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Dud: Five Reasons Why the Rosetta Stone Acquisition of Livemocha is a Fail

By on April 6, 2013
Language Learning, Mergers & Acquisitions, Required, Startups, Technology, top, Venture Capital



Rosetta Stone, arguably the largest language learning company gobbled up five year old Livemocha for $8.5 million in cash earlier this week. That’s a pittance compared to the reportedly $19 million Livemocha has raised in the past. There are a few reasons why it seems Livemocha went out like a garage sale.

LingoLive, a platform for Spanish learning, has a great round up of five reasons why nobody is a winner in this deal.

  1. Language learning is all about mobile, and Livemocha has no mobile app.
  2. Different business models: Livemocha is freemium, Rosetta is premium only. It will be interesting to see how Rosetta reconciles this massive difference.
  3. Rosetta Stone is trying to buy online cred with users to overcome a narrow sliver of a lucrative audience.
  4. Livemocha doesn’t help learners sort through the language learning noise.
  5. Livemocha and Rosetta don’t fix learner’s main pain point. [Insert LingoLive plug for newsletter] We signed up but didn’t receive it. But we suspect it has to do with live conversation, judging from LingoLive’s offering.

Still, that said, Rosetta [RST] investors seemed to like the move, which ran the stock up four percent on the day. But there was hardly any volume (no conviction from the herd), and on the week the stock closed roughly flat at $15.40.

Meanwhile, Arlington, VA-based Rosetta Stone also announced they would cut 16 percent of its employees and  shutter 56  remaining airport kiosks. Desperate times. But the broader course correction by management is making investors happy with the stock up over 50 percent YTD.

And online language learning is buzzing. Just last week, we saw Babbel‘s language learning platform score $10 million in Series B funding, with a grab for PlaySay.  And it’s starting to become a crowded room with Duolingo, Voxy, MindSnacks, Busuu, and LivingLanguage just to name a few. Perhaps they’ll have better exits when they reach their destinations.

[TechCrunch, edSurge, LingoLive, Fool, Skift]


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Paul Glader
Apr 6, 2013

An executive at one language-learning firm tells us:

It is clearly a move into the right direction as the market for traditional learning software is drying up while the online and mobile markets are almost exploding. Rosetta Stone has a good starting point with one of the strongest brands in language learning in the US but in the end the quality of the product will decide about success of failure. It is interesting that they didn’t go for one of the market leaders in the industry and future will tell if both companies can manage their turn-around together. For Babbel as a rapidly growing company in the online and mobile language learning space, this acquisition is a good development because it will help to promote the possibilities and advantages online learning agains traditional methods. And for now, it’s not about competition and market share but about market development.

Paul Glader
Apr 9, 2013

Analyst Jeff Meuler at Baird Research writes:

RST Announces tuck-in acquisition; 2013 guidance unchanged. RST acquired Livemocha, an online language learning platform, for $8.5mn cash. We view this primarily as a technology and learning community acquisition, consistent with the company’s strategy to focus on improving and expanding its products/technology in 2013, both organically and via acquisition. Notably, despite likely (in our view) initial up-front EBITDA dilution (was generating losses as a stand-alone organization), RST’s 2013 guidance is unchanged, due partially to stronger underlying organic performance. Increasing price target.

Donovan | The Mezzofanti Guild
Apr 12, 2013

It’s definitely a strange takeover.

Perhaps Rosetta Stone is hoping to use Livemocha as a platform to move beyond the pricey, standalone software bundle and provide a less-expensive, web-based alternative.

Wired Academic
Apr 15, 2013

@Donovan, what are your thoughts about the Livemocha platform and how it fits in the language learning ecosystem?

Apr 18, 2013

@Donovan - apologies we are just now seeing this but below is part two of our blog post on the 5 Biggest Reasons Why Rosetta Stone’s Acquisition of LiveMocha Was a Mistake.

Reason #5 is that neither company meets the biggest need of today’s language learner: the ability to learn from a native, anytime and anywhere. This is something that 75% of the people we interview have noted (that’s everyone from middle-aged parents to college students and institutions alike). We delve into this greatest need and analyze how both RST and LM are marginalizing this service:

Feb 28, 2014

It’s definitivey a bad idea. Old Livemocha lessons were good, not perfect, but fun and good. The new lessons are low-quality with low quality audio, approximative translation provided by google (sometimes the translation is so bad it’s impossible to understand.) It is not possible to follow the lesson when you begin a language with scratch with the new livemocha, and there’s a lot of spelling and grammar mistakes in the lessons. Rosetta Stone has never been good for teaching the grammar, not a wonder the quality is lowering from Livemocha to Rosetta stone, even if I loved the visual way of teaching in the Livemocha and Rosetta lessons, they removed all the visual stuff that was the reason for the success.


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