Up Next In Commerce The Digital Transformation of Rosetta Stone: How President Matt Hulett Earned Trust Transforming an Analog Business into a Digital First Experience
Sometimes an opportunity comes along that’s too good to pass up. For Matt Hulett, that happened when a friend approached him about a job at Rosetta Stone. The famous language-learning company was stuck in the analog world and they wanted Matt to be the guy to bring them into the digital future. It was no small feat, but Rosetta Stone has made progress on the digital transformation and Ecommerce journey, including introducing a subscription model and overhauling its tech stack and app. On this episode of Up Next in Commerce, Matt discusses the challenges of transforming a world-famous brand, including how he chose a free-trial subscription model over going freemium, what it was like to achieve buy-in from investors, and the future of Ecommerce and why he thinks social selling still hasn’t reached its full potential.
3 Takeaways:
- Even the most well-known brands need to earn their stripes when entering a new space. When a previously offline product starts playing in the digital world, it has to prove to customers that their investment in this new space is worth it
- AR and VR are tools that Ecommerce platforms will be exploring more in the coming years. If you can provide a more immersive experience, you differentiate yourself from the competition and create more value to your customers
- Stay true to the brand and don’t try to compete on business models that don’t fit
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Up Next in Commerce is brought to you by Salesforce Commerce Cloud. Respond quickly to changing customer needs with flexible Ecommerce connected to marketing, sales, and service. Deliver intelligent commerce experiences your customers can trust, across every channel. Together, we’re ready for what’s next in commerce. Learn more at salesforce.com/commerce
---Transcript:
Stephanie:
Welcome back to Up Next In Commerce, this is Stephanie Postles, co-founder of Mission.org and your host. Today, we're going on a digital transformation journey. Matt, how's it going?
Matt:
Oh, really good. A little cooped up here like we all are, but I'm hanging in there. How are you doing?
Stephanie:
I'm doing well. Yeah, same hot, very hot. It's 92 here and the places in Silicon Valley usually don't have air conditioning so just a little sweaty in the studio.
Stephanie:
So I must admit, I have not checked in on Rosetta Stone in a while and when I started browsing through you guys' website, I was like, "Whoa, you all have come a long way from CD-ROMs and everything that I was used to when I was growing up and thought of Rosetta Stone." So I'd love to hear a little bit about what brought you to Rosetta Stone and your background before you joined.
Matt:
Yeah. It's interesting, just before I dive in, it's rare to join a company where everyone knows your brand and your product like just about everyone in the United States does Rosetta Stone.
Matt:
And so actually, it's an interesting story because there's not many ed tech companies that are a public companies, you could count them on your hand and the company has been a public company for over 10 years.
Matt:
It's been around for 27 years and it's a really interesting backstory on how the company was founded and so some of that came into play with what got me attracted to the business.
Matt:
So a friend of mine who's a recruiter talked to me about this opportunity and I typically do restarts, pivots as they are [crosstalk] for startups.
Matt:
And even the startups that I join are typically pivots. So there's kind of this pivot transformation story that typically is a draw for me for whatever weird reason why I attracted to these things and when he said, "Oh, it's Rosetta Stone."
Matt:
I was like, "Oh, the CD-ROM company, the yellow box." I was like, "Yeah, but they're trying to be digital." I'm like, "They're not digital yet?"
Matt:
And so the draw for me was typically, I take on jobs and assignments that are very difficult where I have to either completely change the strategy or get new financing on a new idea.
Matt:
There's generally something really, really wrong and Rosetta Stone was so intriguing to me on the surface for the intellectual reasons why they brand the product, people love it.
Matt:
It's not one of those iconic brands that people are afraid of. It's not like saying, "Matt, do you want to restart Myspace? I was like, "Oh my God, it's Rosetta Stone, of course."
Stephanie:
That's your next project. Myspace.
Matt:
Yeah.
Stephanie:
Just bring it back.
Matt:
Making it great again. Too soon. But what personally drew me, that's kind of the intellectual business level, what personally drew me into the company was and is the fact that I'm dyslexic, and a third of the revenue for Rosetta Stone is actually one of the fastest growing.
Matt:
We sell software into K-12 schools primarily in United States that help kids learn how to read, better learn how to read which is a problem. I've seen my own youngest son struggle with his dyslexia as well.
Matt:
And so on a personal level, it's very emotional when you can kind of tie that emotional tie to a company to its mission and vision. It's really intriguing. So it's been one of the best career decisions I've ever made.
Stephanie:
Yeah, that's great. Were there any universal truth that you discovered as you are kind of pivoting from different companies and trying out different roles and turning them around? Was there anything like yeah, universal truths that you saw while doing that?
Matt:
Well, that's a great question. Yeah, a couple things. One is it's so crazy to me, when I step into a company how basically from week one, maybe day one, no one really understands how the business works, like truly understands it.
Matt:
The key insight, what makes the business special, what can you do to apply capital or a time or attention to improve your strategy or your outcomes? It's just so, it's so weird when you go to a business that's operating, and maybe these are the only businesses I look at where it's not quite tight inside around the strategy and what makes the kind of the economic engine run. I think that's the biggest one that I see off the top of my head.
Stephanie:
Yeah, that's interesting. I can definitely see a lot of companies struggling there especially as they grow bigger and they have many business units and everyone's kind of chasing a different path, I can see people losing sight of what's important and what's actually driving this business like you're talking about and making it profitable or maybe it's not, but it's the lost leader, something that we still need. So yeah, that's really interesting.
Stephanie:
So when you joined Rosetta Stone, it hadn't been digital. I mean, only a few years, right? I think it stopped, maybe it didn't stop doing CDs, but it went online. Wasn't it in 2013?
Matt:
Yeah, I would say it was like half digital. What that means is we were selling one of the most expensive products in the App Store at the time and we didn't really have the concept of really effective sales funnels, a well thought out pricing and packaging strategy based on the type of customers that we're going after.
Matt:
We didn't have a lot of mobile native features and capability. So I would say it was kind of a port of the CD product in the mobile environment and that was kind of the approach.
Matt:
And also the approach was really not to focus on the consumer business. So not only did we make this kind of business model and digital transformation move, but also when I came into the business, the big focus was for the language side of the business was to focus on enterprise customers.
Stephanie:
Mm-hmm (affirmative).
Matt:
I thought that was actually the wrong move because enterprise is difficult, it's a smaller market, yet consumers where everyone knows Rosetta Stone, everyone likes the product. They actually remember the CD products in many cases and want to use them again, but they want to use them on your phone.
Matt:
So I thought, "Well heck, everyone knows who I am from a brand awareness perspective, I'll have an easier time deploying less capital against the consumer space and enterprise space." So there was not only just a business model shift, but also a strategy shift.
Stephanie:
Did you end up sticking with that business model shift to focus on enterprises or did you kind of make it a mix of 50/50?
Matt:
Oh, good question. So it is about 50/50 today, although consumers now are growing fast. I mean, we're a public company so I can only speak to our public company numbers, but in Q4 of last year, we grew the consumer business about 20% year over year and this is from a business step was growing at single digit.
Matt:
And then our last reporting earnings quarter, we grew the consumer business around 40% year to year and the enterprise business has struggled more primarily because of the C-19 impacts this year because obviously, we're in a never before seen macro economic headwind, but generally, it's the right decision to make and I view the enterprise business as more of an extension of what we want to do for all adult learners versus creating as a separate entity.
Matt:
That's a long answer to say consumer turned out to be the right move. It was not clear when I joined the company that even joining Rosetta Stone was a smart move.
Matt:
I had a lot of folks that I know, acquaintances more so than friends say, "Good luck. There's a lot of error in this company." And I just think it's just a really exciting problem and it's a ... Sorry to keep going because I've had maybe 80 cups of coffee today and just, I don't know.
Stephanie:
No, keep it up.
Matt:
It's like the two big verticals that are the most expensive that increased their prices to consumers over the last 50 years are healthcare and education and they have the lowest penetration of digital, and like, "Well, those are hard problems to solve. Why wouldn't you want to be involved?" So anyways, I think it's really fun.
Stephanie:
Yeah, that's fascinating. So when you came in, what were expectations for your role? What did people want you to do? Did you have a 90-day plan? How did that look?
Matt:
Oh yeah, if anyone thinks these are scripted questions, these are not scripted questions. These are very good questions. So during the interview process and I'm sure you've had this experience before, when you meet with somebody in a company, you're like, "I'm going to do whatever it takes to get this job."
Stephanie:
Yup.
Matt:
And I had one of those experiences with Rosetta Stone. I knew I wanted this job and so I came into maybe the first or second interview with a 90-day plan before I even started, this is the first or second interview.
Matt:
And the 90-day plan did change slightly because then I knew a little something, but I've done enough of these transformation projects, these pivots where I knew there's these basic building blocks in a format, I have a toolbox of things that I do that really didn't change.
Matt:
The inevitable strategy didn't know before I started, I didn't know the team members, were they the right fit or not, I didn't know any of that, but the basic building blocks I definitely put together.
Stephanie:
Got it. So what was on your roadmap, did you have to think about how to re-platform to support your commerce journey and shifting into enterprise and then consumer? What was on that plan that you laid out?
Matt:
Yeah, and I kind of learned some of this years ago when I was ... Sometimes I think my best work, I can't speak for you or anybody else, but my best work is when I'm completely ignorant of the challenges in front of me and so when I was younger, I worked for ... Well, actually, we sold our company to Macromedia and they had a division called Shockwave.
Matt:
And Macromedia at that point was not bought by Adobe, and this is Web 1.0 bubble, so I'm dating myself which is not legal in Washington State and these jokes have all jail time.
Stephanie:
[crosstalk] get us in trouble.
Matt:
I know. And so we step back through that experience and I learned a lot from the Macromedia Adobe kind of M&A folks about how to approach a problem. And that plus some other work experience over time really got me to the point of thinking through things from I call it the insight, the math in the heart.
Matt:
And no one framed it that way to me, but that's kind of how I framed it and so when I think about the insight, I think about the addressable market, the position that we are in the marketplace, so supplier's demand competitors.
Matt:
Then I think about what value we're driving to consumers, what value are you driving to your suppliers if you have them. And then what are the decisions you're going to make based on the strategy that you're laying out for the best outcome?
Matt:
So you want to grow market share, you want to grow revenue share. Do you not have enough capital? Do you actually need to raise capital and buy companies in order to get size and scale that's the outcome?
Matt:
So it's kind of a process that I've done over time and I want you to figure all that out, and it takes a while, maybe 90 days, maybe a little bit more, then it's really like how do you put a process together and dashboard is a little trite, but how do you actually run the business so you understand what things are working, the unit economics, what key layers of the business are you looking at, and then figure out an organization to support that and then you find the right team.
Matt:
And it sounds kind of exhaustive in terms of an answer, but I think too many people come in situations and they say, "Okay, I started this job, I got to restart it. What's my team look like?"
Matt:
And it's always I think the tail wagging the proverbial pivot dog and I typically, you can find startup people that are good at startups and sometimes, you find startup people that are good at later stage.
Matt:
You can find every dynamic possible, but until you do the work on, "I need this type of person for this type of growth stage, it's the right person the right time."
Matt:
If you don't do the work upfront, then you end up having a team that isn't the right team for the outcome that you want.
Stephanie:
Yup. Yeah, I've heard ... I forgot who said that startup advice where a lot of startups especially around here, are looking to hire that VIP level person, you have to pay a bunch of money to and someone was making the point of like, "Well, will they help you right now where you're at?"
Stephanie:
And it's okay to kind of grow out of people, but it's not okay to hire someone who's way above that actually can't get their hands dirty and do the work of what needs to be done right now.
Matt:
That's right. There's lots of people that have different approaches. I actually like to be pretty data driven in terms of how I think about people so I use like employee satisfaction studies and I use different personality profile tests.
Matt:
Obviously, you're not trying to like ... Hopefully, no one is like applying an AI filter looking at my reactions on this live video, but you can go overboard with data, but I do feel like you need to get the right alchemy talent for your team.
Matt:
And I've made mistakes where you have that senior person that doesn't want to get their hands dirty when you're like, "Look, I'm in build mode, I'm painting the fence, and I'm the CEO and I'm painting the fence and then I'm talking to the neighbors and driving Uber ..."
Matt:
The alchemy of that is hard to do, but that's a long winded answer to say there's there's a process and I think it's figuring out what's special about your company, how do you improve it, how do you run it? How did the inputs become the outputs and then what team is required for that?
Stephanie:
Yeah, very cool. So with the company having to shift as they did to go online and create mobile experiences, what kind of challenges did you see come up when you guys were going through that shift?
Matt:
Yeah, so there's multiple. So I always think about kind of the four constituents in most businesses, its investors, its customers, it's your internal employees and society.
Matt:
Not in that order. The order depends on lots of different things and so when I kind of checked down all those boxes, I think the big one, the first one I pick is investors because you're having to explain a model where the CD is purchased up front, it's very expensive versus you don't get all the revenue upfront, you amateurize that revenue and recognize it over 12, 24 whatever terms of the span of the subscription.
Matt:
So it's a change in terms of how you're reporting revenue, explain it in a consistent way, explaining the new metrics of subscription is challenged one I think from an investor perspective explaining why we have a language business, the Lexia business that I mentioned that focused on literacy is a 20 to 25% growth business, it's growing pretty nicely and language was declining.
Matt:
So then explaining to investors why do you still have this business and why are you changing the direction from enterprise to consumer, I think for employees.
Matt:
I always like to think through the employee piece, get the employee piece right, you can do anything and so getting the employees reason to believe, I was the first president to actually run the language business.
Matt:
It had multiple owners of the P&L and I was the first person probably since the CEO, we had one CEO that that started Rosetta Stone and took it public 20 plus years ago.
Matt:
I was the first single leader to ... I also tried creating a reason to believe a compelling vision, mission and culture and then when I think through kind of the customer piece, it wasn't as hard to be honest because there was so much brand equity that was good brand equity that doing little bit of things in a way that was kind of planful and data driven actually generated a lot of great outpouring of support.
Matt:
So the customer side of what we were doing wasn't as difficult as I would have thought and we also had an enterprise business that had already integrated things like digital tutoring with the software and demanding Fortune 500 companies.
Matt:
So there was some DNA in the company where we knew, "Boy, you can earn every interaction with every interaction." So that was that piece and then later, I started building more hooks into society as part of that and so I kind of view it as a self-fulfilling positive effect of you take care of your employees, they take care of your customers, the investors get great outcomes, and society benefits and you keep kind of turning this crank and you start getting much more reflective about it.
Matt:
And it does have, it does pay off. It takes I think, in general, I think people brag about how fast they can turn around companies. I don't know why people brag about that.
Matt:
I don't know, my experience is two years and taking a business from bad to like growing, at least, believing in itself is very hard and so I look at those four factors and I think the society piece is one that's super important that a lot of companies pay lip service to and there's a lot of discussion especially in Silicon Valley about some large companies that are controversial there.
Matt:
But I'll give you a for instance why if you can tie together the vision, mission, culture values to society, how that's self-reinforcing, we had a obviously horrible global pandemic that we're still pulling ourselves out of and everyone's kind of living through this experience at the same time.
Matt:
And we basically took just two days to decide that we're going to give away our software for free for three months for students. And we run a current business and selling software to enterprises and adults and we said, "You know what? We know that parents are actually going through hell because there's kind of a make your own adventure right now and schooling."
Matt:
[crosstalk] and I can feel it myself and we are like, "Oh my God, this is so stressful and the anxiety I heard from our own employees about it was overwhelming and I'm asking them to work harder."
Matt:
And so we said, "You know what? We're going to give away three months subscription and we're going to just do it and you just have to ... The parents have to put their email address in the school and that's it."
Stephanie:
Mm-hmm (affirmative). That's awesome.
Matt:
And we're not a free ... We're a paid subscription product. We're not, there are other competitors that have a freemium model and as you know, changing models or mixed models generally don't have a long history of working and we said, "You know what? We're just going to do it."
Matt:
And so the team decided to do it, I just said, "Yeah, let's do something." They said, "Here's exactly what we're going to do." And it was live, and then the amount of positive benefits, we got that from pure impressions.
Matt:
It actually helped our adult business to ... Adult language learning business. That's just one quick example of when those things all start working together.
Matt:
It's transparent, it's engaged and it's consistent. It becomes kind of operating leverage as well. So it's fun. It's fun to see how that work.
Stephanie:
Yeah, that's great. It's definitely a good reminder of do good things and good things will come back to you. Did you have any struggles with maybe like surges and people logging in and trying to get on the platform that maybe you hadn't experienced in the past? Because it was maybe a bit more predictable since it wasn't free?
Matt:
That's a really good question. Not on the system, the system's basis, but certainly from a support basis because we had a lot of, we outsource most of our customer support, and we debated for a while whether we we're going to continue phone support, we still do and I still debate that one, but a lot of our service providers were in outside United States and they all of a sudden had to work from home and then some facilities shut down and so we are just constantly playing whack-a-mole with our support organizations.
Matt:
And then also, I would say to our frontline heroes were our tutors and we employ a lot of highly educated tutors that have degrees in language learning and they all work from home primarily, they're part-time employees.
Matt:
And they turn out to be like our heroes because they took some support calls in addition to one-on-one digital tutoring. And so there was unique ways in which we had to adapt with the demand, but I would say more on the demand side regarding the support elements and we definitely saw a surge do the work from home trend as well, but that didn't impact kind of service levels and general software.
Stephanie:
Okay, cool. And I could see it being a bit tricky to develop and maintain a platform that has so many different layers to the business. I'm thinking about the enterprises who are going on there and buying seats for employees, and I'm thinking about the school is going on there for students, and then the individual consumer like me who's maybe like, "Hey, I'm going to Italy and I want to learn Italian."
Stephanie:
I don't know, but like it seems like it would be pretty tricky creating a platform that does all of that. How do you think about creating that so everyone gets a good experience and also being able to monitor and measure it in a successful way?
Matt:
Yeah, I've never seen the complexity Rosetta Stone before at the smallest scale, but what I mean by that is we have three businesses and we're a small cap public company. So that's unusual and the business was run on the language side ... Well, let me step back.
Matt:
So the literacy business is a business that was acquired seven, eight years ago and that's a 30-year-old company that was acquired, it's called Lexia and it works as a distinct operating unit from my business and is run by an awesome gentleman.
Matt:
And I use that word loosely and if he's listening, sorry Nick, he's a great guy and so passionate and his team is so good and it's ... I've never seen before a product that's built with like academic research combined with awesome data product engineering that gets results.
Matt:
It's just, I've never seen anything like it and they had the time to build this product over these many years, it was always digital first and so they're run separately.
Matt:
My language business was run on two different tech stacks. Actually, it was like five and when I started, I was like, "Well, wait a minute, why is this product that looks the same running off this underlying architecture? Why don't we move everything to react?"
Matt:
As I kind of went through this morass of tech stacks, it was a lot of M&A that generate a lot of complexity and a lot of tech debt. And so I would say majority of our innovation was not innovation, it was just keeping these old tech stacks up.
Matt:
So from an R&D perspective, in addition to all the other complexities we just talked about in this interview, I was trying to grow the consumer business, trying to change the business model, swapping out new team members for more growth orientation and doing a huge tech migration.
Matt:
And the complexity around that is mind boggling. We finished that late last year like de-flashing like old weird services, moving to a services architecture. All that stuff we end up doing and inevitably, the goal is to have one learner experience, just like you use Google, Google Mail for your enterprise, or personal.
Matt:
There were some admin privileges and other things that are associated in the back end, but in general, the product kind of looks and feels the same and that's, the inevitable goal which we're very close to execute on.
Stephanie:
Got it. Were there any pitfalls that you experienced when going through all those different pieces to the business or anything where you're like, "When we implemented this, or we move to this type of tech stack, this is when we saw a lot of improvements with conversions or anything around the consumer or enterprise business."
Matt:
Yeah, just on conversions, yeah, one thing on that is interesting is the amount of improvement we saw just with like putting different team members with specific goals and this is going to sound kind of crazy because everyone is going to like, "Yeah, he's talking about agile."
Matt:
Just getting very specific about areas in the funnel to improve and how to adjust the trial experience at certain times, and experiencing and showing customers different things at different times.
Matt:
That had like a crazy amount of upside for us. And I would say less architecturally that we see an improvement other than we had just less stuff that wasn't moving the innovation forward, but just these small things have big impacts and get and I must say like if any one of my team members is listening to this and say, "You haven't solved all that yet is."
Matt:
It's very difficult to take a business that is so complex, and then all sudden kind of say, "Look, we're going to reduce all the complexity, networks are innovating again." I think there's still a challenge of like, faster, smaller teams, we use a safe framework which is kind of scrum like.
Matt:
I don't think we figured all that out yet, but it's way different than when I came in and felt very waterfally to me. We're going to issue a press release, what this release is going to look like in one year and we're going to work back from that, I'm like, "Yeah, that's very Amazon."
Stephanie:
Yeah, yup.
Matt:
I'm like, "Well, how do you even know this is the right thing if you don't have any customer?" So there was there's a whole evolution of trying things, validating them, making sure that you're deploying enough capital against that makes sure it gets a fair shake, but not too much where you're, you're in over your head and we've had some public black eyes on some of our tests, and I don't care.
Matt:
We were trying some things internationally with tutoring, it didn't work out, it didn't have the capital honestly to support some of it and I kind of feel like those are good experiences to understand whether you're going to invest more in something or not.
Matt:
And so I think the fact that we can start doing those things now because we simplified the platform or if possible. Yeah, I think it's hard to say no to things and yes to things. And some of that discipline is easier when you're a startup because you just don't have people to outsource to.
Stephanie:
Yup. There's always an excuse. Nope, no one else can help us with that. Can't do it.
Matt:
Yeah. There's never like I'm a product manager by training and I've used every product manager tool under the sun and now I've kind of just resulted in my using Google Sheets again and what I'm trying to triage like epics and themes and stories, and I still like to play around with those types of planning elements, I just always look at all these people in these points available. I'm like, "You guys have no idea the luxury we have."
Stephanie:
I'm sure they like hearing that.
Matt:
Yeah, there's nothing more pure than a startup and it's like five people, five engineers and like a product manager that codes and the seat goes, doing UI, UX and it's ...
Stephanie:
Yeah, that's really fun. So you mentioned earlier a free trial which I actually went on Rosetta's website and I ended up going through the entire trial of learning Spanish. How did you all think about creating that free trial and actually convincing people to do it?
Stephanie:
Because a lot of times, I think I would see something like that and I'd be like, "Oh, that's too much time and I don't want to start that process right now."
Stephanie:
And I eagerly jumped in and started doing the lesson plan because it was engaging and fun, and it kind of felt like the real world with the person walking around and you're stopping and talking to them. How did you think about creating that? So it actually converted users into paying customers?
Matt:
Oh, thanks for saying that. Yeah, I think we have a long ways to go. I think in terms of what we could be doing is we're just, I just feel like we're sprinting to the start line because of the late start, but I think the core piece is for most companies and they think about like what business do you want to be in a lot of people will default to like whatever their venture capitalists said they should do from their other companies they manage or whether they read on TechCrunch or whatever, or listen to on this program is I think you have to be very specific once you figure it out the approach to the product that you're going after.
Matt:
Are you going to be freemium? Are you going to be paid trial? Or are you going to be for lack of a better term I call it force-trial or upfront trial and there's elements of this that change, there's kind of nuances.
Because that's more of a nuanced discussion is the freemium players in the language space for instance would be Duolingo.
Matt:
How do you get the most amount of MAUs, Monthly Active Users and get enough of them to convert? Or the Spotify example, and you're using basically cap ex as cap, you're using your R&D to drive user and usage and that's kind of Slack-like.
Matt:
Slack is slightly different obviously. Then the paid trial is, "Well, I have enough of something that's good that I want a lot of people to use it, but I want the conversion to be pretty good."
Matt:
And so for the first one with freemium, you have to say, "Okay, it's going to be so fun and compelling and I'm going to actually invest in growth that isn't there yet because I think I have scale effects —I can crowd out everyone else."
Matt:
The second one is I actually have a pretty good product, I need enough people to use it and then feel like I use it enough to want to use more of it. And that's what I decided to do and I'll explain why.
Matt:
And then on the upfront paid thing is typical like for low ACV, Annual Contract Value SaaS companies you'd see, please just call my ... Just call us and we'll walk you through it with one of my sales reps.
Matt:
And we'll do a guided tour through the demo or whatever and the decision why we did the second one was it was a good decision and is people knew enough about what the Rosetta Stone brand was like that we knew people would want to try it and that for people that remember what it was like, they definitely would want to use it again and we felt like the pinch was more compelling if we gave everyone a little taste of that.
Stephanie:
Mm-hmm (affirmative).
Matt:
We could have said, "Please pay up front." And we're the gold standard and giddy up, but we felt like we needed to earn our stripes a little bit into proving to people that we weren't just like a port of a CD product.
Matt:
And so that's why we decided to do that and we've played along different roads before. We've never done full freemium and I would argue at this point in the market, we would not be better served to do that because Duolingo has done a really good job of growing their monthly active users and have built some advantages there and we're not trying to play that game.
Matt:
I'm trying to play the game of being a really good, effective language learning product and I'm trying to set the tone in the trial experience that when you're using the product, it's not going to be like a game.
Matt:
It's not going to be like Clash of Clans. I guess Clash of Clans is a bad example, or the jewel or like Candy Crush I guess is what I was thinking of.
Matt:
Every day, I collect coins and I'm collecting coins to benefit my gameplay. It's kind of how I think about Duolingo a little bit and it's ... I think they're masterful of what they do, but I think they're designed to do something different than what I'm trying to do.
Matt:
And if you're serious about learning a language, and you stick to what I'm doing and you do a couple tutor sessions that we offer, you're going to get there.
Matt:
And so the business model and what we're trying to do in terms of posture, not market share, but revenue share really drove kind of the philosophy on the trial experience.
Stephanie:
Yeah, it definitely, it felt more serious especially where you could speak in the language and it would tell you I guess if the tonality was right, and if you were saying it correctly, and it would keep kind of advising you on it, once I saw it had that feature, that to me was when I was like, "Whoa, this is really serious, and I better be ready to learn this language because it's not like a game, it's not just saying random words."
Stephanie:
You're actually kind of conversating and having to hear yourself which I think is really important. That seems like a big first step to getting people to try it.
Matt:
It's an interesting observation because we are very oral first in our pedagogy. We want people to engage with the product and speaking is actually just in general a really good way to learn and then the key outcome of speaking well is not sounding stupid.
Matt:
And so if you're trying to learn a language, you want to sound somewhat authentic. So for Rosetta Stone, I would say, for anyone that really wants to learn a language, we'll get you there, but if you're just kind of trying to build like, it's like counting your calories kind of.
Matt:
If you wanted to do something like that, then I would say, pick a freemium product over ours and yeah, it's not like super intense scary, but it's like, "Yeah, you better do your lessons before you do your group tutoring session."
Stephanie:
Yeah. No, that's, I mean, that's great to incentivize people like you're paying for this, you might as well get the best out of it. Is there, so one thing I was thinking when I was interacting with the free trial was, "Wow, this would be really cool if there was like a virtual world where you could be walking around and talking to other students who are learning."
Stephanie:
Are you all thinking about any technologies like that to implement or is there anything on your radar where you're like, "We're moving in this direction or planning on trying this tech out or this digital platform out?"
Matt:
Yeah, we've played with VR in the past. I've been kind of like bearish every time someone says, "Let's go into VR." I'm like, "This is [crosstalk 00:39:27]."
Stephanie:
It's a hot word for a while. VR everything, it doesn't matter to the problem.
Matt:
Yeah, I know and I have a lot of friends. One really good friend of ours, she has a pretty successful, his definition of success and I think it is honestly successful VR games company, but like I have a lot of other friends that went into VR that gaming or especially verticals that just had a hell of a time just because there's not enough handsets that are available.
Matt:
Well, we have dabbled in in terms of immersive experience. I think what you're saying is is there a way to since we're immersive, use technology to make it even more immersive and what I really want to do is enable more AR in our experience.
Matt:
And we have like a little feature called seek and speak where you can ... It's like an almost a sample app where you can use your phone, we use ARKit to do a treasure hunt for things around your house like fruits, objects around your house and incorporate that in your speech practice.
Matt:
And I always thought that was like a really cool thing for us to expand into and if we ever get the Apple visor, some AR HoloLens or whatever, it'd be cool to start interacting with your world around you, not just with translation, but also to see if you can actually interact with folks that are kind of ambient around that experience.
Matt:
I personally and maybe this we're going too deep here, but I always thought it'd be cool if like I can visit another country and just decide how much of the spoken language am I going to generate myself, how much am I going to have my device do it because I'm not going to spend the time.
Matt:
And then how can I phone a friend? How could I have my tutor or my guide integrated experience where I'm going to sound really authentic if I do this or here's an experience that I could do here.
Matt:
I think the goal for language learning inevitably is different based on where you are in the world, but if you're from the United States or one of ... Maybe some European countries like the UK, it's kind of like this is a cool way to get engaged with a culture.
Matt:
If you're not in those countries, learning English primarily is a necessity and so I think some of these AR ideas that you just mentioned would be really good and speaking more frequently to other folks that are even not native speakers, but just trying to generate language is a very good way to teach.
Matt:
We have a product coming out called Rosetta Stone English this summer, literally like a couple months and it is a version of Rosetta Stone for EL kids or English Learners K through six.
Matt:
And this product is an oral first product and this blew me away. The stat if you're trying to teach a kid English primarily from lots of different countries is written communication.
Matt:
It's like 20% spoken and so our product is like 70, 80% spoken because this ... And so it's just really interesting. What could you do that's more immersive using AR or VR?
Matt:
I think there's, I'm with you. I think there's a lot of cool things you could do and I think you could enhance the travel experience quite a bit. I think you could enhance the young learner experience quite a bit. I think there's so many cool things you could do.
Stephanie:
Yeah, I completely agree and there seems like a lot of opportunities there. So what kind of disruptions do you see coming to the world of ecommerce and online learning?
Matt:
Yeah, it's a weird market and it's weird because like depending on what we're talking about in terms of overall commerce, it's like a $6 trillion education market, 6 trillion.
Matt:
Consumer is probably the largest out of that and then obviously, there's higher ed, there's middle school, high school, there's elementary, and then there's adult education and then where it's coming from, is the consumer paying, is the government paying.
Matt:
And so take all this aside, less than 10% is digital right now and I think there's going to be this massive realization and awakening because of the C-19 pandemic of everything that I do has to be digital.
Matt:
And it's not that we're replacing teachers, it's how do we integrate digital curriculum and conductivity between the teacher and the student, how do I build a data layer that personalized that experience.
Matt:
I think that can happen between, language learning, it can happen in lots of different curriculum like reading and writing. And not having a digital enabled kind of curriculum I think is going to be like if you don't have a solution for that, if you're an education system, if you're a college, if you're whatever, and if you don't offer these types of products in the future, you're going to go the way the dodo bird.
Matt:
I think higher education has a wake up call. J.Crew, I like J.Crew, they're in bankruptcy now. Hertz, I used Hertz. They're in bankruptcy now and I think there's this massive pull forward right now that's happening because the product that we've been using in education hasn't changed in like 40, 50 years.
Stephanie:
Yup.
Matt:
It's the same problem. If I time warp myself from 50 years ago into most classrooms, it would look the same.
Stephanie:
Yup. Yeah, I've always kind of thought that a disruption was definitely coming around higher education, but this seems to have moved everything forward by many years and especially around K through 12 where that felt like it would be much harder to change.
Stephanie:
For colleges, it's like, "Okay, now it's changing pretty quickly with all the boot camps coming out and company's not really always requiring degrees, at least in this area."
Stephanie:
But K through 12 felt hard to change and it feels like this is going to be an interesting forcing function now that like you said, a lot of kids are home and parents are figuring out how to be a part of their education more in the online learning process.
Stephanie:
It just seems like there's going to be a lot of opportunities that come up because of this.
Matt:
Yeah, I agree. And I also think that now I'm sounding like the tech utilitarian, but I would say that ed tech and I'm not from the ed tech space, but I am in it now.
Matt:
I would say that the ed tech providers that ... We're now entering the third wave I guess is how I think about it. The second wave which is typical of most other businesses that you and I have seen before, like ecommerce or sales ops tools, now you can talk about those and go, "Remember Omniture and it was badass?"
Matt:
Yes, it's now part of Adobe Cloud Matt is when you talk about these generational shifts in how we think about things, I think a lot of the ed tech players, people who are selling software to schools or directly to the parents or kids or whomever, they've definitely oversold or oversold the efficacy of some of those products.
Matt:
And when I talk about digital transformation, I'm not talking about the ability to do things self serve, and have the teacher look at some flat experience.
Matt:
Right now and this is not against teachers. Teachers, they're like little mini MacGyvers to me. I mean, they're like doing amazing things streaming together curriculum on the fly.
Stephanie:
Yeah, both my sister and my mom are teachers and I do not know how they're doing it and how they had to pivot so quickly to being in the classroom and my sister is actually a ESL, English as a Second Language teacher. Yeah.
Matt:
Oh my gosh, okay.
Stephanie:
Yup, because I have a twin sister and she always tells me about the difficulties that she's experiencing right now trying to bring her students online and develop curriculums online and a lot of them don't have internet access and it's just very interesting seeing how they kind of develop workarounds to make it work for their students.
Matt:
Yeah, my criticism of education isn't the teacher clearly, a lot of it is kind of the cost basis in the bureaucracy and when I talk about ed tech, it's like I think it comes down to and this is not a Matt Hulett Rosetta Stone specific thing is educating a group of young individuals or even old individuals, it doesn't matter the same way at the same time makes zero sense.
Matt:
And so building in the ability for the student to do some things themselves, having a data layer so that a teacher understands the areas in which that student is struggling, and so that the instruction becomes very personalized.
Matt:
It is generally what I'm talking about and it's right now, I think we have a billion and a half young kids around the world that don't have access to computers.
Matt:
And if they do have access to computers, they're scanning in their Math homework and sending it to a teacher. Well, who knows if I struggle for five minutes on this problem versus long division versus multiplication? The teacher doesn't know.
Matt:
And so I think the ed tech software that I'm more in favor of what I'm speaking about is how do you build curriculum-based, efficacy-based software, not unlike what your mom and your sister think about because they have degrees and know how to actually educate someone, they're not software [inaudible 00:49:10].
Matt:
And if they're wanting to provide very explicit instruction, my guess is they're really swamped. They've got other things they need to do, they're probably paying for materials that are [crosstalk 00:49:22].
Stephanie:
Yup.
Matt:
And so I think about all these stresses and we're asking them to provide excellent education, it's just, it's too much. And so I really feel like this third wave of technology, and I think it's going to happen is it's going to integrate this we call AI and HI, how do you integrate the best of what software can do and integrate that into the lesson planning of the teacher versus let's try to create AI for the sake of AI and disintermediate teachers which I think is ridiculous is and that's what I'm talking about.
Matt:
Because I see a lot of tech companies playing the game of ed tech versus education companies that are actually trying to be technology companies.
Matt:
I think the latter will be the software and the providers that will end up actually being the most successful and the most adopted, but obviously, I'm passionate about this because I've seen this with our Lexia software.
Matt:
And we have like 16 plus academic studies that show that the software works and I'm like, "How is this possible that two-thirds of kids still today by the time they're a third grade or reading below their grade level that continues through eighth grade?"
Matt:
Two-thirds are reading below level. How is this possible? And I'm not here to tell my own software. I'm just like, "Why is this possible?" Well, it turns out we don't train teachers to teach kids how to read.
Matt:
There's an approach to it, and we don't do real time assessments of kids struggling, the teachers swamped, they don't know what's going on.
Matt:
Anyways, I could talk about this for hours, but I do think there's this world where at some point, the $6 trillion business of educating all these kids and adults and young adults will be digitized.
Matt:
And I think that will be an interesting space. Ed tech is that one space where most VCs wouldn't want to touch.
Stephanie:
Yup. Yeah, I know. It's a hard ... I mean, health care and education. It's a hard space. So yeah, I completely agree. I know we're running into time and I want to make sure we can jump into the lightning round.
Matt:
Okay.
Stephanie:
Is there any other high level thoughts that you want to share before we jump into that?
Matt:
Nope. I think I hit the verbose button when I answered that question, but I didn't realize you have some familiar background on education which got me going so I [crosstalk]
Stephanie:
Yeah, no, yeah.
Matt:
I will be [crosstalk] lightning round.
Stephanie:
Yeah, we need a whole other podcasts where we can just talk education stuff and I can have my family be the call-ins and they can give us a little advice and ideas.
Stephanie:
All right, so the lightning round brought to you by our friends at Salesforce Commerce Cloud is where I ask a few questions and you have one minute or less Matt to answer. Are you ready?
Matt:
I'm ready.
Stephanie:
All right. What's up next on your reading list?
Matt:
Words that matter. I don't know the author.
Stephanie:
Cool. What's up next on your podcast list?
Matt:
This podcast of course.
Stephanie:
Hey, good. That's the right answer.
Matt:
And then Masters of Scale. There's a new podcast actually with one of my competitors from Duolingo.
Stephanie:
Oh-oh. Very cool. Yeah, that's a good one. What's up next on your Netflix queue?
Matt:
God, it is embarrassing. Do I have to say it?
Stephanie:
Yes you do.
Matt:
Too Hot to Handle.
Stephanie:
Oh my gosh. I can't believe you're watching that. I'm judging a little bit, but I've also seen a few episodes. So if you were to choose a company right now to turn around, not Rosetta Stone, some brand new company, not a brand new one, but maybe one that's in the industry right now where you're like, "I could jump in and help." What company would you choose?
Matt:
That's a great question. WeWork.
Stephanie:
Woo, that would be an interesting one to try and turn around.
Matt:
Yeah.
Stephanie:
All right, next one. What app are you using on your phone right now that's most helpful?
Matt:
I listen to a lot of podcast, I love Overcast. I don't know if anyone ever mentions that. I just love it because I listen to things 2x.
Stephanie:
Yup, yeah, I know. I agree. I like that app as well. What language are you or your family working on right now to learn?
Matt:
Well, it's funny. I'm kind of barely competent in Spanish. My 16-year-old is actually I would say pretty intermediate level Spanish and my 10-year-old is oddly learning Japanese.
Stephanie:
Oh, go. Go him. A boy, right? Yeah, that's great. All right and our last, a little bit more difficult question. What's up next for ecommerce professionals?
Matt:
Oh boy, ecommerce professionals. I think to me it's a lot of the same topics in ecommerce have been discussed for so many years and I think that the interesting one is how do we actually make social commerce really good.
Matt:
And I think I spend a lot of time just, I'm not serious with it, but playing with like, TikTok and Twitch, and I think there's some elements to the social selling piece that I think are super interesting that no one's really figured out and I buy actually a lot of products off Instagram, and it's still too much friction and it's not quite working right for me.
Matt:
So I think there's some ... How do you integrate ecomm and then TikTok in a way that's native to that audience? I think there's some things there.
Stephanie:
Oh, that's a good answer. Well, Matt, this has been yeah, such a fun interview. Where can people find out more about you and Rosetta Stone?
Matt:
Rosettastone.com for the company and I'm matt_hulett on Twitter and it was a pleasure to talk to you today.
Stephanie:
All right, thanks so much.
Matt:
Thank you.