Online education advertisements have become pervasive.
In 2020, almost all popular variety shows will have online education company advertisements. "Happiness Trio" can see the advertisement of Zebra AI, watching "Longing Life" can see the title of the homework assistant, watching "Extreme Challenge" will jump out of the "famous teacher online" in the high school classroom. The large-scale advertisements of the programming cat will rush to your face when you take the subway. When you wait for the bus, you will see a huge poster of the topic. You can brush up the promotion of the monkey AI lesson by brushing the circle of friends, even on the bus body. They are all posters of a series of online education companies such as Banyu.
"Isn't high-quality education a scarce product? When has it become a promotional item that needs to be advertised and discounted?" Lin Xin (pseudonym), who is already a 3-year-old mother, was puzzled. Lin Xin wanted to enroll his children for English and thinking classes, but he had no choice but to contact too many brands. "You can't buy all the low-cost trial classes. How much time and energy will be wasted."
The feelings of parents are only the tip of the iceberg of online education in 2020. Under the deep sea, the entire industry is running blindly and surviving the fittest under the influence of capital.
In 2020, during the epidemic period, "stopping classes without stopping school" pressed the accelerator button for online education. According to data from iiMedia, the penetration rate of China's K12 online education market has increased from 15% in 2019 to 25.8% in 2020. The penetration rate of online education has soared, and the online education companies involved in it are like high-speed trains, which have turned on speed-up mode.
"Deep Web" combed the underlying logic and development trends of online education this year through dialogues with many educational entrepreneurs, practitioners, parents, and investors.
This year, capital began to gather at the top online education company, and the subdivision tracks such as double-teacher live broadcast of large classes, online children's English, online mathematical thinking, online children's programming, and education information technology all ran out of the head company; In 2012, in order to seize the trend of customer acquisition, most online education companies exchanged strategic losses for scale growth; this year, in order to increase the life cycle value (LTV) of users, expand subjects, grades, and build matrices to become top online education The consensus of the company; this year, industry leaders began to reflect that online education has never been a traffic business. When the market scale reaches a certain boundary, large-scale product delivery and services will become the main battlefield.
The online education industry is still a marathon without an end, and the race for capital and innovation has just begun.
Stay at the poker table
"The Matthew effect of financing in the online education industry this year has become more and more obvious. The money flows to the top companies of the subdivision track. There are only three types of startups that can stay at the table. One is to obtain financing, and the other is "Successful selling, holding to the thigh, the third is to choose a strategic contraction or dormant tail enterprises", Banyu CMO Zhai Lei told "Deep Net".
According to statistics, from January to December 2020, a total of 91 financing incidents were disclosed in the online education field, with a total financing of approximately 51.2 billion yuan. From the financing amount of a single company this year, it can be seen that more than half of the capital went to two online education companies-Yuandaodao and Jiaxingbang.
Yuandaodao received three rounds of financing of US$1 billion, US$2.2 billion, and US$300 million in March, October, and December this year, respectively. In June and December of this year, Job Help received US$750 million and US$1.6 billion in financing respectively. A total of 5.85 billion US dollars (approximately 38.2 billion yuan), accounting for 74.6% of the industry's overall financing amount.
In the secondary market, Xueersi Online School and Gaotu Classroom, which are also in the K12 live broadcast of large classes, have started a fixed increase financing model. In November, Xueersi.com’s parent company, Good Future, issued an announcement that an international investment company agreed to purchase USD 1.5 billion of newly issued Class A common shares of Good Future; a month later, GSX announced that several value investors had agreed to purchase Newly issued shares of the company totaling approximately US$870 million.
"At this stage, most of the capital companies that are willing to pay are the leading companies that have run out, not only K12 online schools, but also online children's English, online mathematical thinking, online children's programming, education informatization and other subdivision tracks." Investors said.
According to the company’s data, in the educational information technology track, E-Ou Education, which is based on the online live broadcast tool "ClassIn Online Classroom", received two rounds of financing of over 100 million U.S. dollars within half a year; the programming cat won two rounds of 1.55 billion yuan. Most of the financing for the children’s programming track; while the online mathematical thinking track company Spark Thinking and Pea Thinking took 90% of the track’s financing; on the online children’s English track, there were 5 financings reaching hundreds of millions of dollars, of which 4 pens from Banyu and Akasso, who are the main online children's English one-on-one.
Regarding the definition of the head company, Huang He, founder and CEO of Banyu, explained: “Online education companies with stable monthly revenues of more than 100 million yuan, or online education companies with annual revenues of more than 1 billion yuan, are considered top companies. On the track, if you don’t get the investment this year, it will be difficult to get on the car.
In order not to be "washed out" by the leading companies, startups that have difficulty getting financing choose to sell themselves in order to integrate or complement each other.
According to incomplete statistics from "Deep Web", there were at least 10 well-known mergers and acquisitions in online education this year. In K12 online school, GSX took over Puxin Online School at the end of the year and acquired Jingxi Online School; in the field of online children’s English track, Magic Ear was wholly acquired by Pea Thinking in October this year; in Mathematical Thinking track, you shoot One was acquired by ByteDance in August; in the children's programming track, Miaoxiaocheng Children's Programming was officially acquired by Sanqi Mutual Entertainment in January 2020.
"Successful selling is considered a good choice. Companies that have not received financing or been acquired after 2019 will either go bankrupt or have to scale down to survive." Online education practitioners lamented "Deep Web".
Without capital blood transfusion, online education startups will be unsustainable. This is a footnote to the underlying logic of online education development .
Online education has a relatively long delivery chain, and the entire link includes: traffic-customer acquisition-low-price class (free class) sales-regular price class conversion-teaching services-data feedback-conversion renewal and other links. For online education startups, buying traffic, looking for traffic, and doing a good job in customer acquisition are the foundation.
Traffic "black hole"
Traffic is like a "chronic poison" to the online double-teacher live broadcast of large classes. The companies that swallowed this medicine in the summer of 2019 have tasted the sweetness. After the launch in the summer of 2019, the number of users of companies such as Xueersi Online School, Homework Help, and Yuanjiao has indeed doubled.
According to the financial report for the second quarter of the 2020 fiscal year (May 31-August 31, 2019), Xueersi school revenue increased by 94% year-on-year, and the number of regular-priced long-term students increased by 134% year-on-year to 1.4 million . In addition to Xueersi Online School, Hou Jianbin, the founder of Homework Gang, disclosed the results of the "Summer War" in 2019. As of October 20, 2019, the number of students in the fall semester of Homework Gang live class exceeded 970,000 (regular price, removed Refund) to achieve 400%+ year-on-year growth.
In April 2020, someone in the industry once revealed to "Shen Wang", "Several online education companies at the beginning of the year did reserve more than one billion yuan in preparation for this summer, but because of the epidemic, they accumulated tens of millions of free Users, several leading companies will cut their budgets for the summer this year and shift their focus to serving old customers and converting existing students.”
However, judging from the amount of money invested by each company in the summer, instead of reducing the amount of money invested by each company, it has risen sharply. According to statistics, this summer, the top four K12 online schools spent about 4.7 billion in the summer, while last year's summer investment was only 1.9 billion, more than doubled.
"This is also a matter of no choice. The previous head companies did decide the release rhythm according to their own models, but now they are all biting each other. This company has voted, and the other has to follow. Summer head 4 K12 Online schools (Xueersi Online School, Ape Guidance, Homework Help, Gaotu Classroom) throw out more than 100 million in one day, and only 30 to 50 million in one day’s market launch.” Li Lin, an online education company in charge of marketing (Pseudonym) said to "Deep Web".
Companies in the same echelon have installed "sirens" internally. As long as the opponent moves, the alarm will be sounded.
The result of getting together to buy traffic is that the more traffic you buy, the more expensive it becomes. According to the data from the delivery terminal, the traffic price rose by half during the traditional big promotion period in June of the "Huge Volume Engine" advertising system owned by Bytedance.
"There is no way. Compared with the self-owned traffic brought by tools such as WeChat groups, social fission, and photo search in the field of double-teacher live broadcast, the users brought by the purchase traffic are indeed more accurate and the starting volume is faster. Development can only endure strategic losses. K12 online schools say that most people who do not participate in the traffic war have no money to burn," Li Lin said.
The rapid increase in customer acquisition costs for online education this year supports this view of Li Lin.
According to statistics, this year's summer K12 class course regular-priced course will cost around 3,000 yuan. This year, the customer acquisition cost of the online AI lesson package, which is sought after by capital, has soared from 200 yuan at the beginning of the year to about 1,000 yuan now.
"Not only is the summer investment substantially increased, this year's head online education company's investment is no longer a wave-like growth (the investment increased sharply in the winter and summer, and the spring investment fell), but an upward parabola, which has been rising because the head company needs to invest The product is not only the live broadcast of large-scale classes on the tuyere, but also other innovative products," Chen Lin explained.
The change in the delivery curve of the head online education company has a general background. The education products of the head companies such as Xueersi Online School, Ape Guidance, and Homework Gang have begun to be explored. In addition to the K12 stage double teacher live broadcast class, children aged 2-8 The stage of AI classes has also become a track for head education companies to bet on. At the AI Enlightenment Circuit, Xueersi Online School has a monkey AI, ape tutor has a zebra AI, and homework help has a duck and duck AI class. "In order to promote Zebra AI this year, Yuandaodao has placed more than one billion brand advertisements on satellite TV variety shows and elevator ads," said an industry insider close to Yuandaodao.
In addition to re-launching AI enlightenment products, Xueersi Online School also launched question shooting in March this year, which made up for its shortcomings in tool products such as photo search. An industry insider close to Xueersi Online School said: "Since March this year, Xueersi Online School has spent nearly 100 million in advertising campaigns in 8 cities."
Whenever there is traffic, there are users. Online education's hunger for traffic is like a "black hole". Traffic is getting more and more expensive. When online education companies suddenly find that they are already in a black hole, it is too late to get out.
"It's easy to understand that the cash flow of an education company has two main destinations, one is the front-end spends money to buy the flow from the outside, and the other is the operation of the back-end products, including site expenses, teacher salaries, operating costs, etc. Education company founder There is a consensus that no matter how you burn money, you must ensure the stability of the back-end, otherwise the entire plate will collapse. But the education company is a prepayment model, the more customers are acquired, the more inventory has to be eliminated. When an online education company When there is no money to burn and no customers, it means that there is no cash inflow, then the back-end teacher salaries and operating expenses will become minefields," Zhai Lei explained to "Deep Web."
Scale or profit is multiple choice
Regarding online education as a "traffic business" itself is a dangerous signal, but in terms of the scale of industry investment, burning money to buy traffic is still the mainstream way to acquire customers in this industry.
"Although the traffic price will rise, the customer acquisition and brand wars of the top online education companies will continue for at least two or three years. Therefore, the online education companies are basically not profitable, and they are called strategic losses." Company practitioners have expressed similar views to "Deep Web."
Regarding the “strategic loss” of the online education industry, Yu Minhong, chairman of the New Oriental Education Technology Group, once publicly stated, “Now that online education is so prosperous, it depends on capital blood transfusion. For the whole year of 2020, capital has input nearly 15 billion US dollars into the online education field. , But the income of online education is only tens of billions of yuan."
Yu Minhong used the double-teacher live broadcast mode as an example to calculate an account: "From the perspective of customer acquisition costs, the cost of acquiring a class for a student in a large class is now 3,000 to 4,000 yuan, and the total cost that a student can receive in a year is also 3000~4000 yuan; from the perspective of the renewal rate, the online education company disclosed that the renewal rate is as high as 80%-90%, that is, after 100 primary and middle school students try out the class, 80 students will pay the regular tuition. But I think This data is for investors. New Oriental’s best teachers have tried repeatedly and the average renewal rate is about 70%. I believe the industry average will not exceed 75%."
"The renewal rate does not exceed 75%. Every renewal of classes will lose 25% of the students, and the renewal twice a year will lose 50% of the students. In this way, 50% of the recruitment fees will be spent, and 50% of the students will be lost. This means that the tuition fees paid by the students will not be left after a year, but the institution still pays teachers’ salaries, scientific research expenses, product development expenses, system maintenance expenses, etc. Therefore, there is no online education company that does not lose money. If it receives 2 billion, and finally 3 billion will be spent, 3 billion will be collected, 4.5 billion will be spent, 5 billion will be spent, 7 billion will be spent.
According to Yu Minhong's logic, online education companies that have been burning money to win customers will fall into permanent strategic losses.
With regard to burning money and strategic losses, NetEase Youdao CEO Zhou Feng expressed different views on "Shenzhen Net". "The online education industry depends on the indicator of operating cash flow. If an online education company has good operating cash flow and does not have a large number of withdrawals, then the company is healthy," said Zhou Feng.
Zhou Feng explained that the education and training industry has its own accounting logic, that is, marketing expenses and cash flow in advance. In addition, because in the education and training industry, the income from class consumption is included in the quarterly revenue, so the deferred income indicator of the education and training industry is very important. For example, a user spent 1,000 yuan in marketing expenses to recruit a student who paid 1,200 yuan in tuition. On the surface, he made 200 yuan. But if this student needs to take courses for three quarters, his income for the quarter is 400 yuan, but the marketing expenses are recorded immediately. The intuitive feeling is that the 1,000 yuan marketing expenses only bring 400 yuan in income, so in the short term Like losing a lot of money.
"To put it bluntly, this is a multiple-choice question. Before the company burns money on a large scale, online education companies want short-term profits to be completely possible, such as suspending all market launches in the short term, cutting food and clothing, reducing financial expenditures, and fine-tuned operations. , Short-term profit is possible. Just like other leading companies in the Children’s English Track, the market investment last year was several hundred million, but this year’s market investment was only ten million," Zhai Lei told "Shen Wang."
However, in Zhai Lei’s view, the online education industry has Internet genes. The conventional universal value of the Internet is that if you can scale growth, scale first. As long as the cash flow is positive, even if it is a loss, the growth rate is fast enough and the scale is large enough. , Capital and industry are acceptable. After the rapid growth phase is over, the top companies that have won in the scale war will begin to make profits.
The last reaper
Who can become the final winner of the online education "scale war"?
History will not repeat itself, but it often has the same rhyme.
"Now the double-teacher live broadcast of the big class class is a money-burning model, and we have gone through the online one-on-one. Now the few companies left on the one-to-one track can predict the end of the double-teacher live broadcast of the big class", founder of Sanhao.com And the CEO said to "Deep Web".
Founded in 2014, Sanhao.com focuses on the online K12 one-to-one market. It participated in the 2015-2016 educational O2O subsidy battle, and experienced the crazy financing and looting of the online one-to-one market from 2017 to 2018.
In 2017 and 2018, the business model of K12 live broadcast of large classes has not been verified, and at this time it is still the world of online one-to-one companies. In the past two years, the boss has obtained two rounds of financing of hundreds of millions of dollars one-on-one, Sanhao.com has completed hundreds of millions of yuan in round B financing, and Haifeng Education and Hi Class have completed tens of millions of dollars in financing.
Accompanied by the crazy money-sucking of online one-on-one companies, large-scale launches on the track. "Sanhao.com's market launch cost in 2018 was over 100 million yuan, and it is also doing branding for Hunan Satellite TV's "Everyday Upward" popular program," He Qiang revealed.
Data shows that in 2018, the online K12 one-to-one individual student acquisition rose from 4,000 yuan to 7,000 yuan within a year, and even the cost of acquiring a single student in some companies has reached 15,000 yuan. The online K12 one-to-one industry has fallen into a dilemma that the larger the scale, the more losses.
In October 2018, Xueba's one-on-one and Liyou one-on-one, who had both received Series A financing in 2017, broke the capital chain. The entire online one-on-one track quickly fell after a period of highlight.
At the end of December 2020, a learning tyrant who had been deeply involved in online K12 one-on-one for many years was revealed to have encountered business difficulties. The founder Zhang Kailei was dealing with the aftermath.
"Beginning in 2019, the company on this track has come to understand and started to settle accounts. Online education companies have three lines, one is cash flow, one is the revenue line, and the other is the flow line of the market. Only after a complete experience of the track It was discovered after the whole cycle from climax to trough that only by maintaining the healthy growth of the three lines can there be a future. When the focus of the entire industry is no longer the conversion of low-cost courses brought about by the launch, but the conversion of regular-priced courses to regular-priced courses, this The industry is back to normal, " He Qiang said.
On October 16, 2020, the Ministry of Education held a series of press conferences for the Golden Autumn to introduce the "Opinions on Comprehensively Strengthening and Improving School Sports Work in the New Era" issued by the General Office of the Central Committee of the Communist Party of China and the General Office of the State Council and "About Comprehensively Strengthening and Improving the New Era "Opinions on School Aesthetic Education". According to the document, the high school entrance examination for physical education will increase the scores year by year, to achieve the same value as the number of foreign languages, and the high school entrance examination for aesthetic education should also be promoted as soon as possible on a pilot basis.
"Gradually including physical education and aesthetic education in the college entrance examination, this means that in the future, students can allocate less and less time for extracurricular training in subjects such as language, mathematics, and other subjects. At this time, the focus of users is no longer low-cost courses, and it is no longer simple Accompanying and supervising school are whether online education companies can provide efficient courses, whether they can raise points, and the effect is paramount," He Qiang said.