Editor’s note: This article comes from “Diandianhui Think Tank” (ID: diandianhui2020). The authors are Zhu Yujie, Wang Ruixin, and Shao Yuxin.The epidemic struck, and all walks of life have been greatly affected, including education: negative offline, online short-term traffic skyrocketing.It will take about 3 years for users to be covered by online education in the future, and this month they will be quickly transferred online.How should the education industry respond to the sudden fast-forward model?You can learn from history as a guide, and learn from people as a guide.Mr. Zhu from Red Dot China and his industry partners analyzed the crisis and opportunities facing the education industry in a special period from the perspective of investors, hoping to arouse more thinking from industry partners.2003 SARS: Giant Escape and Online School Begins New Oriental: After surviving the crisis of suspension and run, capitalizing and going public After the 2003 Spring Festival transportation, Beijing became the worst-hit area for SARS.In order to avoid crowd gathering and the spread of the epidemic, Beijing announced in mid-April that all education and training institutions had suspended classes.At this time, New Oriental has just solved the copyright issue of ETS, is full of ambition to prepare for a big fight, but is facing the difficulty of recruiting students.Students and parents in panic rushing to ask for a fee refund almost turned into a run-in crisis.During the SARS period in 2003, the signboard of the New Oriental Fourth Ring Headquarters Source: Old Orientals were restricted by the Internet infrastructure and bank withdrawal limits at the time. The long line of refunds to the New Oriental headquarters was discharged from the fourth floor to the first floor at the peak.If student refunds are restricted at this time, not only will New Oriental’s brand be damaged, the run-in phenomenon may also be exacerbated by positive feedback.After Yu Minhong’s special application to the bank, New Oriental finally raised the one-day withdrawal limit.But at the same time, the company’s cash flow also created a huge gap. When the cash flow was less than one month, New Oriental relied on the 7 million emergency funds borrowed from friends by Yu Minhong to survive the crisis.This crisis made Yu Minhong truly realize the importance of cash flow.Since then, New Oriental has gradually embraced capital, and in March 2005 completed a $ 30 million financing of the Tiger Fund with a valuation of $ 300 million.At that time, the investment in the Tiger Fund was responsible for Chen Xiaohong, a student Yu Minhong had taken while teaching at Peking University.The Tiger Fund received a 10-fold return on this investment, and has continued to be bullish on the Chinese education industry since then, and invested in learning and thinking in the 2009 Pre-IPO stage.After being endorsed by the US dollar fund, New Oriental successfully landed on the New York Stock Exchange on June 7 of the following year, becoming the first Chinese education stock listed in the United States.Thinking for yourselves: The “Australian network model” during the SARS period has developed into a good recipe for customers. In 2003, Zhang Bangxin, who had not yet graduated, had taught for more than a year.After the SARS struck, the training institutions that have just opened for a short time have ceased operations upon request.Zhang Bangxin then used his self-taught website technology to establish the “Australian Network.”The 1.7 million elementary and middle school students in Beijing who stayed out of school did not leave home, and could get the analysis and answers to the problems through the homepage of the Olympiad.com, which also gave another wave of loyal users to the formal opening of the SARS storm.Olympic Digital Network later became a traffic portal for learning and thinking-“E Degree Forum” (later renamed Parents Help).So far, the traffic of parental help and public entrance numbers in various places is still providing a lot of enrollment clues.Online school: Under the predicament, after the primary and secondary schools were suspended in April, the Beijing Municipal Education Commission officially established the Beijing Education Information “Classroom Online” as the main body, with the NPC Attachment Middle School, 101 Middle School, Beijing Fourth Middle School, Beijing Yucai School, BeijingFive e-learning schools in the fifth middle school are supported by the e-learning platform.”Classroom Online” is part of the Beijing Municipal Education Commission’s “Aerial Classroom” plan for SARS. However, considering the low PC penetration and narrow network bandwidth at the time, a large number of students actually went through the TV program organized by the Beijing Education Commission.Happy Classroom, completed home study during SARS.At the beginning of 2000, there were about 200 online schools co-organized by schools and enterprises, including Beijing Fourth Middle School, 101 School, Huanggang School, etc.During the SARS period, the Beijing No. 4 Middle School Online School and the Peking University Affiliated Middle School Online School opened their learning resources free of charge and attracted widespread attention from a large number of parents.Limited by the bandwidth and technical bottlenecks, the online school at that time mainly provided recorded courses, electronic learning materials, etc., as well as a small number of live Q & A and interactive functions.After the epidemic ended, the Beijing Municipal Education Commission’s classroom online soon ceased operations.However, due to fundamental problems such as unclear business models and insignificant effects, or joint transformation or escape, the market for online schools is slowly quiet, and the short-term online education bonus has not been retained for a long time.How to make online education from the short-term emergency in the epidemic situation, and move towards occupying the minds of users for a long time, this issue is also a new generation of online education companies to think carefully.2003-2019: The era of technology-driven online education is similar to what happened in 2003. Schools are closed, offline training institutions are under pressure, and the spread of the epidemic has even exceeded SARS.But in these 17 years, the online education industry itself has also made tremendous progress.The biggest driving force for the evolution of the education industry is the iteration of technology, which has brought two levels of impact to the education industry: 1) The carrier of the education industry service has been changed, model innovation has been brought about, and online education content and services have been promotedProductization and digitization: 2) Let part of the capacity of the education supply side be released, creating favorable conditions for the scale of education enterprises.Technology changes the carrier of education, fostering innovation in form, production: Wang Ruixin Mobile Internet: Accelerating the release of supply-side capacity In the past 10 years, network bandwidth has gradually increased, and online education has gradually developed from its infancy.The initial online education was based on simple online content. The model was embodied in a recording and broadcasting school in the adult field that does not require high-frequency interaction. The best of them is ensuring that distance education was successfully launched in 2008.At the same time, the mainstream K12 is still taught offline, and some small regional leading training institutions continue to expand, exploring cross-region and off-site replication.Good Future experienced Haidian’s expansion to other areas of Beijing in 05-08. In 2008-13, it successively tried mergers and acquisitions and large backstage small front desks for cross-regional replication, which was successfully verified.At that time, the good future became an offline training institution with national expansion capabilities.With the development of mobile Internet and gradual penetration in the education industry, after 2013, more and more education applications based on smart phones appeared.From the question bank tools that appeared earlier, online one-on-one and offline dual-teacher classrooms, to the large-scale live broadcast online school, online small classes, WeChat light classes, and AI interactive classes in the past two years.Online education has ushered in a stage of diversified product and service forms.The Internet has broken the constraints of the spatial distribution of the education industry supply, and has also opened the ceiling to serve students nationwide and even globally. At the same time, the release of supply-side capacity has made it easier for online education companies to scale, attracting a lot of early capital betsThe primary market has formed an enhanced loop of capital-growth-new capital, with hundreds of investment and financing events each year.Online and offline: long-term coexistence of multiple forms, but on the other hand, the onlineization of the education industry is not achieved overnight. We return to the essence of the service industry of the education industry, and from the perspective of service providers and user experience, it is not difficult to draw conclusions:The speed of online penetration improvement depends on the bilateral acceptance of training institutions and parents of students.Good Future released the school and thought online school 10 years ago, but according to Investor Presentation on the official website of Good Future, the official start of the live broadcast was in its Q2 fiscal year 2017.At the same time, in recent years, although offline scenes have been squeezed online to some extent, they still have strong vitality, and a large proportion constitutes the trillion-dollar market size of the education industry.Whether it is the first- and second-tier cities with relatively mature online education, or the third-, fourth-, or fifth-tier cities that are gradually competing to sink their layout, a considerable number of users value the immersive experience of offline learning and interaction, voting with their feet, and supporting domesticCash flow of 100,000 small and medium-sized offline training institutions.In the medium and long term, once word of mouth is formed for training that focuses on operations and services, the switching cost of veteran students will be high.Various forms such as small and medium-sized institutions, large chain training institutions, and rapid growth in online education will coexist.Standing back today in 2020, compared with 2003, the education pattern has undergone tremendous changes.The special period strategy adopted by many educational institutions since the beginning of 2020, after the various regions have issued notices of delayed opening of schools and the suspension of extracurricular training institutions, tens of thousands of educational training institutions and tens of millions of upstream and downstream personnel in the industry have quickly acted.Facing the special challenges of national education.Education policy under the influence of the epidemic, production: Blue Elephant Capital offline institutions: during the Spring Festival, several months of workload, such as resolving student extension communication; offline refund of some online fees, offline teachers onlineTraining, etc .; Online institutions: Offline cannot be opened, students are connected to the Internet, and cities and villages are closed in various places. Where can I quickly mobilize the lecturers and operation teachers who go home to cope with the sudden surge of traffic?According to the classification and analysis, the response measures of various types of institutions are mainly shown in the following figure: Classification and mapping of response measures: Zhu Yujie’s various traffic giants acted quickly, quickly handed out 1 billion red envelopes in the Spring Festival Evening, and took the lead in joining the first batch of 42 on the seventh day of the New Year.A high-quality online education institution has launched the Kuaishou Home Learning Platform at a low profile, raising the entrance of Kuaishou Education to a level comparable to the Spring Festival Gala activities.After that, Douyin, Station B, iQiyi, Learning Power, and Central Video also opened up the first-level entrance to school at home.Source: The fast-moving education giant is also very fast. Xueersi Online School, Ape Coaching, and Homework Class have launched free online lessons (Gao Xuan officially followed up with free lesson activities on February 8).7 million, 5 million and 4 million free lessons were donated in a few days.However, this measure also caused a certain impact on the original regular-priced students. Many parents chose to sign up for free classes after refunding their fees.At the same time, such a large increase in the number of free course students objectively led to the fact that several companies could only provide courses with 0 services. In this state, the retention of students and the conversion of regular-priced courses in the future are subject to the test of course effects..Source: Xueersi. Many small and medium-sized offline educational institutions have chosen to embrace the online. The huge influx of traffic can be seen from the frequent disconnection, stuttering and error reporting of various online live broadcast tools.The players in the online education sector are mainly one-on-one and double-teachers in large classes. Players in small classes are difficult to scale due to the pressure of teacher training and the difficulty of organizing classes.However, the current situation of many offline institutions going online will give a large number of students the first online small class experience. Perhaps the proportion of online classes will change after this.As mentioned above, in the past 17 years, the education industry has undergone drastic changes driven by technological advances and demand iterations. Many education industry practitioners have responded to the epidemic situation much more than in 2003.Time is diverse.Within this month, successively promulgated policies include gradually delaying the start of full-time schools until the end of February or even March, ordering offline training institutions to close, and vigorously guiding schools to launch cloud classes, which has led to the current situation of students and parents.The only option left is online education.This policy stimulus has indeed greatly accelerated the penetration of online education.So recently, many media and education practitioners even shouted the slogan “Online education is coming.”From the perspective of investors, we have carefully analyzed the current situation, set aside the noisy slogans in a special period, and from the organizational form of the education supply chain and the different company forms and stages, we believe that the following points are worth exploring: short-term dividendsAnd long-term development: In the long-term development, we must pay attention to distinguishing between α and β offline training institutions that have ceased operations, which brings a blowout of online education coverage in the short term, and many of these users are bound to reduce the use of online education products after the epidemic has passed..Just as mask makers worried about the temporary backlog of production lines in the next few days, which will cause a backlog of goods in the future, education companies should also pay attention to possible overcapacity issues in the future.In response to this, the company must strengthen services to increase the retention rate of this dividend, on the other hand, it can also use the help of part-time teachers, light services and productized content to relatively low cost without reducing too much service quality.Carry this wave of users.Accelerated changes in users’ minds and increased penetration have brought long-term online education circuit bonuses.In this incident, the education bureaus and schools in many regions directly handed over the online classroom business of the school to Nail or Huashu. The amount of business is huge. From Nail to the tens of thousands of new students on the App Store every day.The comments are clear.In the large class track, Xueersi Online School, Ape Coaching and Homework Help gave free lessons to elementary and junior high school students who were suspended nationwide. In just one week, more than 5 million lessons were added.In this situation, how small and medium-sized enterprises can seize this wave of user dividends and how to improve their alpha is even more worth thinking about.Source: APP Store supply chain to be upgraded: both online and offline institutions need to improve standardization. Many online education companies recognize the importance of “creating standardized education products” in this epidemic. The more standardized the delivery, the less difficult it is to organize.The more resistant to risk.We think the same goes for offline education companies.In the past few days, many offline education institutions have developed online courses through third-party tools. The response has been mixed, and behind this uneven reputation, the company’s content supply chain has greatly influenced.Companies with standardized organizational skills can deliver courses with relatively high quality even if some employees are unable to arrive due to special circumstances.Such excellent cases actually give us a reminder to many online education companies that innovate for model innovation: good content and good organizational form are much more important than course delivery offline or online.More rational understanding of capital: neither excessively touted nor bearish is advisable. The amount and scale of private equity market financing in 2012-2019 has experienced rapid advances in 2017-2018, and has stagnated in 2019. Many educational investors have gradually differentiated their views on the track and have completeThose who don’t look also have firm shots.The outbreak has brought online education back to the front of capital attention.The past is not to be stingy, and the followers are still to be pursued. We don’t consider it to be overly touted or bearish.For example, in the New Oriental period of 2003, after embracing capital after suffering from SARS, this incident will also make many previous living conditions very good. Education institutions that do not attach much importance to capital will re-evaluate the importance of investment and financing.Many institutions that have frequently raised capital and survived on blood transfusions have paid more attention to their operational health.In summary, after years of development of online education, the ecology of the entire industry chain has gradually improved.However, as a decision-oriented consumer product, the high cost of user conversion makes the online education penetration rate only slowly increase.But this special event left everyone with only one choice: online education.This is equivalent to pressing the fast-forward key, and pulling in many users who will take time to taste new ones in 1-3 years.As for whether the short-term outbreak this month is a short-lived or the starting point of the prosperity of online education, it still depends on whether the educational institutions can provide really good content, good courses and good services.Therefore, no matter whether online or offline educational institutions have no deviation in their “education”, “quality content and services” are still the two most important basic points that support the development of institutions.References Uncle League, Principal League, “In the face of the new crown epidemic, what can the teaching principal learn from SARS in 2003?”Yu Minhong,” Never Say Never, “Chen Jing, Blue Elephant Capital,” Education Industry Epidemics Consolidated Table “, TAL Education Group Investor Presentation, January 2020.
The Education Industry Suddenly Fast Forward
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