The global pandemic put digital learning in the spotlight and the education technology boom ensued, with Asian companies leading the way. And the market is showing no signs of slowing down.
The world has seen the adoption rate for new technologies accelerated considerably as a result of events such as the COVID-19 pandemic before.
For example, the SARS crisis of 2003 contributed to the boom in China’s ecommerce industry, as quarantines led consumers to shop online. Certainly, this market trend did not slow down once quarantine restrictions were lifted. Ever since, global online sales have risen exponentially. The same story is emerging in the edtech market.
Within the past 12 months, all the industry’s biggest funding deals have been in Asia. Byju, India’s largest edtech company now has a $12 billion valuation following a $500 million funding raise in September 2020.
Surpassing Byju is China’s edtech giant, Yuanfudao, the live tutoring app, which reached a staggering $15.5 billion valuation last October, nearly doubling its valuation seven months prior to that. In just two short years, the company doubled its total users to 400 million students across China.
In two years’ time, the edtech market in China is estimated to be worth $81 billion, according to research firm iResearch.
With China’s next largest online education company Zuoyebang, being valued at $10 billion, the world’s top three edtech unicorns are all headquartered in the Asia Pacific region.
Compare these figures to the largest education technology firms in the United States, Udemy at $3.3 billion and Coursera at $2.5 billion, the difference is huge.
Which begs the question: why are Asia’s edtech companies up to 10 times bigger than their US counterparts? The answer is threefold.
1) The number one difference is that the largest APAC online education companies are creating their own curriculum and courses. Compared to the likes of Udemy and Coursera in the US, which act as platforms for their partners’ content, whether these are educators (as with Udemy) or education institutions (which is the case with Coursera). As a result, the firms creating their own curriculum and courses have net revenues of between 80 percent and 100 percent of their gross revenue. Compare this to net revenues sitting at just 10 percent to 30 percent of gross revenues for edtech companies in the US and the contrasts in valuations become apparent. We are looking at two distinctly different business models.
2) Couple this with the fact that the curriculum and courses the Asian unicorns are delivering are central to the needs of the students, which means they are taking a bigger slice of the education pie. They are focused on test prep and certifications. Whereas many of the US platforms work around the accreditation system – Udemy, for example, does not provide courses that give school or university credits. This is changing in the US, with Coursera now offering degree programmes, but these are fully online and not as likely to result in getting a job after completion. So, the situation is shifting, albeit slowly.
3) Thirdly, the Asia-based edtech companies are a blend of high tech and high touch with students often guided with live mentoring from tutors, while the larger US platforms are mostly pre-recorded courses. The higher engagement where students invite other students to join for a shared learning experience creates a network effect that isn’t yet harnessed to the same level by the US edtech companies.
What does the future hold for the industry? Will a change in business model come to the US? Genius Group, based in Singapore, with a global community of over 1.4 million students is expanding in the US with the Asian edtech model: own curriculum, relevant course, high tech and high touch with live micro-schools and a global faculty.
The edtech boom ignited by the pandemic is just the beginning of a paradigm shift in how we view education and work.
As with e-commerce in 2003, the demand for education technology in 2020 was already there. It has been there for years. Many of the jobs we are preparing children for today may even be redundant in the future.
Edtech can bridge the skills gap, not only within formal education but also for adult learners upskilling and reskilling for today’s digital world.
The edtech sector can deliver the tools to equip students of all ages with the skills necessary for creating their own opportunities, as well as exchanging knowledge and collaborating in a digital economy.
The need for a truly 21st century education system that reflects the needs of the job market is long overdue. Edtech companies are offering solutions to many of these issues that have troubled the economy for the past decade or more, and they are being rewarded with exponential profits.