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Norwegian learning platform company Kahoot has acquired Estonia’s language learning mobile game maker Drops for as much as $50 million.
Kahoot is paying $31 million in cash, plus another $19 million if Drops performs well from 2020 to 2022. It’s a nice payday for the company, which has 25 million users and recently reached a revenue run rate of $10 million.
This year, the Tallinn, Estonia-based Drops saw an increase of 7.5 million users. It is forecast to hit 30 million in total by the end of the year, CEO Daniel Farkas said in a recent interview with GamesBeat.
The Oslo, Norway-based Kahoot, which was founded in 2013, has plenty of cash on hand since it raised $215 million from SoftBank in October.
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Kahoot CEO Eilert Hanoa said in a statement that Drops will be added to the Kahoot platform, which takes a game-based approach to learning. The Drops app has 5-minute sessions where you can answer drill questions by swiping on a smartphone. Vocabulary questions are read out loud, which aids in pronunciation. You have to answer within a time limit, and the app recognizes your voice when you answer questions aloud. I played around with the app, and it was pretty easy to use. Drops currently has about 15 minigames.
In the last 12 months, more than 1 billion participants in over 200 countries attended over 200 million Kahoot sessions. The Drops acquisition is part of Kahoot’s strategy to expand into new areas of learning, whether at school, work, or home.
Language learning has exploded due to globalization, with a more recent surge in e-learning as businesses and schools adapt to lockdowns. As a result, the global digital language learning market is expected to pass $8 billion by 2025.
Farkas and cofounder Mark Szulyovszky founded Drops in 2012. Farkas, who is from Hungary, learned English and then Spanish, and he enjoyed deconstructing languages.
“I realized that you need to pick up languages in order to have a decent shot at the global marketplace,” he said. “I realized that the foundations of language learning are the core vocabulary and building consistency. Language learning is a marathon, not a sprint. You get confidence by learning the building blocks. I couldn’t find a really good tool to build these foundations.”
So Farkas and Szulyovszky began working on a solution and entered an accelerator for Estonian startups. Mentors for the program came from game companies like Supercell and Rovio. “They were quite an inspiration,” Farkas said.
The duo spent 18 months on an app they called Learning Visible. It didn’t work.
“The retention was not there,” Farkas said. “It wasn’t sticky enough. People were not using it on a daily basis. We worked on it for one-and-a-half years, and we pulled the plug.”
They started again from scratch. This time, they borrowed from gaming by making the lessons just five minutes a day, about the same amount of time people spend on mobile games like Supercell’s Clash of Clans. The team built Drops in six months. After they debuted the game in 2015, Apple featured it in China, and it began taking off.
Drops netted more than 900,000 downloads in its first year. It kept growing, and an Android app followed in 2017. The company has now grown to about 23 employees, and its downloads have accelerated every year.
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