As Artificial Intelligence becomes more common and necessary in our daily lives, it continues to revolutionize traditional industries by changing the supply-demand interaction and industry mechanisms, unleashing boundless business opportunities.

Many online education platforms have begun to explore the opportunities brought by AI, while the demand for online education in China has increased drastically year by year.

The rapid development of AI technology has transformed many sectors, including retail, agriculture, logistics, education, healthcare, finance and commerce. It has reshaped how production, distribution, exchange, and consumption take place. 

AI has brought substantial improvements by reducing the cost for companies and increasing productivity in major industries. For instance, according to the ‘AI development report’ of 2018, reported by CISTP (China Institute for Science and Technology), AI increased the productivity in education by 82%, 71% for retail, 64% for manufacturing and 58% for finance. 

Presently, AI applications in education are primarily focused on the following areas: adaptive (personalized) learning, virtual teaching, educational robots, science and technology education based on programming and robotics, and situational education based on VR/AR. 

China has become the host of EdTech startups aiming to bring kids (and their parents) onto their platforms.

Knowbox debut

One of the best-known Chinese online education platforms, Knowbox (小盒科技), embarked on a journey into this new era of artificial intelligence in July 2014. The company, which was founded by Liu Ye (刘夜), focuses on a combination of education and technology to create a platform incorporating AI in order to build an intelligent education ecosystem. 

The company changed its Chinese brand name to Xiaohe Keji (小盒科技), literally meaning ‘small box technology,’ on July 18; it was originally called Zuoye Hezi (作业盒子), which literally means ‘homework box.’

The online K12 education platform firm claims to serve over 40 million users, in nearly 400 cities and 100,000 schools, across 31 provinces in China.

The Beijing-based education start-up has raised more than USD 300 million in a total of six funding rounds. The latest fundraising, a Series D worth USD 150 million, was led by the Hangzhou e-commerce giant Alibaba Group (BABA: NYSE). The fundraising will cultivate and enhance the company strategy to create a more sophisticated online education with the integration of AI. 

‘Xiaohe classroom,’ the first AR teacher

Since 2017, the company has invested significant resources in developing an AI-powered education system aiming to return control over study back to the student. The system was named ‘Xiaohe classroom;’ it provides personalized, adaptive learning and tutoring services to students.

Xiaohe classroom provides students with accurate diagnosis through 3 dimensional portraits and achieves personalized learning path planning based on the company’s internally developed POMH-DINA model; it has nearly 20 million question stakes and 20,000 knowledge slices to match personalized learning content for students. 

Thus, the company claims that ‘Xiaohe classroom’ is the first AR teacher in the online education industry in China. The system also provides an interactive classroom experience through voice, gesture and expression interaction. The company also claims that the classroom currently has more than 10 thousand registered students.

Company core products

Xiaohe student (小盒学生):  a mobile app that provides daily personalized exercises, training, and a variety of teaching modes, animation teaching, video teaching, and parent-child interaction. The courses can be arranged according to their preferences. 

Xiaohe teacher (小盒老师)：the mobile app helps teachers to manage homework, and alleviates the pressure of piles of corrections; it can also be personalized according to users’ needs.

Xiaohe family (小盒家长)：allows parents to better understand their children’s learning progress by providing real-time report. It also allows parents to communicate with their kids.

Xiaohe homework (怕作业): created to support teachers and parents in assisting the children with exercises. 

The integration of AI in education will not only increase learning efficiency but also help preserve a high level of interest in learning.  However, people still believe that AI might one day replace teachers. This is actually a misconception of how AI works. The main objective of AI in the education system is to make teaching more effective and enjoyable for teachers and students.

EdTech companies striving for more investment 

Since its foundation, Knowbox have been competing with several online education platforms that provide similar online services. Companies such as Zuoyebang (作业帮), 17zuoye (一起作业) and VIPkid.  These three online education providers have raised a combined fundraising sum of over USD 1 billion. 

While Zuoyebang was founded by the Chinese search giant Baidu (百度), it targets primary and secondary students by providing an app that allows the students to upload homework questions and search for answers. The company claims to have more than 300 million registered users.  

17zuoye focuses on primary school English and mathematics lessons. It provides students and parents with online homework and special exam-oriented exercises. The online education-powered AI has raised more than USD 500 million in over 7 rounds from investors such as DST Global, Tiger Global Management and Singapore-based investment company Temasek, as well as Beijing-based VC Shunwei Capital.

The market is expanding 

According to a survey carried out by CISP, Chinese technology firms will expand their AI teams by an average of 20% annually, and this demand for AI specialists will grow further. It will likely increase to five million in the coming several years.  

In 2018, the AI segment integrated into the online education industry was worth USD 12.38 billion; it’s estimated to reach USD 20.8 billion by the end of 2019, an increase of 68%. It will then push upward to reach USD 32.86 billion by the end of 2020, according to iResearch statistic.

As is well known, China has one of the largest education sectors in the world. Every year, millions of Chinese students take part in the National Higher Education Entrance Examination (高考) considered the most important exam in the country. In June 2019, it was estimated that 10.31 million students took the exam. 

Therefore, online education is becoming a popular choice among parents to prepare their kids for the transition from kindergarten to (eventually) university life.

A total of 1740 investment events took place in the first quarter of 2019.  The most active investors have been IDG capital and Zijin venture capital, with 24 investments each. They were followed by Sequoia China (16), K2VC (15), Tencent Industry win-win fund (13), Casstar (13) and Matrix partners China (12).

As Artificial Intelligence penetrates more into online education and more parents upgrade their children’s education, the country's online education revenue has increased significantly. According to iResearch, the revenue of China’s online education market reached CNY 252 billion, with a growth of 27.5%. A rate of 24.5 % growth is expected, with a market value of CNY 313 billion.

Since 2013, the structure of Chinese online education has experienced significant alteration, with K12 education arousing the interest of parents to increase their kids’ education quality. Online education has turned into an extra-curriculum portfolio element that helps students improve their grades and enhance their knowledge.

While in 2013 the K12 education represented only 10.1% of online education, with the development of new technology, particularly through the addition of AI, the K12 educational share has increased significantly over the years, reaching 17.6% by the end of 2018. 

The integration of AI into online education is a product of rapid development in the field. Yet educational AI is still in its early stages. The increasing demand for high-quality education has opened the door for new opportunities and brought new entrepreneurs in the market.  The massive Chinese market is pushing online education to a new stage of development and enhancing the country's competitiveness in the global education market.