grammarly-make-money

How Does Grammarly Make Money? Grammarly Business Model In A Nutshell

Grammarly leverages on a freemium service, where free users are prompted to switch to a paid subscription. Grammarly makes money by selling premium plans starting at $11.66 to $29.95 per month. The company also makes money by selling human proofreading services to its paid users.

Grammarly bootstrapping story, organizational structure

Developed in 2009 by Ukrainians Alex Shevchenko, Max Lytvyn, and Dmytro Lider. The company grew quickly also thanks to its viral engine and its freemium offering.

And it was pretty much bootstrapped until 2017 when it got a venture funding for $110 million to further scale its operations. 

According to an interview for Voice of America, reported by Forum Daily Grammarly founders reported:

We saw a lot of plagiarism and wanted to help teachers and other students who honestly wrote their work to solve this problem.

Therefore, they wanted to solve a problem of plagiarism, and indeed we might argue that one of the key value propositions of Grammarly is its plagiarism checker able to check (according to the company) to billions of pages in a few seconds.

According to LinkedIn, the company has 302 employees as of October 2019, mostly distributed across the US and the Ukraine offices. According to LinkedIn, about 40% of the employees work in Engineering and IT which shows a strong focus on the product.

And around 32% of employees work in Sales and Marketing roles.

Grammarly culture, mission, vision, and core values

grammarly-mission

Source: Grammarly

Grammarly’s vision is to build a comprehensive communication assistant.
As pointed out on Grammarly website:

All Grammarlians care deeply about improving our users’ lives through better communication. We take personal responsibility for achieving aggressive goals both individually and collectively. Additionally, we all share a set of core EAGER values, which ensure that you are joining a highly effective, collaborative team.

Therefore the mission is to improve our users’ lives through better communication.
From its mission and vision Grammarly articulated its core values:
  • E: ethical
  • A: adaptable
  • G: gritty
  • E: empathetic
  • R: remarkable
grammarly-core-values
Source: Grammarly

From these values, the objective is to offer a payoff of Grammarly users defined as to accelerate personal and professional growth.

Grammarly monetization strategy

grammarly-plans

Grammarly leverages on a freemium model where its browser extension is offered for free to users. Those users are prompted to upgrade to the premium version to get more value. For instance, Grammarly provides a side-by-side comparison of a free and premium account:

grammarly-freemium-model

Advanced features, like grammar, context and sentence structure; vocabulary enhancement suggestions; genre-specific writing style checks and plagiarism checker detectors are offered for the premium account which starts at $11.66 per month, up to $29.95 per month!

Grammarly also offers a human proofreading services that allow paying users to get additional services, by choosing three modes of delivery (24 hours, 3 hours, 30 minutes).

As a company’s spokesman explained to TechCrunch

We don’t sell or rent user data to third parties for any reason, including for them to deliver their ads. Period. Our business model is a freemium model, in which we offer a free version of our product as well as Grammarly Premium and Grammarly Business, which are paid upgrades. The only way Grammarly makes money is through its subscriptions.

Grammarly marketing strategy

As pointed out on marketingland.com Grammarly was ranked number one on YouTube first-annual list of top TrueView, based on the action taken by users on the Grammarly ads. This shows how good is Grammarly at communicating in a very short time its payoff to its potential users:

Grammarly viral growth

According to Owler, Grammarly might make around $7.8 million per year. Its viral growth leverages on a set of free tools:

Grammarly for Mac

grammarly-for-mac

With its app for Mac, Grammarly makes it easy to use its editor to Apple users.

Grammarly for Microsoft

grammarly-for-mac

With its app for Microsoft, Grammarly makes it easy to use its editor to PC users.

The Grammarly Keyboard

grammarly-keyboard

With its app for mobile, Grammarly makes it easy to use its editor to mobile users

Grammarly chrome extension

The Grammarly Chrome extension is also a key tool that allowed the company to grow quickly its free users base. Thanks to a seamless UX and a set of prompts Grammarly managed to reach profitability and become cash-flow positive.

A glance at Grammarly technolgy-driven approach

As a company that automates most of the processes related to grammar and sentence structure. Grammarly has to leverage on several technologies to make this process work.

For instance, what might seem a very simple task, like splitting sentences has to have natural language capabilities. As the Grammarly engineering team explains:

At Grammarly, we use a lot of off-the-shelf core NLP technologies to help us make a little bit of sense in the mess that is natural language texts (English in particular). The issue with all these technologies is that even small errors in their output are often multiplied by the downstream algorithms. So, when a sophisticated mistake-detection algorithm is supposed to work on individual sentences, but it receives a fragment of a sentence or a couple merged together, it may find all sorts of funny things inside.

The major strength of the company is how they’ve been able to release these at a massive scale. In 2019 Grammarly reported over 20 million users, which might make also a simple NLP task quite complex.

Another key element to understand how technology-supported Grammarly growth is its ability to make its browser extension work at scale.

grammarly-browser-extension

The browser extension reported over 10 million users as of October 2019. And it has been a key element to enable Grammarly viral growth. Indeed, the freemium is most of all a marketing tool that should enable companies to cheaply acquire leads that can be converted in paying customers.

In Grammarly’s case, a browser expension might seem a simple thing, yet as the Grammarly engineering team specified:

These extensions may look easy on the outside because they are low profile and easy to use. But it is actually a complex product supported by a full team of engineers. We have been developing and perfecting it for 6 years.

That is why the engineering team has implemented a branching model to reduce manual tasks, which as you can imagine, on a user base of 20 million might be impossible to keep up for a company with a few hundreds of employees of which only about 24 people in support, according to LinkedIn:

extension-branching-model

Grammarly branching model to eliminate as much as possible manual actions, architectured by the engineering team (Source: Grammarly Engineering Blog) as an example of how tech helps to support Grammarly growth channels. In these cases, technology and engineering are the most important marketers, as they enable a free product to scale, thus making the brand resonate across millions of users across the world.  

What’s a Grammarly competitive advantage? A platform-agnostic AI tool

A competitive advantage is not easy to identify and it is often related to multiple factors. In this paragraph, we’re focusing on one particular competitive advantage, but it is important to highlight this isn’t the only one that makes Grammarly tick so far.

Hoover, Grammarly’s CEO explained to TechCrunch what one of the key advantages of Grammarly is its “platform-agnostic approach.” In short, Grammarly focuses on being anywhere the user needs to be.

This is a great advantage in an era where competition for AI tools is increasing substantially and also large tech companies like Google are providing automation tools for writing. However, those are still closed platforms with their own business logic. Grammarly goes beyond that.

Key takeaways on Grammarly business models

  • Grammarly leverages on a freemium service model. Its product is designed for virality as it offers a set of free tools, mostly compatibles with any device.
  • Thanks to its AI and seamless experience, free users are turned in paying customers. Prompts within the product make it easy for free users to understand the benefits of having more advanced features through the paid version.
  • Grammarly’s vision is to build a comprehensive communication assistant which payoff for its users is to grow professionally. Grammarly’s core values can be summarised in the “EAGER” framework.
  • Grammarly is one of the best examples of how a freemium model, well-engineered, can bring massive growth and virality for an organization.
  • It is important to remark that a freemium model is not a size fits all and it’s not a business model but a growth tool. However, when you’re able to design a great product, a seamless experience, a simplified and gamified UX, and a clear payoff for paying customers, a freemium becomes a powerful weapon to grow your business.
  • This also requires substantial investments in technology and engineering to require the platform to work at scale to sustain its growth.
  • Thus, Grammarly business model teaches us how a freemium can help sustain the growth of an organization. But it’s also a cost center as it requires substantial engineering resources to sustain and maintain it at scale.
  • That is why it’s important to understand the economics of the paying subscribers and how to make freemium work for your organization.

Other resources: 

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Published by

Gennaro Cuofano

Gennaro is the creator of FourWeekMBA which he brought to reach about a million business students, professionals, and entrepreneurs in 2019 alone | Gennaro is also Head of Business Development for a high-tech startup, which he helped grow at double-digit rate and become profitable | Gennaro is an International MBA with emphasis on Corporate Finance | Subscribe to the FourWeekMBA Newsletter | Or Get in touch with Gennaro here

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