The very basic section for learning new vocabulary words is free, but you have to pay to get the juicy content.

I recently succumbed and paid them though, and am finding it quite worth in terms of value vs. Rosetta Stone and in affordability vs. Rosetta Stone.

Step 3: Profit is now satisfied.

Free is not a BUSINESS model. It is a market share tool, but not a business (make money) model.

- Low cost of creating software platforms. With significant open source software available, it is indeed possible for a small startup like Livemocha with less than 10 software engineers to compete with the mighty RosettaStone
- Low cost of delivering content and services on a global basis. Hardware, software, hosting, bandwidth costs are incredibly low and getting lower everyday
- Of course, low or negligible cost of customer acquisition given the power of free to attract users. With over 3.5 million registered users, we have clearly proven that free is a powerful customer acquisition strategy.
- Low cost of creating content given that you can now tap the expertise of eager contributors. In fact, if architected correctly, one can build a content base that is so deep that no single company with its own editorial staff can afford to match. As you point out, Livemocha has successfully tapped the community to build a large footprint of languages (now at 25 and soon over 60). Our site, currently localized in 7 languages, will soon be available in many more languages — again through community based translation.

All of this means that we can keep our burn rate low for a very long time and, therefore, the bar to achieving profitability becomes a lot easier. RosettaStone has been very successful in building a powerful brand with their ubiquitous kiosks and TV advertising (and kudos to them for the amazing marketing machine they have created). However, how long is it before people in the US discover Livemocha in droves via their friends on Facebook or through their local school or library. Aside from our own claims, if you search the internet you will find significant evidence that people find Livemocha to be a more effective and engaging offering. And, while RosettaStone is attempting to move to the web with the recently launched TOTALe offering, pressure from Wall Street is undoubtedly forcing them to price the offering at levels ($999 per year) that don’t cannibalize their CD-ROM business.

We believe that the language learning market provides us with a number of significant monetization opportunities that will lead to successful business model. There are a large number of casual language learners in the market, and a critical mass of serious language learners who are willing to pay for specialized learning content and instruction (as they are currently doing today in brick-and-mortar institutions). Livemocha is partnering with experienced and credible publishers like Pearson to deliver new premium courses that users are paying for — and telling us that these courses offer them unique content and native speaker interaction that they can’t get in their local market.

I have no doubt that RosettaStone and other major language players are watching us closely. However, so far, there is no evidence that they are prepared to deal with the growing challenge that the Livemocha represents to their business models. Thankfully, Wall Street is cooperating with us to keep the pressure on the incumbents to stick to their existing business models.

I am part of the team and therefore I would like to ask your permission to post some info about the site, which we believe will have a better methodology for the lessons because they were developed in collaboration with ACTFL (The American Council on the Teaching of Foreign Languages)

Hello-Hello.com will be a FREE language learning website combined with social networking where members will be able to:

- LEARN: do the lessons online anytime, anywhere

- TEACH: get help from native speakers and help other members to learn their native language

- COMMUNICATE: chat with people around the world to practice the language and make friends

The site will be ready in a few days and people that pre-sign up before the launch will become VIP members so go ahead to hello-hello.com

With the community comes the ability of crowdsourcing the content. That’s why most of the lessons are already available in 26 different languages.

Livemocha also made a partnership deal with Pearson to offer a new English online course.

Livemocha is more taking advantage of the social web than of the slow move of Rosetta Stone. Some public lbraries in the US are now even offering Livemocha instead of RS.

And Livemocha are not the only ones. They are the biggest but there are more and more communities like this: Babbel.com, Busuu.com or Palabea.net to mention a few.