There is no winner in 2020, will it be in 2021?
Editor’s note: This article is from the public micro-channel number “to coffee think tank” (ID: laikazk), Author: Feng Yuan.
“For every dollar earned in online education, it costs two dollars. Once the capital stops blood transfusion, online education will be sad.”< /p>
——Yu Minhong
It takes time to test whether Yu Minhong’s judgment is correct, but the recent weak stock prices of online education companies have revealed the gradual worries that have arisen in the capital market. When the editor talked to education analysts about the top companies of K12, they laughed at themselves: “The marketing battle of education companies is good for the media sector.”
At present, the online education industry has entered the deep water zone. With the increasingly fierce game, the reshuffle of the industry and the overweighting of players are all proceeding simultaneously. But a remarkable fact, whether it is a listed company, an unlisted unicorn, or a newly-entered giant company, the competition for traffic has heated up. But in addition to overwhelming advertising, Douyin and Kuaishou’s live broadcast, what other killers do they have? Who can really use the power of intelligence and data to promote the development of education? The market has no answer.
01
“match point” approaching
In Beijing’s bus stations, Moments of Friends and variety shows, advertisements of major online education brands can be seen everywhere, and the winter vacation marketing battle is self-evident.
Looking back at 2020, key words such as donating classes for the epidemic, skyrocketing stock prices, short selling, continuous financing, bankruptcies, burning money marketing, and involution have formed the industry map of online education. According to statistics, there will be a total of 233 financings in the education industry in 2020. Although the number is less than last year, the financing amount is as high as 104.6 billion yuan, which is basically the same as the total financing in 2017-2019. In the end-of-year market of online education, even in the last week of 2020, the total amount of announced financing reached US$6 billion.
From 2017 to 2020, online education has also been in the cycle of financing and marketing. After the big waves, the online education track has beenLu has become a “leftover” competition among several oligarchs, while traffic acquisition and OMO models have become concerted actions.
There will be no winners or losers in 2020. Will the winners or losers be decided in 2021?
02
Funding 6 billion US dollars a week
The Matthew Effect of Online Education
In the first and second markets at the end of the year, online education began to harvest a new round of funds.
On December 24, 2020, Yuandaodao announced that it has completed the settlement of the $300 million financing of Yunfeng Fund, with a valuation of $17 billion. Yuandaodao has become the most highly valued unicorn company in the global online education industry. Job Gang followed suit and announced on December 28 that it had completed the final settlement of the E+ round of over 1.6 billion US dollars in financing. The latest post-investment valuation was approximately 9.6 billion US dollars.
For the good future that has been listed and GSX, both adopt the fixed-increasing financing model. At the end of December last year, GSX announced that all US$870 million fixed-increasing financing had been put in place, and Good Future also stated that it had reached a private placement agreement of US$3.3 billion with investors, of which US$2.3 billion was convertible bonds and US$1 billion was new issuance. The transaction is expected to be completed in the near future.
Public data shows that from January to December 2020, there were 91 financing incidents disclosed in the online education field alone, with a total financing of approximately 51.2 billion yuan, and most of the capital went to Yuanjiao and Homework helps these two online education companies.
But the other side of these leading companies vying to announce financing is the reality that some small and medium education companies are facing bankruptcy due to funding difficulties. Since last year, in addition to brothers, Biver English, Fun Travel, Disney English, Yousheng Education and other offline institutions have thundered, voluntarily declared bankruptcy or ceased operations, the well-known domestic online education institutions that have recently been endorsed by Haiqing Overlord, because the platform cannot be used normally and offline stores are closed, it is suspected that the capital chain has broken and will go bankrupt.
Although Xuebajun CEO Zhang Kailei posted a long article in the circle of friends, promising to “never run off, never shirk responsibility, or declare bankruptcy if the problem is not resolved”, the final result is only a matter of time. Public information shows that Xuebajun’s latest C round of $100 million financing was completed in December 2016, and no new financing has been obtained after 2017. In the online education track that generally relies on capital blood transfusions, the academic tyrants who have not funded blood transfusions for four years have already fallen behind.
The experience of Xuebajun is just a microcosm of the development of online education. It is a common practical problem in the period of rapid development of online education. Top players frequently raise funds to replenish ammunition.The sense of existence of the family is getting lower and lower, and it is even more difficult for some startups to obtain financing opportunities.
The players who entered the market have spent a lot of money to do the market, but the conversion rate is too low, and the effect is similar, but they have to do it, and they are caught in a dilemma of following up losses and watching and falling behind. Under the industry’s money-burning war, the cost of acquiring customers has been soaring, and Xuebajun has also been overshadowed by the dual pressure of customer acquisition costs and teacher costs.
At the 2020 Yabuli Forum, New Oriental founder Yu Minhong publicly expressed his doubts about the online education model: “Up to now, I don’t think online education is a running business model.” He asserted, Online For every dollar earned in education, two dollars are spent. Once capital stops blood transfusion, online education will be sad.
In the eyes of Changke Liu, CEO of Qing Education, online education in the future may be a state of coexistence of oligarchs. None of these companies will die. The top three companies may gain more than 50% of the market share. Online large classes will eventually be a protracted battle, and the protracted battle depends on whether the pocket is deep or not. The so-called “pockets are not deep” is to see if there are barriers that take time to build, even if others want to intervene, it will take a long time to build; second, see if there are one or two product lines in a steady stream Contribute cash flow and profit, not just rely on capital transfusion.
The “leftovers” under the competition will naturally prepare food and grass early, hoping to become the final “victor”. GSX founder and CEO Chen Xiangdong bluntly said that according to the current market competition and the financing situation of various companies, the competition in 2021 is still relatively fierce, and the competition should reach a balance point in 2022.
03
New giants enter the market
A year-round marketing traffic war
Behind the craving for funds and the continuous burning of money, it reflects the disappearance of the traffic dividend in the online education industry and the high cost of acquiring customers. Especially at present, in the cost structure of online education companies, marketing (marketing) expenses account for a very high proportion of revenue, generally 60% or even more than 90%. To survive, you need to continue to spend money to buy. Therefore, both established companies and new entrants are now stepping into the river pursuing flow.
The iResearch report shows that the penetration rate of the online education industry in 2019 is still less than 20%, and due to the impact of the online course experience brought by the epidemic, the industry penetration rate has risen to more than 50% in 2020, and the scope of the target market With the substantial increase, the marketing investment of major education companies has also risen. New Oriental founder YuMinhong once said that the current customer acquisition cost of online education institutions cannot be lowered, and the renewal rate is also low, making it difficult to make blood. “Up to now, the customer acquisition cost of basically all institutions is more than half of the total income of students in a year, and some institutions even reach 100%.”
Data from the “2020 Mobile Internet Advertising Insights Report” released by QuestMobile also shows that the education industry is currently in the stage of money-burning marketing, each company has sufficient advertising budgets, and the media portfolio is gradually achieving full coverage. Traditional educational marketing scenarios, such as subways, buses, elevators, and televisions have long become standard equipment for educational enterprises, and have now been extended to include naming, sponsorship, celebrity endorsements, celebrity promotion, content marketing, display/performance advertising, etc. Kind of gameplay. It is worth noting that this kind of war on investment is even open throughout the year. After spending 10 billion in the summer last year, a tens of billions marketing war is now being staged during the winter vacation.
The increase in the cost of burning money is directly reflected in the corporate financial report, and it has also brought the industry into it. For example, according to the 2020 Q3 financial report of GSX, due to the company’s active participation in the summer marketing war, the sales expense ratio has increased significantly from 59.3% in the same period last year to 104.6%; and Good Future has exceeded US$200 million in marketing expenditures starting in fiscal year 2020. In the last quarter, it even exceeded 300 million U.S. dollars; and NetEase Youdao, which previously focused on content, services, and technology, has added money-burning marketing to increase its marketing expenses in Q3 2020 by nearly five times year-on-year Netease’s largest single-quarter brand marketing investment.
Homework CEO Hou Jianbin believes that high traffic and high customer acquisition costs have always been the pain points of online education. In the summer of 2019, the customer acquisition cost of the industry on Douyin, WeChat and other platforms is about 2,000 yuan per regular-priced class. The number in the summer of 2020 is about 3,000 yuan, and the figure in the fall of 2020 is about 4,000 yuan. In the industry, it is estimated that some companies that rely heavily on external investment and do not have their own traffic will probably fall into a situation where they cannot pay back. In the “extreme stress test” where customer acquisition costs continue to rise, these companies are likely to withdraw one after another.
As analyzed by industry insiders, driven by capital, online education institutions must compete with rivals for conversion rates and contract renewal rates, and also try to reduce their own customer acquisition costs, otherwise capital will not follow the investment because of the company’s capital chain. It may collapse instantly. “It should have been an extremely broad Internet market, but now it can only be maintained by a huge amount of investment, and online education has been highly involved.”
It is worth noting that some giant companies with capital and traffic advantages are also constantly entering. Among them, the strength of ByteDance for education is the most concerned. Chen Lin, head of Byte Education, once said, “ByteDance will invest a huge amount in education business in the next three years.” In addition to direct investment in various education tracks, Byte has also invested heavily in promotion and marketing. It is understood that bytedanceLast year’s education brand was not only titled “Happy Camp”, “Sister Riding the Waves”, “Romantic Travel of Wife” and “Wonderful Little Forest” and other popular shows, but also in subway stations, bus stations, Placed in the elevator room of the community.
Recently, some industry insiders stated to Laika Think Tank that the total amount of education brands under BYTE is still relatively small. It is necessary to further observe the data during this summer vacation in order to make a more accurate future. judgment.
Currently, the price of a user acquisition on an online education platform is as high as several thousand yuan, which is much higher than other areas of the Internet. At the same time, the conversion advantage of high customer unit price is another threshold for the conversion of user value. Therefore, from now on, online education platforms should think about how to acquire customers at a lower cost than their rivals. Otherwise, once the capital bonus period ends, a chain decline in profitability will be an inevitable trend. Who can first reduce the marginal customer acquisition cost, who can grab the match point in the second half.
04
Return to the essence of teaching service
New variables in OMO mode
From the perspective of the entire education service system, it can be divided into three major links: content research and development, service delivery, and customer acquisition. Among them, teaching and after-school services in the service delivery link are the core of the entire system. Teaching and research, educational administration, and teacher training are all Provide support for teaching and after-school services. At the same time, the quality of teaching and after-school services determines the reputation of teaching and training institutions, which in turn determines students’ renewal, additional courses, and referrals. Continued reporting, joint reporting, and referrals do not incur marketing expenses, which are the key to improving profitability for educational and training institutions.
Therefore, online education catalyzed by capital should never be a traffic business. Its essence is still teaching services and teaching effects. In other words, learners hope to spend the least time and the least cost (that is, the highest efficiency) to obtain the greatest learning effect, and educational institutions hope to strive to improve the best operational efficiency to obtain the greatest operational effect. Especially when the market size reaches a certain boundary, this kind of delivery and service will become the core barrier of educational institutions.
In this continuous exploration, OMO integrates online and offline advantages, conforms to the teaching logic of education itself, and can optimize teaching effects. The advantage of online teaching is to allow high-quality educational resources to break the limitations of time and space, and rely on big data and AI technology to achieve personalized teaching and improve teaching efficiency. The advantage of offline teaching is to deepen the teaching effect through the encouragement and interactive learning between teachers and students.
At the same time, OMO can also reshape the business process of education and training institutions to reduce costs and increase efficiency. For example, at the operational level, it can improve customer acquisition and conversion efficiency. Through online low-cost diversion courses or offlineExperience stores, online and offline diversion, can expand service boundaries and market increments, diversify customer acquisition channels, and make clue profiles comprehensive, ultimately lowering the overall customer acquisition cost. Through multiple conversion scenarios such as online communities, course consultants, online activities, and offline activities, conversion efficiency can be improved.
For example, New Oriental and Good Future, which has offline stores, once suffered heavy losses due to the impact of the epidemic, but the offline business gradually recovered in the second half of 2020 and began to play a role in boosting online business ; There are also online education institutions such as Spark Thinking and Pea Thinking, and they all began to explore ways of acquiring customers through ground channels such as distribution agents, regional agents, and offline double teacher stores last year.
It can be said that the OMO model can realize the transformation of the entire education industry from teaching and research, teacher training, management, customer acquisition to delivery. But its core integration is not about migrating from offline to online or empowering from online to offline, but to achieve the optimal solution of effect and efficiency at the three ends of the supply and demand chain.
Chen Xiangdong, who studied with whom, said recently, “Our understanding is that education must be slow, and today’s fast will be made up for by the future. “Who can slow down today will truly serve every student and Parents, when you can truly convince every student and parent, and when the expectations of students and parents can not only be met, but also surpassed, the reputation of this organization will truly stand up and pass on. “Advertising and marketing are definitely effective, but today, the best effect must be that we serve every student and parent well. I believe this is the greatest effect and the best effect.”< /strong>
The report of Huatai Securities pointed out that in the short-term stage, especially in the new track with an undetermined market structure, user reach determines the short-term growth rate of education and training institutions. In the new track, users generally lack understanding of different products and brands. Therefore, institutions that can effectively reach more users in a short period of time will seize the opportunity to rapidly expand the scale of users and achieve the purpose of card slots. Of course, achieving growth through user reach requires supporting marketing skills and better products and services. If the product and service experience is not good, user reach will accelerate the deterioration of word-of-mouth and bring negative effects.