Tutoring startup Yuanfudao stands out in China’s online education market
By Yu Wen
Chinese online tutoring startup Yuanfudao last week attracted an additional 300 million US dollars in funding from Tencent and other investors. It came at a time when most online education companies are struggling to attract investments.
The Beijing-based online tutoring company was launched in 2012. It boasts over 200 million users, but only 0.5 percent are paying users. The company hopes to encourage the free riders to start paying, and says it will use its latest round of investment to further develop its smart learning AI technology and enhance user experiences.
Claudia Wang, executive director of EY-Parthenon, said Yuanfudao is one of the top three online tutoring tech companies according to their data.
“Yuanfudao has around 200 million parents and students using the app, and that translates into big potential for other business models, for example, sales of after school courses…I'd say that in next six to 12 months, lots of investments are going to be leading players in this field,” she said.
Apparently not everyone in the education sector is as lucky as Yuanfudao is. Total funding for online education shrank nearly 40 percent in the second half of 2018 compared to the first six months.
One education market insider explains that there are actually several different categories in the industry -- online startups like Yuanfudao, traditional offline players like New Oriental, and other skill-oriented companies like VIPKID.
Offline education providers usually start with mega classes, with one teacher for several hundred students. Experts say Yuanfudao's different marketing strategy gives the company a much higher PE ratio than that of traditional offline players.
Yang Zhongning, analyst of Industrial Securities, said online education saves costs on venues and teacher resources.
“Traditional players like New Oriental, their advantage is in training power - it has thousands of teachers and tutors, whereas Yuanfudao pays more attention to online tutoring. And Yuanfudao also invests heavily in AI, so the market thinks highly of its technology development," he said.
A report by research firm iResearch shows that the value of China's online tutoring market will reach 44 billion yuan (six billion U.S. dollars) by the end of this year. That is expected to more than triple to 150 billion yuan by 2022.