"Deep Water War" Of Online Education: Industry Reshuffle Continues To Intensify, And The Profit Problem Remains To Be Solved

The online education industry, which is accelerated by the impact of the epidemic in 2020, will continue to develop vigorously in 2021.

Since the new year, not only has the news of spark thinking and headmaster education going to the US IPO spread. In the past week, there have been a number of formal announcements of financing.

On January 25, spark thinking completed the E3 round of financing. So far, spark thinking has won a total of three E1-E3 rounds of financing in the past five months, with the financing amount of more than 400 million US dollars. On January 26, the online brand whale foreign teacher Peiyou won the B + round financing from New Oriental. On the 26th, cloud school, a solution provider of digital enterprise university, also announced that it had won the E1 round strategic investment of Tencent.

With the development of the industry entering the deep-water area, the head companies continue to raise huge amounts of funds, and even go to IPO. At the same time, the shuffle of online education industry is also intensifying. For example, the former star company xuebajun lost blood, which not only shows the cruelty of online education industry competition, but also reflects the difficulties of online education enterprises in making profits.

The industry has entered the deep water area, and the requirements of users and investment standards of investors have been upgraded in an all-round way

The new epidemic situation since 2020 has accelerated the cultivation of users' habits of using online education products. But for online education companies, the benefits are not sunshine, but there is Matthew effect. The online education enterprises with high popularity in the head get more advantages, while the online education enterprises in the middle and tail may feel bad.

Wu Hao, CEO of whale foreign teacher Peiyou, explained to the 21st century economic report that since online education enterprises are generally still in the stage of continuous optimization of economic models, they are unlikely to make profits in a short time, so the development of enterprises still needs continuous blood transfusion support of capital. The head enterprises that are easy to get financing will increase investment in labor cost and flow cost and obtain more growth. The middle and tail enterprises that can not get financing have no financial support, and the cost of participating in the competition is higher and higher, which is easy to break the capital chain and close down.

"Before the middle and tail enterprises in a number of industries have not built their own hematopoietic capacity, they have to face the fierce competition situation that the capital continues to gather to the head enterprises. They may be in trouble because they can't get financing in time, and eventually the capital chain is broken and facing elimination. In 2021, there are likely to be more similar enterprises. " Zhai Lei, head of the fish marketing department, analyzed the 21st century economic report.

There is Matthew effect in the online education industry, and the top well-known enterprises are more favorable, while the middle and tail parts may be negative. Visual China

He said that the common characteristics of those enterprises that can continuously obtain financing are: first of all, they belong to the leading enterprises in the subdivision field. Second, its business generally has a large-scale growth, that is, the scale of users and income of the company has a large and stable growth. This is the business data focus of online education enterprises in the general pursuit of healthy scale growth.

"If online education enterprises want to achieve sustainable development, they are facing a comprehensive upgrading of user demand and investment standards of investors." Wu Hao said. He takes the online children's English track as an example to more intuitively show the current situation of the industry entering the "deep water war".

Wu Hao said that in the past seven years, the development of children's English industry has experienced two stages. From 2013 to 2018 is the first stage. At this time, parents and children are just beginning to adapt to the shift from offline education to online education, and there is not much online resource supply.

The focus of the product at this stage is to attract children's attention, so that children are willing to sit in front of the computer for 25 minutes and communicate with high-quality foreign teachers. The product can really help children's performance improvement, but next, parents' expectations are not so high. At that time, the online children's English enterprises were mainly based on the one-to-one mode, which made the operation more difficult and user acceptance higher. For capital, investment is also very straightforward, mainly focusing on growth data and user experience, rather than economic model and renewal rate.

But in the last two or three years, the users, enterprises and capital of online education industry have changed significantly. First of all, due to the abundant online resources, users' needs have upgraded from children's sitting ability to more practical results. Secondly, for enterprises, in order to continuously meet the needs of users, the difficulty of operation will be increased. At the same time, with the passage of time, the one-to-one model of enterprises has entered a state of slow development due to the challenge of economic model. Many enterprises began to seek new business models to improve operational efficiency.

Third, for the capital side, it is more cautious to move out because of the difficulty in raising funds in the equity investment industry. Moreover, it is very difficult for them to sustain the development of burning money model, and they prefer enterprises with healthy economic model and can see the possibility of profit in the future.

The problem of profit remains to be solved, and enterprises seek the balance between scale and profit

In fact, at this stage, online education enterprises are still burning money, which has been criticized by the outside world for a long time, whether it is the top star companies in the primary market, ape tutoring, or the bright future of the secondary market and New Oriental online.

"The online education industry does have a rigid demand and faces a huge user group. But there may not be a fully profitable online education enterprise in the next three years. " Zhai Lei said frankly.

He explained that for enterprises, there are two aspects of the cost can not be reduced. One is the cost of personnel. Although online education belongs to the Internet industry, the service attribute of education is biased. Coupled with the long business chain, online education enterprises may have larger staffing, especially in the service team and head teacher staff. With the continuous growth of enterprise scale under the background of expanding science and technology, how to use the power of science and technology to enhance productivity, reduce human cost and improve organizational efficiency is an urgent problem for online education enterprises.

The second is the cost of acquiring customers. In the face of fierce industry competition, online education enterprises are paying more and more attention to attracting customers. If the pattern of the industry is stable in two or three years, we will no longer burn money for vicious competition, and the enterprise may be further away from the real profit.

Jiang Kaiyang, director of Taihe capital, once said that the flow pattern has four levels: self owned flow, private domain traffic, IP or brand traffic, and investment flow. In essence, delivery is the simplest and fastest way to obtain traffic. Self owned traffic is the highest level of traffic. Its advanced level is fully controllable and fully controlled by the enterprise. It can make various transformations. In addition, it has the lowest customer acquisition cost.

In fact, there are already some enterprises in the market, such as operation group and companion fish, which have established a large amount of revenue on the transformation of their own flow, so as to reduce the cost of acquiring customers. It is understood that companion fish is committed to building a product matrix ecology of all scenes and ages. Companion fish picture books attract young users with enlightenment education, forming a user flow pool, and providing drainage for other products such as companion fish children's English. As a result, the cost of customer acquisition is relatively low and it is easy to bring high gross profit.

"The best state for the development of online education enterprises is to seek large-scale growth on the basis of ensuring students' learning effect and enterprise health, and put the extra profits into the future construction and reserve. It is not right to blindly spend money on scale, nor is it right to blindly pursue profits and give up scale growth. Enterprises should look at problems from a long-term perspective and take a virtuous circle of "user word-of-mouth driven growth". They need to find a balance between health and scale growth. " Zhai said.

At the same time, it is worth mentioning that Tuoke will greatly help companion fish to improve its revenue and expand its profits, so as to make the best use of its traffic. Tuoke products of companion fish are expected to go online in the second quarter.

Even though the whole industry has not made profits, there are still companies preparing for listing, and there are also news that spark thinking and leader education will go to the US for IPO.

According to an industry insider's analysis of the 21st century economic report, this shows that the capital in the primary market is not willing to continue to pay for the burning competition of online education enterprises. Finally, the enterprise will either go public or go bankrupt because of the broken capital chain. In 2021, two or three online education enterprises may choose to go public, but listing is not the end point. Enterprises still need to consider the future profitability in the long run. At the same time, more companies may fall in 2021.

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