Livemocha Seeks to Upend Rosetta Stone, Taking Language Learning to New Heights Online

Livemocha is ready to kick some language learning butt—at least according to chief executive Michael Schutzler. The Bellevue, WA-based startup is already the largest online language learning community in the world, with over six million members from over 200 countries actively studying some 38 languages—not bad numbers for a 3-year-old company. But this isn’t enough for Schutzler, who has his eyes set on beating popular language learning software company Rosetta Stone.

“Our mission is to do this for every language, and our goal is to get every single person on the planet to converse in multiple languages,” he says.

While this may seem like a pretty lofty ambition, given that there are literally thousands of languages spoken throughout the world, Livemocha does have one advantage—it already has an established global community. Even though the company is based here in the states, this isn’t a U.S.-centric company. Ninety percent of Livemocha users, according to Schutzler, are based outside of the U.S.

Livemocha is structured quite differently from its rival, Arlington, VA-based Rosetta Stone (NYSE: RST). Rosetta Stone offers CD-ROM courses in 29 languages (and a few more in varying dialects)—most of which come in multiple levels, and run anywhere from $219 to $249 a pop. Instead of selling retail software, Livemocha offers a series of free and paid lessons accessible online, where it connects learners with native speakers around the world in real time—what Schutzler calls the centerpiece that differentiates it from the competition.

Every month Livemocha’s 6 million members help to build out its community by creating more than a million speaking and writing activities for each other, reviewing each others’ work. Its users generate an average of 35,000 exercise reviews every day—and they practice real time conversation skills with other users in the network.

“At any moment in time half the community is contributing in an editorial fashion, and the other half of the community is learning,” Schutzler says.”We’ve created this transformative language experience that makes conversation the real language.”

Rosetta Stone’s CD-ROM can’t do that, he says.

Michael Schutzler

Michael Schutzler

“The investment in Rosetta Stone is massive, but the average time its users spend on it is only 2.5 hours, over 6 months,” he says.

Why is this? Because learning a foreign language is “really hard work,” especially for adults. So when the going gets tough, many give up. Livemocha has found a way to marry language learning course curriculum with community interaction, and this, he says, is what makes the Livemocha system more effective. While Schutzler declined to comment on the retention levels of Livemocha’s users, he did say that the engagement is much more pronounced because of the social nature of the community. He himself logs on to tutor others in the community in English and German, and is currently learning Spanish, and “refreshing” his Arabic.

“At the heart of what we do is conversation practice, and the only hope we ever have of learning and mastering a language is talking with a conversation,” Schutzler says. The company even has a growing number of members who are starting to make a living on Livemocha, through points earned tutoring other members, grading coursework, and creating new practice exercises.

Livemocha currently has 38 free languages available on its site—everything from commonly spoken languages such as Spanish, English, and Hindi, to the more obscure Catalan, Icelandic, and Latvian. And yesterday it rolled out its more advanced paid service, Livemocha Active Courses, in five languages—English, French, Italian, German, and Spanish. These courses have four levels, and cost $150 each for a year, or $20 a month, compared to the $750 plus you’d have to shell out for the equivalent level courses on Rosetta Stone.

“By the time you complete all four levels, our promise is that you will be able to compete in conversational language skills in the language that you are studying,” says Livemocha co-founder Shirish Nadkarni.

The company has raised $14 million in financing so far, including $8 million in a Series B round led by August Capital, with participation from Seattle-based Maveron. The launch of Livemocha’s new service, which just happened to coincide with Rosetta Stone’s own product roll out, is all part of the company’s plan to expand its reach in the U.S., and plant a firm foot in the $50 billion language learning market.

“Our goal is kick Rosetta Stone’s ass starting on September 14, and not need any more VC funding,” Schutzler says. “This is a bit of coming out party for us in the U.S. to let people know we exist and that we have a brand new product that, frankly, blows the doors of anything else out there.”

Schutzler, who joined Livemocha in June with high ambitions for the social language learning company, is confident in the platform. In fact, he plans to keep experimenting with new social services—like Facebook and Twitter applications—down the line.

Livemocha has already gained traction with businesses and academic institutions looking for affordable and effective ways to engage employees and students in active language learning. “We have relationships with a number of university professors who have made Livemocha a requirement for the course curriculum,” Schutzler says. This, he says, has poised the company to aggressively pursue sales options.

On the brink of its U.S. expansion, Livemocha is prepping for growth. The 30-person company is moving to a brand new office in the first week of October, and is already recruiting—and will continue to “aggressively hire”—in anticipation, according to Schutzler.

“We’re not only growing rapidly, we’re having growth pains. We’re not hiring fast enough,” he says. And in a final throwing of the gauntlet, reiterating his every intention of blowing Rosetts Stone out of the water—and fast—Schutzler adds, “I would hate to see anyone waste their money on a yellow box.”

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