Monetization in EdTech Sector; Where Are We On The Curve?

India is a land of numbers, given its population, market-of-markets advantage, and divergence in socio-economic fabric. When we talk of Education – a sunrise sector, its current status is encouraging.

Considering that India has 1.4 Mn schools, 227 Mn students and more than 36,000 higher education institutes, it is clear that the current education market in India pegged at approximately $ 100 Bn holds clear potential and an unprecedented opportunity for education technology companies.

Of the gargantuan opportunity in Education, e-Education market is expected to touch $ 40 Bn by 2017 with a CAGR of 17%. India is currently the largest market for e-Learning after the US. Education sector is set to receive INR 1.13 Tn ($ 17.07 Bn) shot in the arm with the Government’s ‘Digital India’ initiative.

But there remains many a slip between the cup and the lip. There’s much that’s happening in terms of technology and multimedia. However, the advantages constitute less than 1 per cent of the total education market size. And, at the core of the issue is the frontrunners’ limited ability to monetize in a reasonable time frame.

Market of Opportunities

Brick-and-mortar classrooms are giving way to virtual and digital ways of learning. Personal computing and ‘cloud concept’ for one-to-one learning has made education accessible anywhere, anytime. BYODs and telecom upgrades have pushed the envelope even further. Gamification, m-Learning and latest SMAC technologies lends a lot more fun to the ecosystem.

Indeed, the potential has been well realized; lot many startups have emerged in this space in the past two-three years. These emerging businesses have arrived at a time when the sector is looking quite closely at the issues that have dogged it for long. Within them lies the bouquet of opportunities.

While education sector poses a huge opportunity, it is also riddled with its own set of unique challenges; Multiple Stakeholders and Decision Makers, Longer Investment – Return cycle, Challenges in Monetization & Scale, Digital Divide etc.

• Cost, Quality and Access: Making quality education materials accessible – be it physical or digital — at best price.
• Innovative Delivery Systems: Breaking the stereotype in delivering educational content through MOOCs, gamification etc. is still at a nascent stage of adoption across key stakeholders.
• Learning Analytics: Though personalized and outcome-based adaptive learning solutions and certifications have arrived but are still to provide adequate capitalization.
• Skill Gap: Bridging the divide between education and employment providing jobs based on the education obtained continues to be a critical need.
• Need for educational content: With increasing Internet and smart device penetration, Young India’s online presence is increasing exponentially, both urban as well semi-urban areas. Of 375 million Internet users in India, more than 74% were mobile Internet users as of October 2015. Of these, more than 28% were from rural India. Experts say the rural mobile Internet users are going to grow at a much higher rate hereon. All these factors offer a huge e-Education opportunity.

• Education abroad: Once a much-sought long aspiration has become more accessible today. Thanks to e-Learning and simplified processes to enroll with universities worldwide, the student-teacher population and startups have the potential in their sights.
  Lack of a highly successful “Unicorn Startup” in online education sector in India makes investors skeptical of monetization and scalability aspects in this sector.

Slip Between The Cup & The Lip

Despite the huge opportunity Education sector poses, the challenges unique to the sector cannot be ignored — Multiple stakeholders and decision makers, distant monetization prospects, haphazard up-scaling and of course, the digital divide.

Various early stage investments in online education demonstrate that investors are warming up to the sector. Having said so, lack of a highly successful “Unicorn Startup” within the space makes investors skeptical because of the aforementioned challenges.

The near-total absence of short to medium term monetization in education technology is more of an aberration than the norm. The average investment-return cycle ranges anywhere between 5-10 years.

The Ecosystem Shift

Education — especially the K-12 segment — is a classic multi-stake holder environment where technology adoption is driven by the least common denominator, that is, adoption of technology tools is driven by the latest adopter of the technology. While students are growing Internet savvy at a faster pace, school teachers need to be skilled and willing to adopt technology to improve learning outcomes.

Perception Shift

Technology is expected to be cost-effective if not free. This perception, however, needs a paradigm shift in favor of the value offered, to foster innovation.

Most of the educational startups are monetizing on business-to-business side by:

• Selling products to schools & institutions (learning management systems, CMS etc)
• Driving admissions and enrolments into private and deemed universities
• Affiliate advertisements on content platforms

As far as B2C is concerned, online learning is still predominant in supplementary education and it will take a while before it becomes mainstream.

There is always a lag between Internet awareness, Internet adoption and using Internet to buy paid services.

Awareness And Adoption

Internet penetration is set to increase but far from optimization. Coupled with this is the lack of Internet awareness, adoption and use to buy paid services. It will be a while before the rural population starts adopting Internet as much as it should and is armed with the means and willingness to pay for online services and content.

Fast Changing Preferences And Usage Patterns

In the current scenario, where education technology players are still struggling to simulate offline learning aspects in an online set up, the user expects online to even more personal yet collaborative, and better than offline learning set up. Leveraging technology to meet learners’ needs is resting uneasily on a plank of ever-increasing, changing demands.
This is a key tech challenge, which if solved, will pave the way for huge monetization opportunities for startups.

Online Education Is Still Not Core

E-Education is still considered supplementary and not the core. There is an inherent bias in favor of offline degrees and certifications compared to online ones. Online is still not considered authentic by the masses, as offline is.

The issue is of a pretty unique and disconcerting nature for India, where hundreds of fake, illegal and unrecognized education institutions exist. Often a fake degree from one of these institutions is preferred over an authentic online one.

Not Just The Blackboard

Education technology startups today have the uphill task of establishing their position in the technology-infused market. It’s not a question of either-or between online and offline but whether e-Education can carve its rightful place here. Startups have already taken a leap of faith. Their consolidation and cohabitation is the next phase of cohesive growth the sector eagerly awaits. It’s not just about the blackboard but also the smart device for education. There has to be a connect.

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