As Artificial intelligence (AI) technology advances, apps start replacing teachers in language education, but turning this change into money requires more time.
Nowadays, after long hours of office work, Chinese people seem not to spend their leisure time just relaxing and watching TV dramas. Instead, many of them are using mobile apps to improve their language skills.
All thanks to the AI teachers. Liulishuo – means ‘speak fluently’ in English – company’s mobile app ‘AI Teacher’ claims to be one of the earliest apps that used AI teachers to help people advance their English skills.
Liulishuo offers solutions to people looking to improve their competency in spoken English – especially in terms of pronunciation. While using the app, 10-second audio clips by native speakers play on the screen as users start their lessons, after which the app asks users to imitate the piece. Later, it evaluates performance on a scale from 1 to 100 and gives feedback on weaknesses to allow users to make improvements.
If you score more than 90, it means your pronunciation is proper. A three months subscription will cost approximately USD 80, and if the users complete the courses with an average score of 90, then they can get reimbursement, the company says.
Why this sector?
English is one of the most highly emphasized subjects both in school and at home in China, and employers highly value a good mastery of English in the country’s job market. However, learning English has many challenges for Chinese people. For example, in Chinese language, there are no sounds that directly correspond to the English sounds’ l’ and ‘r.’ Chinese learners cannot hear the difference between the two sounds. As a result, they have trouble differentiating between the two in pronunciation.
Wang Yi – CEO of Liulishuo and a former product manager at Google, who returned to China in 2012 – found that Chinese students achieve high grades in written English tests, however, when it comes to spoken English tests, most of them could not match the equivalent score.
Therefore, Wang and his partners began to work on a mobile app that uses AI to provide self-paced online English courses that cater to a wide range of users, from beginners to advanced learners. In July 2016, Liulishuo introduced the app to its users, with charges ranging between USD 15 and USD 150.
Moreover, learning English through mobile apps have become a trend among Chinese people. According to China Daily, among the education apps in Apple’s app store in China, English learning apps make up half of the slots of top 10 paid-for apps, and four slots in the list of top 20 free apps.
The revenue created by the Chinese online education industry is expected to reach CNY 543 billion in the coming years, and English learning makes more than 60 percent of it, according to the market research company iiMedia Research.
High Competition and Marketing Cost
It seems like Liulishuo (LAIX: NYEX) saw a big opportunity in online English teaching and tried to differentiate itself from the competitors by focusing mostly on pronunciation but it might not be enough to succeed in the market. Chinese online education sector is relatively saturated, and the competition is fierce.
The firm is also negatively affected by competition. Although the company’s revenues are increasing, its net income continues to decline for five consecutive years.
To attract more users, the company launched Liulishuo kids last year. Currently, 40 percent of Liulishuo’s users are children.
Among the company’s competitors, Baicizhan (百词斩) is the most successful rival as both target similar consumer groups. Baicizhan develops various English learning apps, including Hundred Word, Mint Reading, Tomato English, Cake English, and Cheese – almost all quite popular among Chinese users. In addition, other companies focus on school subjects but also offer English courses such as VIPKID, Squirrel AI, Chalk.com and EdCast.
This highly competitive environment makes marketing essential for customer acquisition to make a profit for online education companies. However, marketing cost creates a dilemma: if the company spends too much on marketing with a low renewal rate of subscriptions, then it subtracts more than it adds from the company’ balance sheet.
Opportunities
Luckily, beyond spending on marketing, Liulishuo is investing in technologies like big data, voice recognition and AI phonetic detection to improve its services. For instance, Liulishuo’s users are provided with customized pronunciation correction and grammar correction.
While working on these technologies, the firm is not only attracting new users but also attracting investors. In fact, in the past company raise funds with a promise to increase research and development spending. These investments are the company’s primary revenue sources.
Therefore, although there is a chance that Liulishuo can attract more investors, and maybe increase its number of subscribers in the long run. For now, it is unlikely that the company will start making a profit.