The form of domestic online education carriers is evolving from traditional PC to mobile and hardware terminals, showing a portable feature; after the emergence of large models, learning devices equipped with large models are experiencing a second transformation.
Smart Finance APP learned that Minsheng Securities released a research report stating that the global online education is booming. Among them, online language education, as an important branch of online education, has nurtured the unicorn 'Dolingo' worth billions. Currently, China, as the world's second largest online education market, is experiencing a profound transformation in domestic online education with the breakthrough development of AI technology represented by Chatgpt. From the perspective of development characteristics, the form of domestic online education carriers is evolving from traditional PC to mobile and hardware terminals, showing a portable feature; after the emergence of large models, learning devices equipped with large models are experiencing a second transformation, showing more intelligent and personalized features.
The main points of the Minsheng Securities report are as follows:
The global online education market is experiencing vigorous development, and online learning platforms have become the most populous and highest penetration online learning model for users. Among them, the online language learning track has nurtured 'Duolingo' (DUOL.US), a unicorn with a market value of tens of billions of RMB.
According to Statista, the current global online education market is mainly divided into three major markets: online universities, online platform learning, and professional certificates. As of 2023, the sizes of the three markets are $103.28/$56.63/$6.66 billion respectively, with a total global online education market size of $166.55 billion. With the rise and maturation of the mobile information wave, online language learning applications have emerged and continued to develop, giving birth to many well-known applications. Currently, online language learning platforms have become an important branch of online learning platforms.
In 2023, the revenue of global online language learning applications reached $1.087 billion, and the global online learning app downloads amounted to 0.231 billion times. Currently, popular online language learning apps include Duolingo, Babbel, and Bo tree. The global online language learning app market is highly competitive, with Duolingo emerging as a leading application in the online language learning industry, with a market value of tens of billions of RMB.
Review of the billion-dollar giant Duolingo: Duolingo is the world's largest online language learning platform. Since its founding in 2011, the company's core product, the Duolingo App, has become one of the most popular language learning platforms globally.
Duolingo's main profit model is to attract free users from large markets and then convert some of them into paying users, that is, the "free value-added" business model. CICC believes that Duolingo's ability to achieve huge success is mainly due to two factors:
Firstly, the company's unique language product design and distinctive incentive mechanism, as well as the application of AI, that is, strong product capabilities. From the perspective of product design, Duolingo APP focuses on the fun and challenge of learning, using a gamified form to promote language learning. By combining gamified learning, competitive incentives, and continuous engagement mechanisms, it effectively enhances user retention over the long term.
Secondly, the company's "free value-added model" increases the company's profitability potential. Compared to the advantages of the "only paid" model, the free value-added model mainly reduces the trial cost for new users while increasing their willingness to pay. From the actual number of users, revenue, and profit situation, Duolingo's success also validates the feasibility of the free value-added model. Babbel, a pioneer in language learning apps and the long-term revenue leader in the industry, adopts an "only paid" model. As of 2023, Duolingo achieved positive net income for the first time, whereas Babbel has not yet been profitable.
Looking back at domestic online education: AI injects secondary vitality, and development shows intelligence and portability.
Since the late 1990s when internet technology entered China, Chinese online education has been developing and has now entered a preliminary mature stage. In 2023, the United States and China lead the global online education market, with shares of 45% and 28% respectively in the global online learning market. In terms of "players," domestically, there are companies that started with online education (such as Gaotu, Fenbi, etc.) and companies that later entered/transited to online education (such as TAL Education, Dao Shen Education, etc.).
In terms of development characteristics, the form of domestic online education carriers is shifting from traditional PC end to mobile end and hardware end, showing portability. After the advent of large models, learning devices equipped with large models are undergoing a second transformation, showing more intelligence and personalization in their development. Currently, online education giants are embracing AI technology to improve educational quality. Netease Youdao has launched the large model 'Ziyue,' Gaotu and Tencent Cloud have reached an AI strategic cooperation, and TAL Education and Yuanfudao have also successively released their large models. Dao Shen Education announced a joint R&D with Microsoft to develop the Bean AI large model and established a joint venture subsidiary with Zhipuhuazhang for educational AI R&D.
Investment suggestion: Global online education is flourishing, with online language education as an important branch of online education, nurturing the billion-dollar leader Duolingo. Currently, China, as the world's second-largest online education market, is undergoing profound changes in domestic online education with the breakthrough development of AI technology represented by ChatGPT. Online education giants such as Gaotu, TAL Education, Netease Youdao, and Dao Shen Education are embracing AI large models to improve educational quality, benchmarking the overseas Duolingo. In the future, a billion-dollar leading online education company may emerge in the vast domestic online education market. It is recommended to pay attention to Dao Shen Education (300010.SZ), Gaotu (GOTU.US), Netease Youdao (DAO.US), and Fenbi (02469).
Risk Warning: Intensifying industry competition risk, lower-than-expected user retention, content compliance risk, policy risk.
