Who needs translators when you have the Rosetta Stone? Founded in 1991, Rosetta Stone provides language-learning software via CD-ROM and online subscriptions. The company's Rosetta Stone Language Library combines images, text, and audio, without the traditional translation or grammar explanations, to mimic the way children learn their native languages. With consumer and institutional customers in more than 150 countries Rosetta Stone offers software for about 30 languages. Its products are available through direct sales channels and at selected retailers such as Amazon.com, Barnes & Noble, and Staples.
Rosetta Stone operates through three segments, North America Consumer, International Consumer, and Institutional. The consumer segments derive revenues from individuals and retail partners. The North America Consumer segment is its largest, accounting for about two-thirds of overall sales. International consumers account for 15% of sales. The Institutional segment, which consists of sales to educational institutions, government agencies, and corporations worldwide, accounts for more than 20% of revenues.
The company makes about 80% of sales in the US. . It has international sales offices in Brazil, Japan, South Korea, and the UK. One of the benefits of its language-learning approach is that products don't require translation into the user's native language, potentially increasing the efficiency of global expansion. Sales and Marketing Most of the company's sales come through direct channels such as call centers and websites. It also targets the home school market with promotional campaigns at trade shows, seminars, and direct mailings. Rosetta Stone closed all of its US retail kiosk locations in 2013. Citing poor performance (as more customer buy online), it shut down its 55 kiosks in malls, airports, and other high-traffic locations in about 20 states. It still has one kiosk in the UK, three in Japan, and 25 in South Korea.
Rosetta Stone has made small strides in revenue growth, with sales increasing between $5 and $10 million over the last four years. Sales were up 2% to $273 million in 2012. As the company moves more of its products online, subscriptions continue to replace CD-ROM sales, and the transition incurs costs of its own. As such, it has not recorded a profit in the past two years. Strategy Although it still holds a leading position in its industry, Rosetta Stone has seen its US consumer bookings decline since 2009 due to the troubled global economy, increased competition, and an evolving media and product delivery environment. To address its challenges, the company is looking not only at experimenting with pricing and marketing, but also delivering more of its offerings online, in both desktop and mobile applications.
Mergers and Acquisitions
In 2013 it acquired Seattle-based Livemocha, which operates online language-learning communities, for about $8.5 million. Livemocha's cloud-based learning platform will aid Rosetta Stone's expansion in that area. The year before it bought Gogolingo.com, which uses games, music, and humor to teach Spanish primarily through pictures and sounds to 3- to 7-year-old children.
Directors Laura Witt and Phillip Clough, through ABS Capital Partners IV Trust, together own nearly one-quarter of the company. Director John Lindahl owns another 15% through Norwest Equity Partners.