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Rosetta Stone, Inc. Message Board

  • themarkdownbin themarkdownbin Mar 5, 2011 12:22 PM Flag

    Doomed, imo, just like the encyclopedia business

    Not that many years ago, there was a lucrative business selling encyclopedias for hundreds or even thousands of dollars per set to schools, libraries, and individuals. In the pre-internet era, they offered a comprehensive and often definitive reference, that could even be updated via annual subscriptions. The downside was that they were expensive, and became increasingly cumbersome to update and even use since they weren't technology based.

    Then CD-Roms came along, and brought far lower prices and a swarm of new competitors, who often produced a superior product as they were not constrained by the limits of legacy products. In a few short years, the encyclopedia publishing business ground to a halt--because CD-Roms were cheaper and by then, most people had personal computers in their homes, so they didn't have to go to the library to access the information.

    And shortly after that, of course, the internet became widespread, and with it, Wikipedia, google, and so on, and the encyclopedia business withered away. The business model of Wikipedia is such that not only is it free to use, but it doesn't even take any advertising!

    Technology seems to move faster these days, and imo, Rosetta Stone's business is just as doomed as the encyclopedia business was. In the next year or so, everyone will have tablets, either the IPAD or some of those awesome Android 3.0 ones that I keep reading about. Some of the Android ones might only be $200 or even less when they ship. They will have App stores with hundreds if not thousands of free language apps(in fact, they have those today). And they will have no interest in paying hundreds of dollars for an application they can download for free or for a few dollars.

    IMO, Rosetta Stone's outdated business and technology model make it like the encyclopedia was just before the internet took off, i.e. doomed. I find it hilarious that they still don't have an app for the Iphone or Ipad or Android(there is a limited app for those platforms that requires a 4e subscription).

    It's not because of technology, it is ridiculously easy to develop an app for those platforms, that's why there are literally hundreds of thousands of them. Quite simply, imo, they just can't risk cannibalization of all of those packaged software sales. Their customers might decide that they are happy with a $10 app, rather than paying $600--and that would be a disaster for them, imo.

    And yet, they are already seeing the effects of that imo. It's not a coincidence imo, that their US business tanked just as smartphones and the IPAD took off Maybe they will be able to transition their business to online, personally, I doubt it, again, all of those things are often available for free and from multiple sources. Or maybe they will build the institutional business, although it is a radically different business model, and requires a very different corporate and cost structure. But imo, that will be a very painful transition to go through.

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    • US Military uses Rosetta, only uses online ! I'm in the army and I have access to 20-30 languages that the army has contracted. All internet based, there's no supply pool full of cd-roms. Not sure what your talking about how they could make the switch to online...I'm guessing that is already their business model. If Rosetta can grab just a tiny slice of the vast international market, they will more then make up for crappy domestic performance. I think this is a great entry point, though not on the low risk side of the house.

    • Thanks for taking the time out to write this exploratory piece. I will make this exercise brief.

      Faults:
      - Comparison of a learning system delivery model to a shift in content delivery (encyclopedias)
      - Correlated delivery vehicle (smart mobile devise) and smart device apps as key input to RST lost sales.

      Have you considered: the learning model complexity, how subtle nuances affect outcome, service, support, scale, community, SaaS model effects on industry and growth, and reduction of piracy?

      Let's change gears and use a complex product comparison for our exercise: databases. MySql is free, why would enterprises and individuals pay for SQL Server and Oracle? Review the above paragragh and reconsider your argument.

      BTW. Look at what date I started posting and it'll give you an idea of when I entered the stock. I fancy myself to be a TA trader, but I never step into one w/o knowing the fundamentals so don't be so quick to judge. I was just having a little fun.

      GLTY

 
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