The group of Rosetta Stone contenders shrunk to two today. According to a press release Rosetta Stone has acquired Seattle based language learning community Livemocha for $8.5 million in cash.
So what happened? Why is Livemocha sold off for cheap to the company they wanted to replace? At this price it seems that the numbers must have been pretty bad. As I mentioned in my post about babbel.com raising $10 million just last week, Livemocha never got aggressively into the mobile learning space like for instance babbel.com or of course busuu which might have been decisive. To my mind it was an important key factor missing to say the least.
From what I can tell Livemocha never really recovered from that shift and now it is essentially sold for parts. According to the press release Livemocha’s acquisition is part of Rosetta Stone’s strategy to get its learning products into the cloud. I think it’s about the 16 million users and the possibility to get their own low cost product on the market without cannibalizing their core business of premium products. On the other hand, Rosetta Stone can now directly compete with busuu and babbel.com.
One potential strategy could be to offer Livemocha for free similar to Duolingo and then make the upsell to Rosetta Stone products for those who are really serious about learning languages. As Rosetta Stone Chief Product Officer West Stringfellow says in the press release
“But even more exciting, it gives our customers more choice. Livemocha presents us with a low-cost or even free alternative product to offer learners around the world. It becomes a ‘ladder of learning and value’ for our customers.”
Livemocha’s CEO Michael Schutzler will assist in post-acquisition integration efforts as a senior advisor to Rosetta Stone CEO Swad. Livemocha will remain in Seattle. Below you can read Michael Schutzler’s email that got out to all Livemocha users today.
Dear Livemocha Community Members,
Over the past five years, Livemocha has grown into a supportive, global community of over 16 million members, working together to learn, teach, and practice a new language. The learning experience that each of you creates makes Livemocha effective, meaningful, and fun.
We are passionate about building a world in which every person is fluent in multiple languages, and today, I am thrilled to announce that we have taken the next step towards that goal.
After months of hard work and preparation, Livemocha has agreed to merge with Rosetta Stone.
Rosetta Stone has built one of the most durable and well-known education brands in the world. They have created powerful technology-based language learning solutions that are the envy of the industry. By combining our strengths, our technologies, and our dedicated focus to serve you well, we will transform the world of learning.
Please rest assured that Livemocha will continue to be the learning experience, product, and community you know and love. Indeed, Livemocha – in partnership with Rosetta Stone – will now offer more languages, add powerful new tools, and become available on more devices than ever before. And, thanks to your feedback and the participation and the support of the talented team at Rosetta Stone, we will continue to roll out the brand new product experience that we have been building and testing over the past two years. Stay tuned for more announcements soon!
We are and always will be committed to building a world without barriers.
CEO Livemocha Inc.
This latest development makes it even more clear to me that the freemium model was a bad idea for the language learning space in general. Sure, busuu have managed to build a profitable business based on it but the team also ran a very lean startup, fairly differently to what I have seen from Livemocha over the years.
As I pointed out, now that its rival babbel.com raised a significant round and with Livemocha joining Rosetta Stone it seems to be inevitable for busuu to either raise a Series B round or get acquired. My tip still is that busuu is going to raise a $10 million+ round in the coming months.