It’s been a crazy 18 months for EdTech. Back to school, no! back to home! No! the semester will start! Wait…actually…let’s wait and see. Yes, it’s been crazy.
But along with the craziness EdTech is having it’s long overdue moment in the sun with more users, growth and prospects than ever before, leading to successful company outcomes: Coursera, Kahoot & Udemy have IPO’d. EdX got acquired by 2U for $800 million and a wave of smaller acquisitions have occurred as well.
Now that we’re 18 months into the pandemic the initial stage of explosive, panicky growth has passed and that leads us with the question: where are we now? What’s here to stay? What are the trends that are playing out and where are we going?
Here are the key trends in EdTech from the Q3 earnings of leading EdTech companies.
Q3 EdTech trends
Trend #1: The pivot to the enterprise
An industry built on B2C is pivoting hard into selling to businesses. For Udemy and Coursera this is most felt as their B2B divisions are their fastest growing business units and the ones who receive the most focus in their S-1 and earnings calls. It makes sense — selling to businesses is a more predictable and controllable growth channel, and they have the budget and need to pay. This is a trend that started before Covid but has indeed strengthened during the pandemic and is here to stay. Unlike other EdTech sales trends, B2B sales haven’t slowed one bit during the entire 18 months.
Chegg and Kahoot, traditionally B2C oriented companies, are also entering the enterprise.
Kahoot! at Work further strengthened its Kahoot! 360 offering to support professionals in the hybrid workplace through new features and implementation of integration with Zoom, making virtual meetings more engaging.
– Kahoot! Q3 earnings release
While B2B is appealing, it’s quickly becoming highly competitive. In addition to Coursera, Udemy, Kahoot and Chegg, there many other established EdTech companies focusing on this, such as Skillshare and LinkedIn Learning as well as up and coming offerings like Blinkist and Masterclass.
The key takeaways are that it’s much easier to pivot into B2B once you have the a) catalog and b) brand and c) capacity to build the tools, tracking and compliance that B2B requires, as well as the salesforce to get those deals done.
🔮 Predictions: The B2B channel will grow more crowded it becomes a buyers market and not a sellers. HR Teams are fatigued by the many offerings and as ‘work from home/office’ reaches a sustainable level across the business the desperate need for quick solutions fades. HR teams & employees won’t have the attention to deal with all the different providers. They’ll search for:
- A bundle or aggregator of the long tail of offerings
- Brand names
- Unique offerings that their employees love
- Increased backend functionality of features
Trend #2: Consolidation
Consolidation is happening. Educational offerings and styles are being scooped up by the platforms with distribution and low customer acquisition costs. As EdTech grows more crowded, it’s distribution that matters, not education. It’s easier to plug in an existing educational offering into a customer base than the other way around. Here are some examples:
- 2U → EdX to strengthen the top of funnel, user acquisition costs and boost university offerings.
- Coursera → Rhyme Softworks to build out hands on and project based learning.
- Udemy → CorpU to boost executive education.
- Kahoot → Clever to increase Kahoot! for schools go to market.
- Chegg → Mathway to increase STEM offerings.
Distribution is what matters and gets called out consistently by the large companies: Coursera, Udemy, Chegg, Kahoot!.
🔮 Predictions: Consolidation will continue due to a few factors:
- There is power to brand and lower customer acquisition costs. Especially in an industry suffering fatigue from too many offerings and platforms.
- Public companies have access to funding and capital to make acquisitions.
- Covid hangover will soon be here, causing many companies to struggle = lower valuations for startups and a buyers market.
Trend #3: Bifurcation of higher education
Most surprising trend from Q3 was the complete collapse of lower end college. While the top institutions mostly went back to school normally, the lower, long tail, of higher education schools (aka community colleges) struggled as students simply didn’t go back to school.
Why not? Better employment and online fatigue as called out in Chegg’s Q3 earnings call:
This industry-wide dynamic was unanticipated and is a direct result of the COVID-19 pandemic, a combination of variants, increased employment opportunities and compensation, along with fatigue, have all led to significantly fewer enrollments than expected this semester. And those students who have enrolled are taking fewer and less rigorous classes and are receiving less graded assignments.
All signs in the economy show that it’s a tight labor market and as employment opportunities grow, the need to attend a lower tier college decreases, and the students who do attend, attend less classes because they’re probably working remotely while they learn.
Another factor that’s eating the lower end of higher educations lunch is nano-degrees, bootcamps and targeted upskilling courses. All of these business units did well for EdTech companies. EdTech is eating the lower end of the higher education market.
🔮 Predictions: The lower end of higher education is entering a long decline. Their core offering is job credentials and it’s clear to consumers that this is better offered online by EdTech platforms. Covid made this clear and we‘re not going back.
Trend #4: International expansion is finally here
While international learners(i.e outside of the U.S) have been the poster children of the EdTech and MooC movement since inception, it’s only now becoming a viable business opportunity. As the major platforms get close to reaching profitability (not yet but soon), they can now adopt prices to lower price points to bring in more overseas paying learners.
From Coursera’s Q3 call:
We introduced a number of platform improvements to better serve Indian learners, including a localized homepage for better discovery; geo-pricing on most individual courses; 5 new payment options, and bulk pricing for avid users. What we learned from our India-focused initiatives will further inform our international strategy
From Chegg’s Q3 call:
In the rest of the world, we continue to see very robust subscription and revenue growth. While still early, international is clearly becoming a meaningful part of our business
The one standout for international is Udemy who’s business is already 60% outside the U.S.
Trend #5: Personalized EdTech is years away
This one surprised me. Despite Coursera, Udemy etc being close to 10 years old, their personalized learning offerings are still years away. Personalization in EdTech still amounts to content recommendations — “if you learned an introduction to AI you’ll also like big data”.
As called out in Udemy’s S-1:
Our personalization efforts are only beginning. We believe that these investments will yield high returns around customer engagement, retention, and lifetime value in the quarters and years to come.
Coursera said something similar in their S-1 a few months ago. Personalized learning has so much further to go. Critical aspects of learning like ‘choose your own adventure’ learning paths and tailored reviews of material based on comprehension are still years away! Navigating content to find the relevant sections is still the learners responsibility and not the platforms.
🔮 Predictions: Tutors, TAs and communities will be in demand for as long as we can’t offered real personalized learning. A starup will be needed to do this as the incumbents don’t have the right incentives to do it.
The challenge of tailored learning paths is a technical and business challenge — it requires the ability to understand what content the student needs to engage with and be able to serve up only that segment of content — not an entire video or article. From a technical perspective, most platforms don’t understand their content well enough to do this and from a content licensing perspective they don’t have the business model alignment to do this.
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