Online education in China has taken a turn from the year 2010 when online learning and online communities first became common.
2013 became the era of mobile+education, with easy access to smartphones, live-streaming classes, and education Apps. Let us take a look into the trend.
The Internet Education Research Institute recently released the ‘China Children’s Online English Education Industry Research Report 2019’ (in Chinese). According to the report, the online education market for children in 2018 exceeded CNY 21 billion (USD 2.9 billion), while the number of users reached 6.25 million. It is expected that this number will exceed 10 million this year. With the increase of public awareness, the penetration rate of the online education industry is growing, and it is expected to creep over 50% by 2022. It is believed that traditional offline learning modes will be almost completely replaced by online mode. Children’s online English market polarization is obvious, with four enterprises - VIPKID, 51Talk, DaDa(哒哒英语)and vipJr - occupying more than 90% of the market share.
Due to favorable policies from the government such as the ‘Two-Child’ policy, the population of 0-14-year-olds in China has increased each year, and the potential demand for English for children has exceeded 230 million, providing a broad market space for online English education firms.
If compared with other services such as online videos, e-commerce and online payment the penetration rate of online education is quite low.
According to iResearch, the revenue of China’s online education market reached CNY 251.76 billion in 2018, which was estimated to grow at a rate of 16%-24% in the following years. The growth rate might see a downshift but will have a steady rising momentum. The rising acceptance level for online education among users, enhanced online service payment, willingness and improvement in the online learning experience, are the main reasons for the steady growth of the online education market.
Online English education is a market of USD 18 billion, where 70% of the total revenues come from children’s English training. Parents want their children to be fluent in both reading and writing when it comes to English, and that aspiration is driving the market.
There has been an increase in the adoption of smartphones and other mobile devices in China, which is pushing the growth in the market. The increased per-capita spending capacity of the Chinese population and the flexibility in online education offerings have been key to driving the online market. Training programs conducted by native English-speaking teachers can be availed of easily through the online medium.
The advantages of online learning have gained more recognition from the parents over the recent years. Data shows that the online learning market for children in 2018 was as high as 26.59%, way higher than the average online penetration rate of the education industry overall. The Internet not only brings high-quality foreign teacher resources to Chinese families but also saves a lot of time for both parents and children. Therefore, parents are more inclined to choose online learning for their children. It is expected that the penetration rate of online children’s English education will exceed 33% in 2019.
The strength of teaching and research is the foundation of an educational platform. At present, the mainstream firms mainly target the common English curriculum standards and provide matching courses for children of different ages and different abilities. The textbooks used by leading firms are mainly divided into original textbooks and self-study textbooks. Most of the companies choose to introduce original textbooks. However, due to cultural differences and difference in learning environments the authoritative textbooks are most suitable for Chinese children.
The data shows that children aged 6-12 are the main driving force of online education, accounting for 71% of the total users. Children above 12 and under six account for 15% and 14% respectively. From the perspective of geographical distribution, most of the online education users are concentrated in tier 1 and tier 2 cities such as Guangzhou, Shenzhen, Hangzhou, and Nanjing. With the growth of the Chinese economy, the awareness of parents about online education in second- and third-tier cities is increasing, hence the willingness to spend on such education is rising too.
The survey found that ‘word-of-mouth’ is the most important channel for users to understand the brand. The results show that 71.40% of the firms are introduced to customers by their friends. The education firms spend a lot of money on advertising which only amounts up to 42.86%. In order to ensure ‘word-of-mouth’ referrals, it is necessary to solve the real needs of the user such as the quality of teaching.
Online Education is the main sector where most of the new investments have taken place in China. Companies like, VIPKID, Zouyebang, Yuanfudao, etc., have raised millions of dollars.
Educational companies in general yield good profitable business models with stable cash flow based on prepayment and a strong gross margin generated by high added-value, new products brought by technology make the industry attractive for the capital market.
With the continuous development of network technology, mentioned above, the penetration rate of online education has been rising, from less than 2% in 2013 to 15.2% in 2019. With the advent of the 5G era, the growth of online education will shape the coming years; it is expected to exceed 50% in 2022.
China's online education is mainly divided into higher education, vocational education, primary and secondary education and other categories. At present, the main body of the market is adult education. This is because adults generally have strong self-control and relatively clear learning objectives. However, in the long run, considering that Chinese parents have high expectations for the growth of their next generation, they have given great importance to education very young ages.
In other news on sub-sectors of the education industry, vocational education is the sector currently supported by government policies – such as a shift to emphasize vocational education as mentioned in an article written by EqualOcean recently.