LIVEMOCHA: Ouch. Language learning companies have been a source of great interest--and recently, investment. But today's deal adds a distinctly nota agria: Rosetta Stone paid $8.5 million in cash for Seattle-based Livemocha, which reportedly had received $19 million from investors (depending on whose tally you believe.)
The deal was reported AllThingsD and appears driven by Rosetta Stone's desire to bolster its delivery platform, as its chief product officer stated in the press release: “Livemocha will enable us to quickly migrate our legacy products to a future-proof technology stack with a modern, cloud-based architecture and contemporary means of distribution.”
Founded in 2007, Livemocha currently counts over 16 million users from 195 countries in its online language learning community. Its team of 35 will remain in its Seattle office and operate as a subsidiary.
Accounts vary about how much investors have put into the company since it was founded in 2007. (GeekWire contends it was as much as $19 million; TechCrunch agrees.) CEO Michael Schutzler suggested in The Seattle Times that the valuations it got from investors was based around the company's potential growth in the social networking space. (It last raised an $8 million Series B in 2009.) But Livemocha decided instead to target schools and institutions and go the enterprise route. Blogger Kirsten Winkler suggests that Livemocha's lack of a strong presence in the mobile space might have been "an important key factor" that affected the price of the deal. She points out that as competitors such as busuu and babbel.com launched mobile apps, they eroded the lead that Livemocha had built up over several years' time.
That seemed to resonate with investors, who recently pumped $10 million in Berlin-based Babbel, which, had just a week earlier snapped up competitor, PlaySay.
Even so, there are plenty of other language learning tools out in the wild. (Check out our "Forty Ways To Learn A Language" summary list.) Winkler believes that competitor, busuu, is due for a big round soon. Even so, she warns: "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."