Business Operations Business Models

How Does Grammarly Make Money (Business and Revenue Model)

The Grammarly business model

how does Grammarly make money? | the Grammarly business model
Here’s what you should know:
  • What is Grammarly, and how does Grammarly work?
  • How does Grammarly make money?
  • Subscriptions (2 types)
  • Licensing the software to colleges and universities
  • Grammarly’s expert writing service
  • Grammarly’s profit and revenue
  • What is the Grammarly business and revenue model?
  • Grammarly’s funding and valuation
  • How does Grammarly make money if it’s free? Well, here is a full, in depth, breakdown of their three (3) revenue streams and the different products and services they offer, as well as the Grammarly business model, their year over year revenue, and how Grammarly works.

    What is Grammarly, and how does Grammarly work?

    Grammarly is a writing assistant tool that autocorrects mistakes using artificial intelligence and integrates with your browser or computer as an extension (app).

    Since being founded in 2009 by Alex Shevchenko and Max Lytvyn, Grammarly has over 30 million daily active users since its release, as of 2020.

    Some of Grammarly’s competitors include EvernoteSlackDocuSign, Notion, Trello, and other productivity apps.

    Grammarly in Apple App Store
    Source: Apple App Store

    How does Grammarly make money?

    With more than 30 million daily active users and over 2,000 institutions and enterprise clients, how does Grammarly make money?

    Well, although Grammarly offers a free version of their browser extension in which they call their “freemium” version, they also offer paid upgrades to those looking for more out of the writing assist tool besides just the basics like correcting spelling, grammar, and punctuation.

    Below is a price breakdown of how much money Grammarly makes from their paid users and educational institution partnerships.

    Here are the 3 ways of how Grammarly makes money (in 2022):

    Grammarly has a revenue model that makes money in three (3) ways.

    #1. Subscriptions (2 types)

    Grammarly offers 2 types of paid versions of the writing assist tool, Grammarly Premium, and Grammarly Business.

    These upgrades include everything the freemium version offers plus checking things like fluency, readability, word choice, plagiarism detection, inclusive language, formality level, and more.

    Grammarly Paid Versions | how does Grammarly make money?
    Source: Grammarly

    Grammarly Premium (for individuals):

    • $359.40 per year: $29.95 per month
    • $238.56 per year: $19.88 per month (33% off)
    • $139.95 per year: $11.66 per month (61% off)

    Grammarly Business (for teams):

    • 3 to 9 members: $12.50 – $25 per member; $37.50 – $225 per month
    • 10 to 49 members: $12.08 – $25 per member; $120.83 – $1,225 per month
    • 50 to 149 members: $11.67 – $25 per member; $583.33 – $3,725 per month

    #2. Licensing the software to colleges and universities

    Grammarly also licenses their proprietary writing assist tool to educational institutions, which they call Grammarly @edu.

    How it works is, the institution licenses the software from Grammarly for a fee (figures not shared by Grammarly), in return, the students of that college or university get full access to Grammarly Premium paid version for free.

    Grammarly @edu Pricing | The Grammarly Business Model
    Source: Grammarly

    Grammarly @edu pricing plans:

    • 5 Users: $500 per year
    • 10 Users: $800 per year
    • 20 Users: $1,200 per year
    • 20+ Users: get a quote

    In the earlier days of Grammarly, before developing and offering a browser extension with a paid tier, licensing their software to colleges and universities was their main source of revenue.

    By 2014, Grammarly had partnered with more than 250 educational institutions and more than 100,000 students.

    Today, they have gotten into more than 1,000 institutions worldwide license the tool. Including notable institutions like Iowa State University, Clemson University, Chapman University, University of Utah, University of Illinois, and more.

    Note: Licensing the grammar and writing correct tool to colleges and universities is a brilliant example of targeting their audience.

    #3. Grammarly’s expert writing service

    Grammarly’s expert writing service support is only available to Grammarly Premium subscriptions, which is a clever way to upsell those on a premium subscription and a great selling point to those on the freemium version.

    This service helps those who want a little extra help with proofreading any uncaught mistakes.

    The way it works is, (1) the Premium user chooses the service and turnaround they want Grammarly’s writing expert to do, (2) submits their order, and (3) waits for the email confirmation once it’s complete.

    Grammarly expert writing support pricing | how Grammarly works
    Source: Grammarly

    Expert writing service cost:

    *Cost based on service provided

    • Correctness only: $0.019 – $0.149 per word (based on turnaround time)
    • Correctness and Clarity: unknown

    Grammarly’s profit and revenue

    With those three (3) sources of revenue, subscriptionslicensing the software to universities, and expert writing service. How much does that make them in a fiscal year?

    In a 2014 press release, Grammarly talks about how they ranked 55th on Deloitte’s Technology Fast 500 list of the top 500 fastest growing tech companies, having a 2,326 percent revenue growth from 2009 to 2013.

    What is the Grammarly business and revenue model?

    Grammarly makes money through a few revenue models that they combine within their company, they are:

    • Freemium business model
    • Software as a service (Saas) business model
    • Software licensing business model

    Grammarly introduced their free browser extension version in 2015. Since then, their daily active users (DAU) have increased from 1 million daily users to more than 30 million in just 5 years.

    Grammarly Product Growth Timeline | the Grammarly business model
    Source: Grammarly

    Grammarly’s funding and valuation

    According to the Crunchbase profile, Grammarly raised its first round of funding in May 2017 worth $110 million followed by its second round of funding in October 2019 for another $90 million, giving Grammarly a valuation of more than $1 billion U.S dollars.

    Note: Founders Alex Shevchenko and Max Lytvyn bootstrapped their business for 8 years up until 2017.