Tag Archives: livemocha

Rosetta Stone Tell Me More

Rosetta Stone acquires French Competitor Tell Me More for $28 million

“The acquisition of Tell Me More is an exciting way to close out what has been a transformative year for Rosetta Stone.” Steve Swad, President and CEO of Rosetta Stone

Indeed. It seems that this year ends with a bang for the language learning market as Rosetta Stone announced the acquisition of its French competitor Tell Me More for $28 million.

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Duolingo

Duolingo hits 10 million Users – Wants to give Language Learning a Bigger Purpose

Duolingo

Yesterday Duolingo released a new promo video on its YouTube channel. Marketing and feel-good / world-changing agenda aside, the spot has a pretty telling message: Language, free at last. (emphasis mine).

I also just got an email stating that

“Since its launch 15 months ago, Duolingo has reached 10 million students and become the most popular way to learn languages online. No ad campaign, no gimmicks; just your support and a mission of free language education for the world.”

Looking a few years back the premise of language learning startups like Livemocha, busuu and babbel.com was to make language learning more affordable compared to their chosen nemesis Rosetta Stone. Since then Livemocha’s newsletter has turned into a sales channel for Rosetta Stone after the acquisition, promoting RS products at 60% off.

As a funny side note: if you follow the link to Livemocha’s YouTube channel on the bottom of the email, you will still find the legendary Livemocha spot with the (infamous) yellow boxes.

But back to Duolingo. If you talk to folks in the language learning industry you notice that most (all) of them are not happy about the new competitor. How can you compete with a free product that also seems to work quite well according to a study.

What Duolingo does is essentially disrupting the former disrupters or at least establishing itself as the third alternative method. busuu’s success is clearly its global community of language learners and babbel.com has chosen a more technology based approach similar to Rosetta Stone.

Now, of course we all know that there is no free lunch and, to use another catch phrase, if the product is free you are the product. Duolingo is selling this over a call to join a movement, giving your language learning a bigger purpose

“With Duolingo there is no tuition or subscription fee. It’s 100% free. Instead students like us give back by helping to translate websites, news and Wikipedia articles. It gives our personal language learning journeys a bigger purpose.”

I can see why many folks in the space see this storytelling as misleading. In fact Duolingo users are Mechanical Turks but instead of getting paid a couple of cents per task, they get “free” language lessons in return. Sounds good but they should also know how much their work is actually worth and whether language lessons, as good as they might be, are an adequate recompense.

The new spot is definitely a step-up from the first one that was more toned down yet also mentioned the business model behind Duolingo, adding the layer of being part of a global movement to better the world through language learning.

I also think people underestimate the power behind such global communities. Just recently Viki, the online community around translating and adding subtitles to popular TV shows, got acquired by Rakuten. One of the rumored bidders was Google.

Since I first heard about Duolingo and its concept I was pretty sure that the startup is one of the upcoming acquisitions by Google. Not only did Google acquire Luis von Ahn’s first startup reCAPTCHA but if Duolingo can prove that a global community can offer nearly instant translation of every web page, Google just has to write that check as it perfectly fits the overall strategy that we can see with Google Glass, Google Translate and other related services.

And if you think about it, von Ahn also took a site out of Google’s playbook in terms of the business model. Give the users a great service for free and make money based on their data and content.

Rosetta Stone

Rosetta Stone to evolve from Language to Learning Company

Rosetta Stone

Are the days of high priced language learning software over? With Rosetta Stone’s latest acquisition it surely looks as if one of the leading companies in that sector is looking for greener meadows.

The $22.5 million all cash acquisition of Lexia Learning reported by the Wall Street Journal is one indicator that language learning isn’t enough to survive in the long term; the quote

“We are evolving the company from a language company to a learning company,”

by Rosetta Stone’s CEO Steve Swad a second one.

Also, customers already are under the false impression that Rosetta Stone is offering far more learning products than just languages. According to the WSJ a survey showed that people already relate RS to math, reading and music products. Swad stated “To me, it’s just evidence of brand permission to extend.”

Of course the acquisition of Lexia Learning also strengthens Rosetta Stone’s position in the K-12 and global English learning market yet we have to see it as part of a far broader strategy to transform Rosetta Stone into a learning company. From the press release

“This acquisition is another step in the transformation of Rosetta Stone,” said Swad. “We`re moving beyond language; we`re leveraging technology; we`re growing our business in new and meaningful ways. And we`re positioning this company to change the face of learning as we know it.”

I think it is pretty obvious to Swad and the team at Rosetta Stone that the days of high priced boxed (or downloadable) language software are numbered. The acquisition of Livemocha earlier this year and therefore the transition to a cloud based language learning portal was a first step here to compete with similar players like babbel.com and busuu.

All three offer language learning products at a fraction of the price customers need to pay for a Rosetta Stone product. Even the current half price offering Rosetta Stone is promoting on Facebook at $395 looks outlandishly expensive compared with the package prices Livemocha, babbel.com or busuu offer.

Rosetta Stone Promo

And we must not forget Duolingo that is slowly but surely becoming a real threat to the startups that aimed to disrupt Rosetta Stone. Duolingo already offers different languages and mobile applications at no cost to the learner. Duolingo also has studies that show the efficiency of its products and the startup is growing fast. Also, the reviews of people learning with the product I have read so far were fairly positive.

Therefore, it seems to be a good idea to find more lucrative niches as soon as possible. Other verticals are yet pretty much untouched from decreasing prices and Rosetta Stone’s brand and technology might enable the company to build up a new foothold there.


Picture License AttributionNoncommercial Some rights reserved by olivcris

Rosetta Stone Kiosks

Rosetta Stone Kiosks to be closed in Transition to Cloud based Service

Rosetta Stone Kiosks

Rosetta Stone’s CEO Steve Swad is accelerating the company’s transition into a cloud-based learning experience. What used to be one of the marquee items of Rosetta Stone will soon only be a memory: the airport and mall kiosk.

Not even two years ago, under Rosetta Stone’s former CEO Tom Adams, the company invested in new experience kiosks where people could test the software and retail stores targeted at an audience in Hollywood and Capitol Hill. But according to the press release

Rosetta Stone’s kiosks had come to represent a shrinking portion of the company’s overall sales mix, especially as their revenue contribution was eclipsed in 2012 by growth from the web channel and the rising popularity of digital downloads. The company has closed over 100 kiosks since 2011, and by exiting its remaining locations, it sheds a low-margin channel and positions itself to invest in more profitable channels going forward.

With the closure Rosetta Stone is going to let go 245 full and part time sales representatives who worked in the kiosks, following the goal of turning the company into a more nimble and innovative player to compete its smaller however quickly growing competitors babbel.com and busuu.

London-based busuu just shared the news that it has surpassed 30 million users, now adding 40.000 new users per day. It also launched a new iPad application for young Spanish learners. According to TechCrunch busuu shows strong growth in emerging markets like Brazil, Russia and Turkey, markets that are also of high interest for babbel.com which just raised a $10 million Series B round in order to expand its services globally.

With Rosetta Stone’s focus shifting away from physical locations and products and last week’s acquisition of Livemocha this is going to be a very interesting year in the language learning space. Now that Rosetta Stone really goes all in it is certainly getting harder for busuu and babbel.com to keep on grabbing market share.

Of course, Rosetta Stone needs to come up with a compelling low cost alternative of its products, probably using the Livemocha brand, I could imagine them to start by offering a version of their Mobile Companion application branded as Livemocha, likely with less features to make it different from the premium Rosetta Stone products.

Talking about premium products I am pretty sure that with the transition in to the cloud Rosetta Stone’s physical CD-Rom and DVD courses are the next thing that will disappear. Reminiscent of Livemocha’s rivalry with Rosetta Stone, let’s watch Livemocha mocking the emblematic yellow boxes in a 2011 commercial.

Picture by San Diego Shooter

rosetta stone acquires livemocha

Rosetta Stone acquires Livemocha for $8.5 million in Cash

rosetta stone acquires livemocha

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.

One could say that this is kind of ironic as Livemocha started out as the rival to the language learning throne always positioning itself as a more innovative, more modern and inexpensive alternative to RS. From the beginning the startup had seen massive growth in terms of users and had also attracted some significant funding over the years. According to GeekWire the total amount was more than $19 million which means that Rosetta Stone got a pretty good deal but Livemocha’s investors surely not.

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.

Before busuu and babbel.com launched their mobile applications Livemocha had been dominating the space in terms of users. But that lead was lost in a matter of months after busuu launched its first iPhone apps, followed by babbel.com which also decided to acquire the startup that had created the apps for them.

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.

Onward!

Michael Schutzler

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.

Picture by Manuel Faisco via Flickr

babbel.com Series B

babbel.com raises $10 million Series B – busuu and Livemocha to follow?

babbel.com Series B

Just a week after announcing the acquisition of PlaySay, Berlin-based language learning startup babbel.com has more news to share. Today we learned that they have closed a $10 million Series B round led by Reed Elsevier Ventures with participation of Nokia Growth Partners as well as the existing investors, IBB Beteiligungsgesellschaft via its VC Fonds Technologie Berlin and Kizoo Technology Ventures.

The round brings the total funding raised to date to $12.2 million and therefore close to its US based competitor Livemocha which raised around $14 million. The third of the trio, busuu comes to a total of $4.5 million with its latest Series A round last October.

babbel_graph_usersWhile the ability to raise funding not necessarily makes a statement about the quality of the product or its business model I think that in this case it actually makes sense. As I wrote in my previous article about babbel.com last week, the founding team has proven to be able to build a viable company based on a relatively small amount of outside capital and then grow based on revenue. As babbel.com noted in the press release about the PlaySay acquisition which was also “fueled from operative cash flow”.

According to TechCrunch the three founders won’t take money off the table, therefore the investment will go directly into the expansion of babbel.com into new markets and platforms. Other European countries and the Americas are now in the focus. With two major global events around the corner and a growing middle class with dispensable income, Brazil is poised to be one of the battle grounds for language learning startups. The US which Markus Witte, CEO of babbel.com sees as “most matured” will be the other main market the startup wants to grow in with help through the PlaySay acquisition.

Which brings us to London-based busuu. The startup has a similar story and modus operandi, having raised small amounts of outside funding and growing quickly since the introduction of their mobile applications. According to the numbers both startups officially share, busuu has about 10 million users more than babbel.com, 25 million to 15 million. On the other hand, babbel.com only offers premium content which means that all users have to pay for the service whereas busuu offers freemium content which means that a significant number of its userbase does not pay for learning languages.

I am pretty sure that busuu is going to raise a $10 million or similar Series B in the coming weeks, latest in two months. It should not be difficult for the founding team as their numbers are quite impressive as well and the startup is also generating positive cash flow for years now. From what I have heard the busuu team certainly have some interesting ideas on how to innovate on their product which might go beyond ‘just’ apps. Let’s see if that vision is yet mature enough to be released in a near future.

However, busuu and to a certain degree Livemocha will need a well-filled war chest to fight off babbel.com. All three now target the same markets and thus it is going to be about marketing and teams on the ground.

Which brings us to Livemocha. Up to now Livemocha has no mobile applications I know of. It seems as if they are working on a new version of the web application (which probably also includes mobile applications) but nevertheless they are late to the game. Even compared to the yellow box selling old bull, aka Rosetta Stone, which offers a variety of mobile and tablet based applications.

It is hard to say how much money is left from the $14 million and if it is enough to launch a compelling suite of mobile applications. Maybe Livemocha has to raise a new round as well but I am not sure if the numbers are as good as those of babbel.com and busuu as the other two have basically accomplished the same user growth with far less funding.

Nevertheless I won’t count out Livemocha just yet as their focus now also seems to go into premium content and teacher lead learning. There are some English for professionals courses going on which are a mix of self-paced learning with the web application, peer learning with the community and instructor lead live lessons in a virtual classroom. Again, pretty similar to Rosetta Stone TOTALe.

So while babbel.com and busuu seem to go for the mass market with applications for the self guided learner, Livemocha is going towards a more personalized approach with expert teachers and live interactions. All in all the battle between the three promises to remain interesting.

Babbel playsay

babbel.com enters US Market through Acquisition of PlaySay

Babbel playsay

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.

While Livemocha and busuu chose and continue to rely on a freemium model as their business strategy, babbel.com decided to switch to a premium model rather early on. Whereas this might have contributed to slowing down the startup’s growth in terms of users compared to Livemocha and busuu, it has certainly helped substantially in terms of revenue generation and breaking even.

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.

busuu london

busuu finally raises Series A Round – moves to London

busuu londonGuys, what took you so long? Joking aside, busuu closed a €3.5 million Series A round and will move its company headquarters to London. Just as I predicted back in July here on EDUKWEST.

According to TechCrunch busuu now has over 25 million users (accounts) in over 200 countries and is growing by 40.000 new signups per day. The funding will be used to grow the team from now 12 to over 30 in the coming months according to The Telegraph.

The round was led by Brent Hoberman’s PROfounders Capital with participation of other private investors. Hoberman, who will join the board of advisers is the founder of Lastminute.com which he sold to Travelocity in 2005 for £577 million. And we all know that travel and language learning go together like peanut butter and jelly. Or in this case clotted cream and scones.

This latest move is just another example of Bernhard Niesner’s and Adrian Hilti’s style of building their startup. Coming back to the beginning of this post it is the exact opposite of what usually happens with startups these days that get a $2 million “seed round” very early on and then raise further rounds after 6 or 12 months. The busuu founders took more than three years to get to this point with just two smaller angel investments over the past couple of years.

Nevertheless, they were able to first slowly then very quickly grow their user base and on top of that reach profitability about two years ago, already. Going into the mobile learning space early has surely helped a lot to gain traction and apparently overtake the much better funded Livemocha though we cannot be 100% sure as the Seattle based language learning startup did not share its user numbers recently.

Furthermore, this Series A round won’t take away much of their shares in the startup, either. It’s a fairly small round which is also split between multiple investors. It seems that it’s just to cover the costs for scaling the team and hence grow the user base of busuu more rapidly as well.

Moving the company to London will ease the process of raising a next round and it also brings the team closer to their publishing partner HarperCollins. Aside from that the UK is doing a lot right now to get start ups on the island. Who knows, maybe busuu will become the savior of language education in the UK by offering their service to the government and department of education? (Take that as my next prediction)

Also, Bernhard now needs to change his complementary close from “Sunny greetings from Madrid” to something that includes rain and fog.

Picture by aigarius

Livemocha School Scholarships

Livemocha launches Scholarships for Budget Cut affected Schools & Colleges

Livemocha School Scholarships

Since Michael Schutzler took over as CEO at Livemocha one of his declared goals has been to teach everyone on the globe to speak multiple languages. The global trend, especially in Europe and North America is going the other way, less and less students sign up for language studies, with only 40% of high school students and 8% of college students in the US. And on top of that budget cuts also heavily affect the language arts .

In order to pursue its mission, Livemocha is going to donate approximately five million dollars of language learning to U.S. schools in 2012 through  free and discounted foreign language services to high schools and community colleges.

Michael Schutzler also points out that in a globalized world the US cannot longer afford to stay with an “English-only” metality. In order to stay competitive the US workforce needs to be able

“… to interact with individuals from other countries, and that requires a commitment to language learning.”

The scholarship is also aimed to support learners of English so they can keep up with their classmates and be successful in their career later on.

To be eligible to apply for the Livemocha School Scholarship the school must meet the following requirements:

  • Schools with budget for language programs reduced from 2010 levels;
  • or only one world language elective since 2010;
  • or no world language electives available today.
  • Must have a teacher to serve as program facilitator;
  • School must conduct proctored testing and offer full credit to student;
  • Each student registered within the Scholarship Program must volunteer 1 hour per month as a language guide for another student in the community;
  • School and student must have online access to participate in Livemocha online coursework.

Scholarships based on the following criteria:

  • How many languages does the school offer?
  • How many language sections were cut since 2010?
  • What is the current size of the student body?
  • What is the number of students who will likely sign up for a world language?
  • How much Title 1 funding does the school receive?

To learn more about the Livemocha School Scholarships visit: http://www.livemocha.com/scholarship

Rosetta Stone

Rosetta Stone has enough Cash to go on for Years

Rosetta Stone

Rosetta Stone

Thomas Kelly, a contributor to Seeking Alpha wrote an interesting analysis on Rosetta Stone and why he would suggest to buy shares.

Though their shares have dropped by 67% over the past year and Rosetta Stone is currently trading below book value, Kelly sees enough potential in the company for a turn-around.

At the moment, Rosetta Stone has $111 million in cash plus $60 million in accounts receivable and notably no debt, enough money to enable them to continue to operate at current levels for several years. Compared to Livemocha’s $14 million investments that’s more than 10 times the runway.

Livemocha’s tactic seems to go more and more towards grabbing market share from Rosetta Stone. In an interview with GeekWire Livemocha’s CEO Michael Schutzler points out that the sale of the learning course books at Barnes & Noble and Amazon are going well.

“(The) bulk of Rosetta Stone’s sales that generate actual margin are in retail. Berlitz has been there for decades,” said Schutzler. “Our partners are Merriam Webster … and therefore we think we have a shot at winning in this arena as well.”

Earlier this year, Schutzler took another shot at Rosetta Stone and its ability to deliver Internet based courses, saying

Rosetta Stone would have a “long mountain to climb” in order to compete with Livemocha in online language learning.

As a side note: it still blows my mind that Rosetta Stone isn’t being more aggressive about the fact that the TOTALe product is available on the Internet for over two years now. You can watch my interview with Duane Sider we had back in October 2009 in which we discuss the advantages of the new product that ties in sessions with language tutors and interaction with other learners around the globe, just like Livemocha, busuu, Babbel etc.

Still to this day, everyone is talking about CD-Roms and yellow boxes which is of course great for Livemocha’s strategy.

But back to Thomas Kelly. The major problem for Rosetta Stone was the “screetching halt” of revenue growth as main buyers like the U.S. army and government cut back purchases of the premium products which is also true for consumers who are not willing to spend $500 or more for language learning in a down economy.

Here lies another chance for Livemocha, of course and the startup is pushing into the government and institutional sector as well for quite a while now.

Kelly still believes that Rosetta Stone will be able to streamline the product as the branding is very strong, the product still the best on the market. He suggests to cut back on the sales force which did not perform that well anyway.

I think, Rosetta Stone needs to come out with smaller and therefore more affordable products that can give learners a taste that makes them want to upgrade to the full price $500 version. The high price of the product and the cost of their sales team and marketing efforts pushes them into a niche of the learning market as people who are willing to spent this much on a learning product are a rare species. Having several products would open them new market segments.

Mobile learning applications might be an interesting market segment as the smaller competitors busuu and Babbel seem to get about 50% of their growth from learning apps for smartphones.