How Edtech Startup Testbook Turned India’s Love For Govt Jobs Into Profit

India’s age-old fixation on finding a secure and stable government job means there is a huge rush every year to reach the promised land. The country’s growing unemployment rates due to lack of jobs in the private sector or the gaps in hiring due to lack of skilled workers for companies has also pushed government jobs to the fore for India’s newly-graduated students. 

Naturally, a parallel economy revolving around thousands of coaching institutes, online educational platforms and touts promising government jobs has sprung up around the rush. Platforms such as Testbook, Unacademy, Gradeup, Olive Board, and Adda247 also emerged seemingly overnight to tap India’s craze for sarkari naukri (government job).

Even though public sector jobs offer lower pay than private jobs, the number of people applying for government jobs every year is overwhelming. In March 2018, the Indian Railways received 23 Mn applications against a mere 100K job openings. Similarly, 200K people applied for 1.1K openings for police constables in the Mumbai Police. Earlier in 2015, Uttar Pradesh government’s secretariat had received 2.3Mn applications for just 368 openings. 

According to Testbook cofounder Ashutosh Kumar, this rush offers an opportunity for platforms such as his to make a real difference. He told Inc42 that 60 Mn aspirants apply for government jobs every year in India, making it the largest public-sector test preparation market in the world valued at over $3 Bn. Further, Kumar estimated that this market is likely to double in size over the next few years due to current government’s mandate to move even more state level government exams online.

Edtech startup Testbook was founded by Kumar, Narendra Agrawal, Praveen Agrawal and Manoj Munna in Jan 2014. The platform’s offerings include mock and live online tests where the test environment matches the actual exam interface, personal and comparative test analytics, tutorial videos among others. 

“Our hypothesis is that just bringing content online would not solve the education problem but re-thinking the experience entirely would help students learn better than offline coaching,” Kumar told Inc42. 

The Mumbai-based company has last raised its Series A funding round from Matrix Partners in 2017. Prior to this, publishing house S.Chand and Utsav Somani of AngelList had also invested in the company.

Getting India To Choose Online Learning

Edtech startup Testbook does have an edge over completely offline or physical coaching institutes thanks to its capability to simulate the actual test experience and provide comprehensive data-backed analytics to each student based on their  test performance. But, the question remains whether an online course can replace the offline coaching experience where a live teacher interacts with students on a daily basis? In fact this is the biggest challenge for most edtech startups in India, as traditional pedagogy is still preferred by many students. While the success of BYJU’S and upGrad seems to be changing this behaviour, it’s still a challenge for something like Testbook. 

The low incidence of Indian students in online test-prep courses is lost on the company, so it also offers mock tests which have shown greater traction. Edtech startup Testbook has invested heavily into building customer trust by setting up offline Testbook learning centres in tier 2 and tier 3 cities, offline sales of Testbook vouchers, tie-ups with established coaching institutes and cyber cafes, and distribution of the Testbook pass with S. Chand’s books. 

The company operates on a subscription-based revenue model split between mock test subscriptions priced at INR 699 per year and online course subscriptions priced at INR 3499 which gives users six-month access. Further, the company also offers shorter subscriptions priced at INR 1299 for two months. 

Kumar noted that Testbook’s marketing campaigns targeting students from smaller town was one of the reasons for the company’s revenue surge from INR 12 Cr in October 2018 to INR 31 Cr in April 2019. “One such campaigns got us INR 70 Lakh in just 36 hours,” he said. 

Image Description: Testbook’s mock test interface in English and Hindi

Turning Profitable But Challenges Persist

Edtech startup Testbook claims to have turned profitable in April 2019, and clocked an annual revenue of INR 31 Cr over the last financial year, with an INR 45 Lakh EBITDA (earnings before depreciation, interest, taxes and amortisation). 

In addition to customer-tailored marketing campaigns, Kumar attributed this growth to the platform’s content quality, and customer-led product customisations such as making mock tests that work even if the internet is disconnected during an ongoing session —  internet is only required to start and end the test. 

Promotional offers such as group discounts, referral program, personalised recommendations and dynamic offers also helped attract the more price-sensitive customers in tier 2 and tier 3 cities, Kumar added. 

The company claims to get over 3.5 Lakh sign-ups every month, but the conversion rate  to paid users is better for the mock test stream than for full courses. “Paid test users make 80% of the company’s total sales,” Kumar said and added that only 5% of its users pay for the courses. 

Which brings us back to the question and exposes the biggest problem for platforms such as Testbook. Users on Testbook tend to be one-time users, who might not return after getting through the entrance exam. So the challenge is to get as much revenue out of them when they do use the platform, and that’s only possible by selling more course subscriptions rather than relying just on mock tests. 

Will Indian Edtech Attract Casual Online Learners?

The Indian edtech segment is expected to be a $1.96 Bn market by 2021. According to Inc42 Datalabs, there were 3,500 edtech startups in India in 2018. Between 2014 to 2018, 182 edtech startups were funded with a total of $1.34 Bn. Of this, about 77% was poured into just four edtech companies — BYJU’S, Toppr, upGrad, Unacademy, and Vedantu.

Many of these major edtech players are focused on school tuitions, college-level courses and coaching for college entrance exams, and thus do not directly compete with players such as Testbook that are targeting the government job aspirants in India. 

However, the Bengaluru-based edtech major Unacademy has its foot in both college entrance exam courses as well as the government job entrance courses. Unacademy has been battling student resistance to paid online courses by onboarding IAS toppers such as Tina Dabi, and reputed government officials such as Kiran Bedi as educators on the platform, which act as an incentive for potential students. Obviously, this approach means spending a lot more on tutors and mentors. 

Can online education ever become as sought after as traditional coaching institutes in India, which often follow conventional teaching methods to great success? Kumar said the adoption for online learning will grow as internet and smartphone penetration improves in India. He said it is already leading a behavioural change in the country’s learning content consumption.

Google’s latest ‘A Year In Search’ report also showed that YouTube watch time in India for science and hobby videos is growing at a 3X year-on-year (YoY) rate. The report estimated that India will have about 500 Mn online video users by 2020.

But whether online video audience will ever pay for online tutoring or continue to get it offline is the big conundrum. And success is far from given, considering how complicated navigating the Indian market is for digital platforms.