As the anniversary of this blog is getting closer, I started looking through the archives as I do every year. Sometimes, I am really surprised to find posts I can’t remember to have written and a lot of them bring back memories, of course. What a ride!
One of the first startups I wrote about back in January 2009 was Livemocha. Back then, the language learning community just cracked the 1 million user mark and started to offer its first premium content. It was a travel course in Italian priced at $9.95
Now, as we all know a lot has happened since early 2009. Livemocha got a new CEO, raised some cash, partnered with Collins, raised some more cash, took over Brazil and has now over 12 million members.
But they are also still experimenting with the pricing as it seems. Whereas busuu and Babbel have pretty much stuck with the same pricing model since they started, Livemocha did a lot of switching and re-adjusting. I did not keep track of every single change but the last time I checked the site in October there was a new plan called “Gold Key Membership”. It costs $99.95 and gives the learner access to ALL premium content on the site, any language, any course. I think, I remember that Babbel offered something similar in 2010.
To be honest, I found this price pretty cheap but then you need to take into consideration that Livemocha is apparently pretty heavily growing in LatAm which requires some adjustment to the pricing structure I guess.
But back to our number of the week as it is not $99.95 but $9.95. During Christmas season Livemocha cut the price of the Gold Key Membership down to $9.95. Yes, one year access to every premium content in any language for ten bucks.
I would be really interested in the number of people who signed up for this deal and how many new members have joined the platform due to this offer. It’s a really extreme form of A-B testing I guess, but with an email list of more than 12 million people even a conservative one percent conversion rate would equal 120.000 sign-ups = $1.194 million USD.
On the other hand, if I were a user who had signed-up for the Gold Key Membership at $99.95 and got the email that is now available at $9.95 I would feel pretty odd as Livemocha have always targeted the price sensitive customer and positioned themselves as the cheap alternative to Rosetta Stone. To me, seeing it now sell for that cheap would be off-putting to say the least.
I now have this picture of Michael Schutzler in my head, sitting in the Livemocha HQ and saying “One million dollars.”
But back to the $9.95. Let’s have a look in comparison with some other of their experiments. Compared with other experiments Livemocha did with Groupon, this $1 million would entirely go to Livemocha, no 50% convenience fee to Groupon minus the non-used coupons which go to a 100% to the daily deal site.
Pretty interesting numbers and quite in line with the idea of the freemium model. Get a ton of users (emails) over the free offer and then make money by selling a part of them premium products.
But then, I could be totally wrong.