By Paul Glader, WiredAcademic Managing Editor

BERLIN – Full disclosure: Babbel.com is one of my favorite language-learning programs as I’m expanding my knowledge of German. I downloaded their free IOS app last year to my iPod and used it to work on German vocabulary. I found it to be much more fun and engaging than using flashcards.

A few months after I started using Babbel, I was at a tech event in Berlin and met Markus Witte, CEO and co-founder, of the company. It turns out language-learning is a strong area for education startups based in Europe, where many citizens speak 2 to 5 languages.

“People want to learn languages but often get discouraged and lose their way,” Witte says. “We want to get everyone who signs up, through their course.” Social elements built into the course, “can give you more motivation to stick with it.”

Among language-learning startups, I could see that Babbel represented a clear threat to RosettaStone’s dominance in that Babbel’s entire platform skipped the idea of selling CD kits or books. Rather, it focused its courses on the Internet as well as on mobile platforms such as IOS and Android. Rosetta Stone is clearly moving in this direction, though, and away from CD-based courses. Since Rosetta already has huge scale and is the 800-pound gorilla in the language learning industry, Babbel has to find other ways to innovate and differentiate.

Babbel’s branding is clever and its interface clean and easy to use. It uses picture, audio quizzes perhaps somewhat similar but different to Rosetta Stone’s approach. After testing both programs for several weeks this summer, I believe Babbel’s software is better at determining my language abilities and tailoring the lessons to me. That’s partly because the company has math specialists on staff who program adaptive learning functions into the software.

Babbel’s pricing model is similar to Netflix in that consumers pay between $7.45 to $12.95 per month depending on how many months they sign up for. It has free exercises and demos designed to get customers using the product before they are asked to pay a monthly fee and start really learning a language.

“In learning, it’s a little like a gym membership. You need your own motivation,” explains Witte, noting that people are more motivated when they pay for the membership rather than using free services such as Memrise. “We try to make learning fun and a good experience. But you also need your own motivation.”

Witte invited me to visit the company’s headquarters in the trendy Kreuzberg section of Berlin to hear more about what makes Babbel different from other language-learning startups. He and the other founders met while working at another startup in Berlin and had the idea for Babbel as one of them was trying to learn Spanish at the time and didn’t see any products he liked on the market.

“The problem with existing products he saw was not in the didactics and coursework but from the user interface,” Witte said, noting that good user design was something he and the others learned at the other startup, Native Instruments, where they worked.

The team hired a language expert and built a site that made a public Beta launch in 2008. The site has grown steadily since with 80,000 users in May of 2008 and now has more than 7 million users in 200 countries using the program online or on mobile apps. Beginners and continuing learners can study German, English, French, Spanish, Italian, Brazilian, Portuguese, Swedish, Dutch, Indonesian, Polish and Turkish.

Babbel’s holding company, Lesson Nine GmbH, picked up roughly Eur 1.8 million in Round A funding from Kizoo AG and VC-Funds Berlin as well as funding from EU-related development funds. It employs more than 50 full-time staff and 70 free-lancers, up from nine staff members in 2010.

An early decision for Babbel was how to sustain revenues. They ruled out an advertising-based model and decided to offer the freemium / premium pricing model because they believed it would allow them to build a product that was best for learning and least distracting.

Interestingly, the biggest user base for Babbel’s courses are not younger generations. Rather, it is senior citizens. “A lot of seniors don’t mind paying for the product,” Witte said. “Younger Internet users still think Internet content should be free.”

While it focused on consumers initially, Babbel is now also marketing products to businesses who want employees to learn more languages. “We believe almost everyone is a customer for us,” he said.

“We aspire to be the market leader in our field,” he says.

So that means growing larger than RosettaStone?

Witte: “Yes Yes. Of course…It’s a big genre. At the same time, it’s not a winner takes all approach,” he said. “There will be more than one players in the market in the long run.”

-0-

Note to readers: Wired Academic is profiling several language learning programs and startups in the United States and Europe. This is the third in a series of such profiles. Previously, we interviewed Voxy and RosettaStone.