Much as SAP and Oracle in 2102 acquired Successfactors Inc. and RightNow Technologies Inc., respectively, to ease their entries into cloud computing, Rosetta Stone is making this acquisition as much for the technology underpinning its smaller online learning rival as for the customer base it hopes to monetize in the near future. The company is also making this acquisition as it sees the tide shifting away from traditional software usage to cloud-based and mobile applications, as much among individual consumers as among its business customer segment.
The acquisition of one of its online language-learning rivals gives Rosetta Stone access to a younger, less affluent demographic, and a technology platform that will help the company accelerate its plan to break into learning markets outside its traditional language segment. “The platform is transformational and accelerates my ability to go faster,” said Steve Swad, Rosetta Stone’s CEO.
Mr. Swad said Rosetta Stone has been “on a mission for the last 18 months to accelerate our transition from being a language learning company to being a learning company, and from a CD-based company to cloud-based company. This transaction is foundational in moving faster in that direction.”
Rosetta Stone, which currently offers CD-, online- and subscription-based courses in 30 languages, will ultimately use the Livemocha platform to host course materials on language and other topics. Livemocha offers free courses, with opportunities to pay for premium services such as private coaching. Rosetta Stone courses average between $350 and $500.
Currently, 99% of Rosetta Stone's business customers access the company’s products over the cloud. The company said that the majority of its customers on the consumer side still buy CD versions of its products, although sales of cloud and online versions are growing at a triple-digit rate and a downloadable version released late in the fourth quarter of last year “is growing,” a company spokesman said.
Prior to making the acquisition, Rosetta Stone was on a path to building a cloud-based platform similar to Livemocha’s. The acquisition allows Rosetta Stone to move to that platform more quickly without having to dedicate as many developer resources to the project.
The deal “gives us access to a demographic we didn’t have access to before… [and allows us to] extend ourselves to a segment of the market that was out of reach of our traditional product portfolio,” said West Stringfellow, chief product officer at Rosetta Stone. Mr. Stringfellow joined the company five months ago. He worked previously at eBay’s PayPal unit and Amazon.com, where he says he developed an analytic approach to product development.
Rosetta Stone plans to port its existing online and mobile offerings to the newly acquired technology platform. “I was spending real time and real money building what [Livemocha has]. The ability to buy it accelerates our roadmap,” Mr. Swad told CIO Journal in a telephone interview. According to Mr. Stringfellow, the acquisition means Rosetta Stone can make use of a new platform 12 to 18 months faster than if it had built it itself.
The company wouldn’t admit to concern about specific competitors, but realizes that its customers are shifting away from desktop computers and installed software to a more mobile, app-based approach. “We’re aware of how fast the market can move, and we realize we have to accelerate our pace of change,” Mr. Stringfellow said.
In addition to providing improved functionality to its existing customer base, the new platform will allow Rosetta Stone to expand its offering by hosting courses created by independent contractors on its site. Combined with usage data from its existing analytic engines, which include some open source software, proprietary applications and a cloud-based analytic engine, Mr. Stringfellow says Rosetta Stone will cull usage and socio-demographic data from the Livemocha customer base “that we can monetize at a later date.”
This could include identifying types of courses in other disciplines which the company could begin offering.
Livemocha currently uses a freemium model, with most customers using an entry-level offering for free. Rosetta Stone plans to use analytics to identify Livemocha customers who are likely to pay for upgrades such as private coaching or courses more suitable to their learning styles or occupation, says Mr. Stringfellow. “We can create new monetization opportunities, and the community experience from Livemocha can help Rosetta Stone customers,” he said.
The Livemocha business model depends strongly on a social networking component, and is something Rosetta Stone believes will appeal to many of its traditional customers. According to Mr. Stringfellow, a potential customer was asked to speak a phrase in Spanish using the microphone on their computer as part of a Livemocha demo. Within minutes, the customer had feedback from four native Spanish speakers using the Livemocha service from around the world.
The Livemocha platform is based on standards-based HTML5 Web programming code, and uses an emerging database technology known as NoSQL on its back end, which allows it to store and archive more data in a less structured manner than traditional databases, while also allowing it to continue organizing content in a structured manner, which makes for a better customer experience.
That’s a big step forward for Rosetta Stone, which is using much older technology. “From a code base perspective, we’re primarily a Flash shop,” said Mr. Stringfellow. “That’s not a great thing in 2013.” Flash requires users to have a lot of bandwidth – and cannot run on Apple’s iOS products such as the iPad and iPhone.
Livemocha’s platform has “beautiful separation” of the front and back ends that will allow Rosetta Stone to “nimbly adapt our offering… very cost-effectively,” Mr. Stringfellow said.
Livemocha also uses Amazon.com’s AWS cloud platform to manage content, which allows the company to quickly add and promote new content to customers. “Once we do the migration, we’ll have demonstrated that anyone can build content to Livemocha and build an instructional unit,” said Mr. Stringfellow.
Rosetta Stone already makes heavy use of analytics, and will incorporate its existing analytics engines with the Livemocha NoSQL database. It expects to be able to offer customers more customized experiences and identify younger and lower-income customers that are likely to purchase paid products. The average Livemocha customer is around 30 years old, compared to a bit over 35 for the average Rosetta Stone customer. “I think we can do a good job cross-selling to [the Livemocha] community,” said Mr. Swad.
He says the analytics engine will allow the company to identify customers who are “very engaged” and “sell them more products.” Its analytics are already teaching Rosetta Stone more about its customers, such as their preferences for the length of individual modules, and will help the company develop more tailored mobile offerings for its customers. Traditional Rosetta Stone offerings are one-size-fits-all; according to Mr. Stringfellow, data is allowing the company to develop more customized learning modules. “We will look to quickly create new mobile offerings that are bespoke… and become more needs-based,” said Mr. Stringfellow. “What the data has told us is the platform has to be flexible, has to take lifestyle and technology preferences and goals into account and build a course that adapts to [customers],” he said.
Source : https://blogs.wsj.com/cio/2013/04/02/rosetta-stone-acquires-livemocha-to-decipher-the-cloud/