With the implementation of policies such as "double reduction", how is the transformation of K12 educational institutions going?
After the implementation of the "double reduction" policy, the training and education industry has transformed one after another. due to the excellent financing performance of the education information track, it has naturally become the direction of the transformation of many educational institutions, including 17 Education & Technology Group Co., Ltd. (17 Education & Technology Group, YQ.O).
According to Wind, 17 Education & Technology Group was originally a leading educational technology company in China, adopting an integrated "in-school + extracurricular" model. Its smart in-school classroom solutions provide data-driven teaching, learning and evaluation products to teachers, students and parents in more than 70000 Kmuri 12 schools. The average number of MAU of the products exceeds that of the top four companies in the first half of 2020 combined. According to the Frost&Sullivan report, 17 Education & Technology Group covered about 56 per cent of primary schools, 60 per cent of middle schools and 7 per cent of senior high schools in China in the first half of 2020 using smart in-school classroom solutions to take advantage of school leadership to provide online KMel 12 large class after-school tutoring services to supplement students' study in school. In addition, 17 Education & Technology Group quickly became one of China's top five online Kmuri 12 extracurricular tutoring service providers in 2019 and the first half of 2020, and is undoubtedly the leader in China's education market.
Now this "behemoth" is about to transform.
As the education reform enters the deep water area, it has really dealt a heavy blow to 17 Education & Technology Group. In terms of share prices, the share price closed at $42.28 a share on December 4, 2020, but it was only $0.99 as of January 20, 2022, down 98% in a year, wiping out $20.3 billion in market value.
Source: Futu Niuniu.
Unlike most educational institutions focusing on the after-school tutoring market, 17 Education & Technology Group started from on-campus business and now has to return to his original business, saying that in the future he will pay more attention to core teaching application scenarios such as homework, and become a SaaS software service provider that will help China's basic education transform and upgrade digitally.
What is the effect of 17 Education & Technology Group's transformation? What is the prospect of educational informatization market? Wait for the author to come one by one.
01. Basically complete the transformation from K12 to SaaS software service provider
As early as 2012, 17 Education & Technology Group began to build intelligent classroom solutions for K12 schools, aimed at improving the efficiency of on-campus learning, and then launched the "growing World" section together in 2017. however, he was criticized for "guiding minors to irrationally consume" and was immediately shut down.
In response to the above, 17 Education & Technology Group said in an apology, "the 'growing World' has been closed nationwide. For products that have been paid for, if parents do not know, you can call customer service to ask for a refund." In addition, 17 Education & Technology Group, together with education experts, parents and teachers, will set up an "Education quality Supervision Committee" to prevent this from happening again. "
Since then, 17 Education & Technology Group bet on online large-class business in 2019 after experiencing O2O platform, one-on-one and small classes, and K12 online courses have gradually become the main source of revenue.
But in the last month of 2021, 17 Education & Technology Group officially announced that "its 12-stage off-campus training service in Kmuri in China will be suspended on December 31." In the future, 17 Education & Technology Group will pay more attention to homework and other core teaching application scenarios, and comprehensively transform into a SaaS software service provider that helps China's basic education digital transformation and upgrading. "
In addition, according to 17 Education & Technology Group insiders, "after the release of the 'double reduction' policy, the company has actively transformed and found a new profit direction in its on-campus and off-campus business on the basis of a series of combined punches such as organizational structure adjustment and personnel structure optimization. to achieve a new model of healthy development with the goal of profit. "specifically:
In terms of on-campus business, 17 Education & Technology Group launched new teaching and learning SaaS products, focusing on improving the efficiency and effectiveness of core teaching scenarios such as homework and classroom teaching, which are now used in more than 50 cities; at the same time, personalized autonomous learning products for family scenes are provided to replace the traditional after-school tutoring services.
Regarding the personalized autonomous learning product, Liu Chang, founder of Co-Education and CEO, said on a conference call after the financial report, "this product is not tutoring, but using the company's technology and data insight to provide targeted learning content to students." Autonomous learning products are charged by discipline, and the subscription fee for a subject is between 2500 yuan and 3000 yuan per year. Since the product was launched about a month ago, paid subscriptions to autonomous learning products have exceeded 300000. "
In terms of off-campus business, 17 Education & Technology Group responded to the call of the national education policy to explore a new era education model for the all-round development of morality, intelligence, physique, aesthetics and labor by means of digitalization and informationization, and at the same time developed intelligent self-study tools and products. in order to stimulate students' self-drive and learning initiative, committed to training children to form a good learning quality.
On the evening of January 18, 17 Education & Technology Group disclosed his unaudited financial results for the third quarter of 2021: revenue for the current period was 496.8 million yuan, an increase of 61.8% over the same period last year, of which the cash income of K12 online tutoring service (non-GAAP) was 301.6 million yuan, down 34.6% from the same period last year. The adjusted net loss narrowed to 457 million yuan from 521 million yuan in the same period in 2020, including a large number of one-time losses caused by the "double reduction" policy.
It is worth noting that 17 Education & Technology Group's general and new deal expenditure increased by 38.4% to 123 million yuan in the third quarter of 2021 compared with the same period last year, while sales and marketing expenses decreased by 21.6% to 389 million yuan. In response, 17 Education & Technology Group insiders said: the increase in general and new deal spending is mainly due to the increase in severance payment required for layoffs affected by the new rules, while the decline in sales and marketing expenses is mainly due to a reduction in the cost of brand advertising and promotion courses.
From the above financial data, it is not difficult to see that 17 Education & Technology Group has basically completed the company's strategy and business transformation, which is also one of the first education companies to achieve transformation after the "double reduction" policy.
02. The market prospect of educational informatization is broad, but the new entrants are facing "double pressure".
Coincidentally, shortly after the release of the "double reduction" policy, according to the website of the Ministry of Education, the Ministry of Education and other six departments issued the "guidance on promoting the Construction of New Educational Infrastructure and Building a High-quality Education support system". It is clearly pointed out that the use of information technology to improve the quality of education and the digital transformation of the industry, and the form of education from the initial blackboard to multimedia and then to the comprehensive Internet. Information technology iteration also continues to drive the development of educational informatization, and plans to basically form a new educational infrastructure system with optimized structure, intensive efficiency, safety and reliability by 2025, and through iterative upgrading, renewal and continuous construction, to achieve long-term and all-round development.
In this context, Chen Liteng, an online education analyst at the online Economic and Social Electronic Commerce Research Center, believes that "with the continuous progress of the policy, it has become a consensus for education to return to the school." "Educational informationization has become the key to improve teaching efficiency, so it will usher in rapid development. "
For a time, educational informationization has become a new blue ocean, and several K12 educational institutions, including 17 Education & Technology Group, have also chosen to march to this track.
In fact, as early as 2018, China has proposed education information 2.0, pay more attention to the construction of Internet platform and the introduction of educational application and content, and the teaching mode has gradually changed.
Source: prospective Industrial Research Institute.
With the gradual improvement of the basic network environment, educational informationization is also being further implemented. Many institutions and capital have entered the field of online education to promote more users to obtain fair and personalized teaching and services. According to the data of China Business Industry Research Institute, the number of online education users in China reached 342 million by the end of 2020, accounting for 34.6% of the total netizens.
Source: China Business Industrial Research Institute.
Among them, the number of mobile online education users reached 341 million, accounting for 34.6% of mobile Internet users.
Source: China Business Industrial Research Institute.
In addition, according to the data of the prospective Research Institute, the total size of China's education information market has reached 433.5 billion yuan in 2020, with an average compound annual growth rate of 9% in the past five years, and this proportion is expected to continue to increase significantly in the future, and it is expected that by 2030, the total size of the education information market will break through the trillion yuan mark.
However, it is worth noting that there are giants who have already taken the lead in the layout of the educational information market, and have continued to develop during the implementation of the policy, such as before, NetEase, Inc youdao's "Youdao, Inc excellent course" explored AI intelligent education, Lenovo released a big screen of intelligent education interaction, iFLYTEK won the bid for Wuhan intelligent education project, squirrel Ai joined Aliyun and Lenovo to create intelligent education classroom, and so on. It is not easy for new entrants such as 17 Education & Technology Group to get a share of the spoon, not only facing fierce competition from old players, but also under huge pressure of capital investment.
03. Release work together version 3.0
The version 3.0 of an assignment released by 17 Education & Technology Group contains five major product modules: a high-quality localization question bank built by adding subject literacy and human education topics, and adding a regional localization marking system; an auxiliary tool for learning situation diagnosis based on unit assignments; a tool for intelligent pen-and-paper classroom interaction; an auxiliary tool for self-reflection and face-to-face criticism, as well as a "double subtraction" policy implementation data visualization supervision service.
We should know that the core goal of the national policy of "double reduction" is how to effectively reduce the burden of homework and out-of-school training of primary and secondary school students, and to ensure the high-quality development of in-school education after the "double reduction". At present, some regional education administrative departments and schools have begun a new exploration of digital transformation and upgrading of education, centering on the above goals and relying on the new functions of 17 Education & Technology Group's homework version 3.0.
Liu Chang made it clear that "We will make full use of scientific and technological means such as big data and artificial intelligence to promote the real and normal use of SaaS software services in school education around homework and other core teaching application scenarios, and solve the five major problems faced in the process of implementing the 'double reduction'. "
Under the implementation of policies such as "double reduction", in the short term, 17 Education & Technology Group's "broken arm survival" is bound to endure great suffering, but in the long run, with the continuous sublimation of the education market, it will usher in a broader space for development. It is very important for 17 Education & Technology Group to find a way to realize it stably. In addition, whether it can withstand the "double pressure" of the education information market also needs the answer from the market, which we will wait and see.