Business

Grammarly Business Model | How Does Grammarly Make Money?

Grammarly was initially a grammar checker, but today it’s a complete writing platform with many tools and techniques for making messages, documents, and posts more precise, less error-prone, and leading to improved online communication.

Founded in 2009 by Alex Shevchenko and Max Lytvyn, Grammarly has consistently quadrupled its user base year after year. There are now about 15 million active users daily, and the application has raised a record-breaking $110 million in growth equity financing. 

Grammarly currently operates in three locations: New York, San Francisco, and Kyiv. However, by creating a communication assistant that can be used holistically, the company has expanded globally.

Due to this need for effective grammar, Grammarly has become one of the most successful self-funded products on the web. 

Grammarly Business Model offers a grammar checker with a freemium product that assists millions of users with creating error-free documents, online articles, and text messages.

What Is Grammarly?

Grammarly is a company that develops technology to help its users improve their writing style and grammatical accuracy. You can access Grammarly through browser extensions, mobile apps, an online editor, and a Microsoft Word plugin.

Grammarly makes money by charging both individuals and corporations for premium subscription options. Moreover, the organization offers educational institutions exclusive pricing and human proofreading services.

Grammarly Business Model

Founded by three Ukrainians in 2009, the company has enjoyed enormous success. There are over 20 million users, and it has received over $200 million in venture capital. 

As of 2021, Grammarly employs more than 400 employees working in four office locations: San Francisco, New York, Kyiv, and Vancouver.

How Does Grammarly Work?

Grammarly is a software-as-a-service tool that aims to help users improve their writing. With Grammarly, you can perform tasks like grammar checking, spell checking, and content plagiarism detection.

Grammarly is not only powered by years of research and robust algorithms, but it’s also effortless to use and quite efficient.

As a SaaS company, Grammarly first focused on simplifying grammar checks so that writing can be creative and professional.

Additionally, Grammarly offers features that help writers improve their vocabulary, conciseness, tone, and writing clarity.

Grammarly Business Model

It is available as an online editor, a free browser extension (for Chrome, Safari, Firefox, and Edge), a desktop application (for macOS and Windows), a mobile app for iOS and Android, and a Microsoft Word add-on.

Grammarly’s products are powered by AI and cloud technologies that enable real-time grammar correction and continuous application enhancement.

The company’s technology is built on several deep machine learning and rule-based natural language processing (NLP) algorithms.

Grammarly is not an open-source project, so it does not provide details on its technical design.

Grammarly can be helpful in the following ways:

  • The free Grammarly extension automatically detects and corrects any errors or problems with writing or grammar on nearly all websites as users browse the web.
  • Grammarly is a small, easy-to-use application. Copy and paste your English text into the Grammarly editor. You will receive suggested grammar, spelling, writing styles (which vary from professional to personal writing), wordiness, and punctuation, and the program will notify you if the text contains plagiarism.
  • Grammarly not only corrects users’ English but also explains why they made the error, allowing them to make an informed decision about how to correct it.

How Does Grammarly Make Money?

Grammarly earns money by selling premium memberships to its three distinct user segments: individual users, businesses, and educational institutions. Additionally, Grammarly generates revenue by offering its human proofreading service to users, corporates, and colleges.

Grammarly began as a premium product geared toward large corporations such as colleges and corporate corporations.

Grammarly Business Model

It was not because the company was losing money even when the product was kept premium that it decided to convert the product to a freemium SAAS and expand its consumer base.

Like Dropbox and Trello, Grammarly runs on a freemium model. The main product is free, but users must pay for additional features.

When Grammarly switched to a freemium model, it was already profitable. As a result, the team could fund its growth toward a more efficient freemium model and increased customer acquisitions. 

The corporation expanded its product rapidly in all directions, ensuring that its members could use it wherever possible in a short time. Furthermore, the company raised $110 million from General Catalyst to expand its product line and customer base.

Let us understand different revenue segments of Grammarly:

Grammarly For Individuals

Using Grammarly’s free service, you can check for grammar and spelling errors, as well as for conciseness.

Those who pay a Grammarly membership fee have access to various premium features, including readability suggestions, vocabulary enhancement suggestions, genre-specific writing style tests, and a plagiarism detector that scans over 16 billion web pages.

Grammarly premium plans are priced at $11.66 per month (when billed annually), $19.98 per month (when billed quarterly), and $29.95 per month (when billed annually) (when billed monthly).

Grammarly will not reward you if you guess which plan it wants you to get.

Grammarly For Businesses

Grammarly’s business plan is designed for businesses that want to maintain a consistent brand voice and tone across all communication channels. It helps them build a style guide that all team members follow.

Grammarly business is compatible with marketing platforms such as WordPress, Facebook, Twitter, and Medium, sales tools such as LinkedIn and Salesforce, and customer service systems such as Zendesk, Freshdesk, and Zoho Desk.

Grammarly Business Model

Businesses with a team size of up to 149 members can find the business plan at:

  • Monthly payment of $12.50 per member (billed annually).
  • Monthly payment of $25 per member ( billed monthly ).

Team prices for teams with over 149 members are not published. Interested companies should contact the Grammarly team to discuss pricing for over 149 team members.

Human Proofreading Service

Grammarly’s product is widely regarded as one of the best in its field, but it will never be able to replace years of human skill.

Grammarly is unmatched in the industry when it comes to AI, but the company also offers a proofreading service for those who prefer to run their writing by a human eye.

Thus, the company offers proofreading services to individuals as well as organizations. Grammarly charges a one-time fee for its human proofreading service, determined by the length of the text and its deadline.

Grammarly for Education

Grammarly for Education is available to universities, colleges, and other educational institutions along with the Premium and Business plans.

Price of Grammarly for Education are not revealed publicly but are available upon request. Grammarly is currently working with over 1,000 education institutions.

A school, college, or university education plan provides access to a predetermined number of students. 

More than 99 percent of students polled by the firm reported that their writing grades rose. Over 70% of them also reported an increase in their overall writing confidence due to using the program.

Success Story of Grammarly

Although Grammarly started in 2009, it has its roots in the 2004 creation of MyDropbox, a plagiarism checker founded by Alex Shevchenko and Max Lytvyn.

Throughout their academic careers, the two had observed a problem that they wanted to resolve with their invention.

Their teachers had no idea that their students could download writings from the web, let alone learn about the behavior of their students.

As the internet was just getting started in Ukraine in 2000, it’d be understandable for the professors not to have known.

In 2004, MyDropbox was created because institutions had already recognized the plagiarism problem and were willing to pay for a plagiarism checking service.

MyDropbox was used by around 2 million students and 800 universities by 2007.

MyDropbox was acquired the following year by Blackboard, the world’s leading education platform. However, the founders claim the acquisition was for a relatively small sum.

The agreement included a condition mandating one of the founders to work exclusively for Blackboard for two years and prohibiting the other from working for a similar firm during that time.

Grammarly’s founders reconvened a few days after the two-year deadline to continue working on the product.

However, they avoided the mistake they made during their previous attempt.

MyDropbox met a specific educational need, but it had limited potential.

Grammarly was created to improve everyone’s writing and communication – not just expanding the total addressable market size but also diversifying it.

Some professionals, such as engineers, attorneys, consultants, salespeople, and journalists, would benefit from a second opinion.

The available resources were limited despite the glorious goal.

The founders in the early stages of Grammarly focused on two objectives: promoting the product through existing relationships with colleges and iteratively improving the product in response to customer feedback and revenue.

At the same time, they hoped to expand beyond educational institutions and eventually reach a broader audience.

Grammarly, however, was it significantly different from other available alternatives at the time?

Yes, it was.

Grammarly, unlike most solutions, addresses contextual spelling and style as well as glaring grammar and spelling errors.

Grammarly has amassed a customer base of more than 300,000 students and hundreds of universities.

With only three years into the business and serving a small niche among billions of English-speaking writers worldwide, this company made $10 million that year.

Grammarly also noticed a significant increase in consumers outside of universities and students, which caused them to rethink their marketing and product strategies.

Grammarly’s original social media approach focused on creating content for grammar geeks. 

However, they soon expanded to include content for digital professionals, such as resume writing hints and email writing tips.

The product landing page has been redesigned to emphasize the company’s position as the most accurate grammar checker. Additionally, the social proof snippet was updated from  “Trusted by 300,000 students” to “300,000+ people.”

With Microsoft Office plugins, Grammarly lowered consumer friction in 2014, enabling rapid adoption of products.

Max Lytvyn, a co-founder of Grammarly, stated at the time:

“The Grammarly team aims to provide Grammarly wherever people write rather than attracting users to the site. Our goal is to create a product that sits between the storage of an organization’s papers and the automatic verification of documents as they’re written.”

Grammatically did not begin with a freemium model, unlike many SaaS companies.

Grammarly instead chose a risk-averse, backward-looking monetization strategy.

They initially charged colleges for the service and used the proceeds to improve the product.

Despite expanding beyond academics, new customers were still required to pay $11.99 to access the site.

By the end of 2015, Grammarly had established a financial foundation for absorbing the economic costs of providing a freemium service.

Grammarly’s freemium offering was further enhanced with Chrome and Safari extensions, accelerating customer acquisition.

As with any freemium service, the goal was to familiarize users with the product and entice them to upgrade to a paying plan.

They did this by restricting access to features such as style advice and advanced grammatical checks while also reminding users what was missing every time they typed something.

In just two years, the Google Chrome extension has attracted over 8 million users. Thus, Grammarly redesigned its website in 2017 to encourage the extension to be installed immediately by new users.

Grammarly continues to recommend Chrome extensions as the first thing website visitors should do.

Throughout the years, Grammarly has prioritized eliminating consumer friction.

With Grammarly, you can write anywhere – on Microsoft Office applications like Word and Outlook, on G-Suite apps like Gmail and Google Docs, Facebook, WordPress, and almost anywhere you have internet access.

You can also download the Grammarly Keyboard Mobile App for Android or iOS, which is compatible with a wide range of other programs.

The year 2019 was a busy one for Grammarly. It has become the first unicorn startup after securing a $90 million second round at a valuation of more than $1 billion. It has grown to a daily active user base of more than 2 million users. 

Furthermore, Grammarly now employs 400 people across its four offices in Vancouver, New York, and San Francisco.

Grammarly Business Model

GRAMMARLY operates on a freemium subscription model. This is mainly used as freemium writing assistance and plagiarism checker, and it is available on all major platforms:

Grammarly Browser Extension

Grammarly’s browser extension is available for free on all the popular web browsers such as Google Chrome, Apple Safari, Microsoft Edge, and Mozilla Firefox. Grammarly assists you in creating error-free material when writing emails or uploading information to Facebook, Linked In, Twitter, and other social media networks.

Grammarly Native App

Additionally, Grammarly is available as a standalone Windows application. As a result, the drag-and-drop program is highly effective compared to other applications in this area, such as spellcheckplus, Reverso, and Whitesmoke.

Grammarly for MS Office

Grammarly Business Model | How Does Grammarly Make Money? 1

Additionally, Grammarly has launched an add-on for Microsoft Word and Outlook that reduces grammar and punctuation errors tenfold when used in conjunction with Word’s Spell check feature.

Grammarly Keyboard

Grammarly is a free predictive and correcting keyboard application available for Android and iOS smartphones. A grammar checker, a spell checker, punctuation correction, and vocabulary expansion are included in this keyboard.

Grammarly Business Model | How Does Grammarly Make Money? 2

Additionally, Grammarly serves millions of internet users with high-quality content through its  Grammarly Handbook, Facebook and Twitter communities, and Grammarly Blog. They provide excellent recommendations on English grammar and writing style via enjoyable exercises and on-the-go talks.

What is the Revenue of Grammarly?

Grammarly chooses not to reveal financial information publicly since it is a venture-backed private company.

Grammarly’s annual revenue is estimated to be $59.2 million, according to a firm statistics aggregator called Growjo.

Regarding Grammarly’s fundraising history, we think the company is burning cash to scale quickly and isn’t focusing on profitability.

What is the Funding and Valuation of Grammarly?

Crunchbase reports that Grammarly raised a total of $200 million in just two fundraising rounds. During its Series B round, where it received $90 million, the company’s value soared to over $1 billion — making it a unicorn.

General Catalyst led both rounds of investment. The company has also received some investment backing from IVP, Spark Capital, and a few other unknown investors.

Does Grammarly Sell its Users Data?

Like those of other freemium services, Grammarly users are vulnerable to cookies and other tracking technologies, although the company has affirmed that it does not sell user data for profit.

A Grammarly Spokesperson in an interview with Techcrunch said,

“We do not sell or rent user data to third parties for any purpose, including delivering their advertisements. Perpetual. Our business model is a freemium one, in which we provide a free version of our product as well as premium upgrades to Grammarly Premium and Grammarly Business.”

Grammarly’s artificial intelligence proofread this piece and corrected us more than a dozen times to be completely candid.

Also read, How Does Deliveroo Make Money?

What Makes Grammarly Successful?

According to a famous saying, English is the elixir to which no word can adequately express our gratitude. Yet, about a quarter of the world’s population speaks English. 

More than a billion people study English as a professional subject. In addition, around 80% of data on the Internet is in English, and more than half of all publications are written in English. 

It is true, and it has worked in Grammarly’s favor. Grammarly’s success, however, is mainly attributed to the decreasing metrics of users and revenue that it is experiencing more than any other competitor in its category.

A total of more than 600 institutions and organizations from around the world have evaluated and certified Grammarly products. Additionally, Grammarly has been certified as a licensed product for official use by its enterprise users. 

Thanks to Grammarly, millions of students have improved their grades, English, and communication skills. In addition, Grammarly is one of the most popular tools among professionals who need help with spelling and grammar. 

Grammarly also offers an affiliate network through which anyone may become a Grammarly promoter and earn monetary prizes and many other benefits. 

It has attracted a large number of eager young minds to whom products like this have benefited.

It has succeeded in improving human communication and has always tried to revolutionize the way people from different backgrounds and identities communicate through their writing skills. 

They have created a fantastic experience for their users, bringing together the world’s brightest minds behind an easy-to-use tool. 

Grammarly is a model of perfection that will enlighten more authors and intelligent people around the world.

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About the author

Madhav

Hey Folks, I am Madhav! I lead a team of Marketers at Tech Startup based in Australia. In my free time, I dissect the business models of various businesses. And if there's any free time, I cook some new Dish!