80% Of Online Education Projects Will Eventually Die Out

摘要: Statistics show 80% of online education projects will eventually die out due to the inability to find financing and the adequate business model. Given the impact that the Internet has brought on education, the online education industry has two potential directions to go for: Writing teaching materials; generating teaching plan and teaching the content.

(Chinese Version)

On January 22nd, the E-learning Research Institute officially published its 2015 Report On The Online Education Industry In China, which points out the fact that online education companies are losing a great amount of money and are currently in major trouble. According to statistics, only 5% of online education companies made profit last year.

The online education industry has been a much heated industry in recent years with tons of capital and plenty of enterprises flocking into this field, turning this once blue ocean into a red sea, or let’s say, blood bath. The growing diversity of related projects makes the competition within the industry even much fiercer. Every company involved has to ask themselves one question: How to make profit? Under these circumstances, some companies choose to keep on fighting while some face the situation of being eliminated by the fierce competition.

So, what kind of obstacle that’s holding back the online education industry from making profit? What segments have the potential to develop? What impact has the Internet brought on education? These are the question that this article aims to work out.

Almost 80% of online education projects will fail eventually, is it really that hard for them to make profits?

The 2015 Report On The Online Education Industry In China shows that in 2014 the scale of the online education industry in China was around 28.37 billion RMB, a 17.8% rise compared to the scale in 2013. In 2015, the scale hit 39.9 billion RMB, showing a significant increase.

Newly-emerged industry that has a large market scale naturally draws the attention of enterprises. By the end of last year, the total number of online education companies in China has reached 9,500, among which the number of K12 online education companies was around 2,200 to 2,400, with three hundred thousand employees. Without a doubt, the online education industry is an extremely hot industry.

However, despite the prosperous scene, signs of danger are still lurking around. The report which surveyed 400 online education companies also shows that currently 70.58% of companies in the industry is losing money, 13.24% is striking a balance, while only 16.18% can actually make money.

These statistics don't look. And the main reason for this phenomenon can be attributed to companies’ inability to find specific ways of making profits. So, how hard it is really for online education companies to make profit? To figure out the answer, first we need to divide the online education industry into different segments and analyze them.

Simply put, online education can be divided into underage-non-interest, underage-interest, adult-non-interest, and adult-interest these four parts according to the age group, content, and property. Among them the underage-non-interest part consists of summer camps and hobby course etc.; adult-non-interest covers public courses, information searching on the Internet, cooking class etc. Since these parts of the industry are non-interest, and therefore their main goal is not to make profit. In that case we will mainly focus on talking about the interest parts.

Let’s talk about the underage-interest part.

In the online education, K12 education has been a crucial part. In short, kids are easy target. In the stage of K12 there have been over 2,500 online education projects. But now, K12 also faces danger.

Many of K12’s users are kids, but most K12 products are not attractive enough for kids. Many kids will be easily distracted when using k12 products. Some will just leave in the middle of the class and start to play games, some would play their phones. It’s hard for these products to keep their users engaged. Babycan’s founder Li Bai stated: “Early education apps have the problem of failing to provide and create innovative content of quality, and therefore having trouble making profit.”

Therefore, the first thing that online education companies need to fix is the content. Appealing to kids and keep them motivated to learn is the most important thing.

Furthermore, many industry insiders believe parents are not willing to let their kids have too much to do with electronic devices. The E-learning Research Institute believes the closed environment of middle and primary schools stops parents from accepting and trying out online education, putting even more pressure on enterprises. Some companies wouldn't survive the heat and just abort. The vice president of EF Bai Jiaoyu stated that for offline K12 education organizations, online education serves an assistive function but can’t replace offline organizations.

Compared to the low performance of the K12 part, the adult-interest part is more optimistic.

Adults have high self-control ability, specific learning goals and rigid demand for learning, which empowers the adult-interest online education an edge.

On March last year, adult professional education institute Sunlands achieved a monthly volume of 78.4 million RMB, making it the largest and fastest growing online education organization in China. Its founder Ou Peng thinks that the business model of online education is different for the fact you can only use index to evaluate the profit instead of simple figures, and that after a certain developing period the revenue will go up fast.

Even though this part seems to have a promising future, there are still many hidden dangers.

We have to admit that courses for the state worker exam and many other professional exams are rigid demands. But the thing is such demands have been mostly met by offline organizations. If we only put those course on the Internet nothing much will be improved. Although online education works on standardized exams like the state worker exam, but the rules have already been set, not by the Internet. In this case, the growing space in this particular segment is small, and therefore companies would still need to find other ways to boost their business.

It seems like the online education industry has no future at all. But that’s not true. There are still successful cases. The most important thing we should note is the influence of the Internet on education.

The production and teaching of content could be a way out

The Internet is like a storm, a storm that changes many industries completely, including education.

China has always been a country that put great emphasis on education. Ever since the time of Confucius, the value of education has been deeply rooted in the heart of Chinese people. Teachers are therefore well respected in this country. However, the traditional form of education has many flaws as well. But with the new blood brought by the Internet, the flaws might be fixed.

Firstly, the Internet helps boost the innovation on educational content.

The content of offline education is generally based on dealing with tests. Knowledge that is not in the outline of the test guidelines wouldn’t be taught in school. Schools serve as the superiors and the mainstream education organization. Such model has been the regular model of the Chinese education industry.

One of the main factors that contribute to this phenomenon is administrative influence. On the other hand, the content itself is already limited. Ever since ancient time, the acquisition of knowledge has never been an easy thing. Books could barely record all the knowledge our ancestors had acquired and many books have been lost forever. But the emergence of the Internet changes everything, making information more accessible and easier to store than ever before.

Secondly, the Internet helps break the obstacles that are bought by the traditional way of producing educational content.

The power of writing teaching materials lies in the hand of a few people. And because of that teaching materials are inevitably conservative and sometimes outdated. That’s why many students find their textbooks absurd nowadays. The emergence of the Internet has opened an age in which everyone is able to write and edit teaching material. There are numerous talented people in society and the Internet provides a stage for them. Therefore, more interesting contents will be generated as well as educational content.

Thirdly, the Internet is beneficial for innovation on educational assessment.

In the past, the score students get is the only indicator for assessment. But as the Internet starts to influence education, people begin to wonder whether such assessment method is accurate or not. Why not assess students based on the methods they use to study and solve problems? Assessments that are not feasible offline are achievable online, which is indeed a major innovation in the field of educational assessment.

It’s fair to say that the Internet has a profound impact on education, and therefore online education still has tremendous potential.

It’s estimated that in one or two years, 80% of online education companies will fail due to their inability to find financing and an adequate business model. Therefore, online education companies have to think really hard on the things they can do to turn the tide and find ways of making profit. If we look at how the Internet is influencing education, we can find there are actually two directions that companies can work on.

Firstly, they can try to create education materials: generating teaching plan and teaching the content. Since nowadays it’s easier for people to have access to knowledge, a lot of teachers only teach their classes based completely on textbooks, which makes classes even more boring. Online education companies can collect and conclude knowledge and information provided in class and from other sources. And with that information in hand, they can make the content more open and more interesting.

This is an incredibly feasible plan. Unlike entertainment content like TV shows or games that cost a lot, even with only a computer people can product very interesting education content.

In this case, online education companies can launch knowledge integration tools accordingly. For instance, they can develop systems that provide course plan writing solutions for teachers, systems that cover from drafting a course plan to displaying. In my opinion, this could be an area where companies can make profits.

Secondly, teaching the content. Education is all about teaching, or, educating students about something. Thus the teaching of the content is very crucial. When I was still in school, I found students all liked teachers that were able to keep their classes interesting better. The same thing can apply to online education. However, offline education faces challenges like renowned teacher barrier, for whom to achieve so would mean great cost.

However, online education doesn't really suffer such burdens for the fact that online education companies only need to provide users with content of quality. In online education industry, qualifications such as working experience and titles don’t matter that much. And thanks to that online education is more interest-centric and aims to make course more acceptable for the users. For example, online education generally utilizes movies, TV shows, games, animations etc. to illustrate the course content, which increases the user retention rate. Additionally, this could also be a potential area where companies can make profit.

The president of the E-learning Research Institute Lv Senlin estimates that the next entry point of the online education industry might be generated by the rise of new technologies. “VR educational content and smart learning software etc. can be the future hot fields. Although VR technology has just taken off and its still exploring the education industry, we can still expect that in the near future about 10 to 20 billion RMB will be poured into this particular area,” Lv commented, stating that the innovation on the form of education could be the next blue ocean.

The core of innovation of online education lies in renovating the form and content of education. If companies can work their ways around then the online education industry will be on the right track. In the future, investment and acquisition will no doubt become common in this industry. Only when online education companies can find the right direction to develop, can they survive the fierce competition.


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[The article is published and edited with authorization from the author @Zuijike, please note source and hyperlink when reproduce.] Translated by Garrett Lee (Senior Translator at PAGE TO PAGE), working for TMTpost.




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