Now that is indeed something that does not happen everyday. A German startup acquires an US based startup for parts, in this case language learning startup babbel.com from Berlin the user base of San Francisco based PlaySay which is pretty telling as neither the PlaySay team nor the technology will be integrated into babbel.com products. Only PlaySay’s founder Ryan Meinzer, whom I interviewed in October 2011, is going to join babbel.com in the role of an advisor for the US market.
So let’s break this one down. PlaySay started at TechCrunch Disrupt as a Facebook application for learning Spanish, and eventually pivoted its way to a mobile application to learn Spanish. It even ranked #1 in the education category of the iTunes Store in ten different countries including the US at one point.
But babbel.com does not seem to be interested in the technology or applications but merely in the PlaySay users who now have 45 days to switch over to using babbel.com instead.
babbel.com is part of a group of three language learning startups which all emerged at about the same time and have battled to become the next Rosetta Stone. Besides babbel.com the others are Livemocha out of Seattle and busuu who just relocated their HQ from Madrid to London after raising a Series A round.
Similar to busuu, babbel.com did not take on tons of funding at this point which probably helped the team a lot to figure out the business model and how to sell best. A strong factor in the growth of both busuu and babbel.com have been the respective mobile applications. In fact, babbel.com’s first acquisition was the mobile app developing startup that had built the first babbel.com applications.
The only real problem babbel.com seems to have had is growing its footprint and finding success in new territories. Both Livemocha and busuu succeeded early on to grab market share in key markets like the US and South America.
Taking all this into consideration I suppose that babbel.com got PlaySay for a pretty reasonable price as the press release states
Deal fueled from operative cash flow.
PlaySay have only raised $820k since 2008 which means that even if babbel.com paid a bit more, like in the range of $1.5m to $2m it was still kind of cheap. It also shows that PlaySay did not manage to get enough traction to make it worthwhile for the founder and his team to keep on working on the product or to raise another round of funding. I think the following sentence from the press release why PlaySay sold to babbel.com is pretty telling.
“It’s fun, social and mobile, just like PlaySay…only better!”
I don’t know how many users PlaySay actually has in its database but if we assume that 1 million people have downloaded the application or signed up for the Facebook application at one point, babbel.com may have paid about $2 per user. I am also not sure what the cost per acquisition for a language learner is these days but I guess it’s much higher, maybe in the $10 range.
Of course, babbel.com can’t be sure that all of the PlaySay users will happily switch to the new service and then also pay for it but in the end it might be enough to get the babbel.com Spanish app ranking in the US iTunes Store which will eventually lead to better exposure and new users.