Livemocha Signs Deal with Telefônica in Brazil. Rosetta Stone Loses Money.

Livemocha, the community-based online training platform, announced an agreement with Telefônica Brasil offering high-speed Internet customers significantly discounted pricing to Livemocha's English courses. The deal is part of an agreement with Telefonica Worldwide to offer Livemocha's language courses to Telefonica customers across the globe.

Seattle area-based Livemocha provides self-study language courses that combine traditional language training with practice with native speakers online. The company shares the space with traditional language training companies, like Berlitz and The Wall Street Institute, but competes mostly with self-paced programs like Rosetta Stone (NYSE:RST), Mango Languages, and Fluenz.

But why is this news?

The first part is pricing. According to their press-release, Livemocha's regular price for Active English is R$40 per month (US$24); but under the agreement, Telefônica Brasil's broadband customers can purchase the program for as little as R$4.90 per month (US$2.90). This allows the company to easily penetrate one of the fastest growing technology markets in the world, where there is a huge demand for English training.

The second part is scalability. Contrary to Rosetta Stone, which generated a net loss in the third quarter of 2010, Livemocha's training model maintains the engagement of the student through very efficient reminders and invitations. Rosetta Stone relies mostly on self-motivation, which in my opinion is not enough. In fact, as I mentioned in a previous blog post, I suspect that a high percentage of Rosetta Stone's software is just shelfware, i.e., software that gets bought by a company or individual that ends up sitting on a shelf somewhere and not being used.

As for Livemocha, I have personally taken at least three free lessons and I am constantly being invited to come back and join the community.

In its SEC filings, Rosetta Stone states that it is growing faster internationally (119% in the third quarter) in markets like Japan, South Korea, the United Kingdom and Germany, but that those sales still represent only 17% of their total revenues. By signing a deal with Telefonica, Livemocha has an opportunity to penetrate more global markets more competitively though a powerful channel partner.

If Livemocha manages to get the visibility and branding that Rosetta Stone did with its ubiquitous advertising and retail strategy, it has the opportunity to grow in a more sustainable way than its competitors.

Oh... from an international branding perspective, I believe that both Livemocha and Rosetta Stone are very bad names.