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India online education: Learning process

This was a 2,000-word feature for AVCJ focusing on India’s burgeoning edtech sector in the middle of 2020 shortly before Byju’s acquisition of WhiteHat Jr.

With millions of Indian students facing the possibility of an academic year conducted entirely online, educational technology start-ups have an opportunity for business model validation

India’s educational institutions – from schools to testing centers – gradually started to reopen last month following a 10-week lockdown intended to curb the spread of COVID-19. Nevertheless, concerned parents and adult students are reluctant to return from virtual to in-person learning, extending the opportunity of a lifetime for educational technology start-ups to rapidly scale their userbases.
“Schools would be the last institutions to open up fully even if other establishments begin to operate,” says Narayanan Ramaswamy, national leader for education and skills development at KPMG. “Not all of the new online users will stay, but they should be able to retain a good chunk.”
Schools in rural areas and small towns unable to offer online classes due to poor infrastructure remain open. But many districts within cities continue to see thousands of COVID-19 cases every day. Some students have simply written off the current academic year, while certain regulatory agencies – operating within India’s decentralized educational ecosystem – have released trimmed- down curriculums.
Those that wish to continue studying have turned to online solutions en masse. None of these platforms claim to be replacements for formal places of learning, but their supplementary classes are extensive enough to pose a challenge to brick-and-mortar coaching centers that primarily offer exam preparation services. These offline players are going online too, but the incumbents have momentum on their side.
“When we speak to students from smaller towns, they tell us they joined Testbook because of a well-known Delhi-based teacher [on our platform]. They never thought they would be able to learn from such instructors,” says Ashutosh Kumar, co-founder of Testbook, an online portal targeting adult students sitting exams for public sector jobs. The public sector is a popular employment option in suburban and rural areas because of a lack of private sector opportunities.
Edtech start-ups have successfully cultivated demand by offering free academic content for a limited stretch plus extensive trial periods. Growth in organic traffic has ensured an exponential increase in monthly revenue across the industry, boosting the financial health of companies. Meanwhile, investors are writing sizeable checks, supporting hiring sprees by start-ups that want the best tutors and technology professionals to ensure Indians can continue learning from the safety of their homes.
A total of $636 million has been deployed in the space so far this year, almost matching the 12- month total for 2019. However, the three largest players – Byju’s, Vedantu and Unacademy – enjoy the lion’s share of the capital.
Customization counts
For Testbook, a large proportion of new users are trying out online educational services for the first time. Many come from areas where internet access is poor. Fortunately, given its long-term focus on small town India, the start-up was prepared.
Not only has it ensured that the Testbook app is easy to download on basic smart phones, users can download videos of classes and watch them offline. The company also has an extensive offline customer acquisition network roping in coaching centers and cybercafés and it operates 50 computer labs that students can use over several weeks for a fee. Other edtech start-ups are expected to follow this playbook in the coming years.
“After every test, we advise on the topics where students are weak. Most of them have never seen this type of analytics,” Kumar says. “While a lot of students were averse to online learning, if the situation doesn’t change for six months or more then user behavior will have to change.”
Other players have introduced additional functionalities to increase student-teacher interaction, incorporated gamification, offered new services, and targeted different age groups. Unacademy, which retains a corps of “star tutors” who have previously excelled at various exams, has expanded through acquisitions or smaller peers and strategic partnerships. Taking advantage of the moment, many start-ups operating in the K-12 segment are trying to convince parents to sign up their children for long-term programs.
“They find parents of kids in middle school and lock them in multi-year contracts offering steep subsidies so there’s a high cost for switching. It’s systematic mis-selling,” complains Aniruddha Malpani, a doctor-turned angel investor.
Last week, Malpani was banned by LinkedIn for violating the social media platform’s terms and conditions. A regular critic of video-based educational platform Byju’s, the country’s leading edtech player, he claims an employee of the company likely reported him. This sensitivity to criticism might be a byproduct of increasing media attention. However, this has yet to be accompanied by regulatory scrutiny, despite the platforms growing in size and importance. It may come as edtech start-ups pursue their frequently stated ambition to move beyond the traditional sweet spot of exam preparation – and enter territory occupied by offline players.
Classplus, a software provider that aims to digitize coaching institutes, operates at the heart of the online-offline conflict. The company provides online tools that help small traditional players with communication, data storage, content delivery, video conferencing and payments. As co-founder Mukul Rustagi puts it, Classplus is arming David in his battle with Goliath.
“There are millions of Davids fighting against the Goliaths [VC-backed edtech start-ups]. It’s a great responsibility for us to ensure that neighborhood coaching centers are able to retain their hyper- local student community and migrate their classes online,” he says. “Honestly, the classroom experience is a much more enriching and interactive one than live online classes.”
Classplus has seen the number of users on its platform quadruple in the last six months, which has necessitated increased spending on manpower and technology.

Inflection point

It is likely 2020 will come to be regarded as an inflection point for the industry. For example, earlier this the month, live tutoring platform Vedantu became only the third start-up to raise more than $100 million in a single funding round. The others are Byju’s and Unacademy.

As for what the future might hold, industry observers suggest looking to China where $100 million- plus checks are fairly common in online education. That said, the two ecosystems are not easily comparable. Given lower income levels and a wider diversity of languages, it’s debatable whether an Indian edtech start-up could ever target the country’s entire addressable market of students seeking online educational services.

Nevertheless, the leading players now have sufficient users and brand recognition to build defensible positions. Industry consolidation, though inevitable, is expected to be delayed as start- ups tinker with their product offerings to find the winning formula. Increased revenues have naturally extended their cash runways.

“In China, many online tutoring platforms that are now profitable offer classes for 30 students or more,” says Liu Fang, a China-based associate director at Deloitte. “One-on-one education remains difficult while there are also start-ups offering language, niche and well-rounded education services. Industry leaders have also tried to diminish the halo of star tutors and standardized learning materials to ensure easier retention of staff.”

In India, many edtech start-ups offer classes to large student cohorts. There can be more than 200 students participating in a class with a single tutor.

Liu adds that TAL Education, one of China’s longtime market leaders, switched from video-based lessons to live tuition in 2016. Not only is customer retention low for video, it is difficult to achieve exponential growth in revenue due to low prices, though this format remains a good customer acquisition tool. Similarly, Byju’s began to offer live tutoring classes for the first time in its nine-year history last month. This is already a feature of the Unacademy and Vedantu offerings.

Malpani believes that, in the long run, start-ups must move away from a cookie cutter approach if they are to make an impact on educational outcomes. This will likely involve smaller class sizes and flexible pricing. “They are mercenaries,” he notes. “Everyone says the same thing about improving learning, but they haven’t walked the talk. India needs mission-oriented institutions like Montessori with a technology component.”

However, the COVID-19 pandemic has laid bare the country’s poor educational infrastructure. Standardization is a pipe dream, given how spending varies by state. That said, it is only in the last three years that a majority of India has come online. The proliferation of low-cost internet plans and affordable smart phones means millions can now access internet services that were previously unreachable.

“Imagine a student hailing from a family of farmers or where the father has a low-income job. They cannot afford a laptop even if it costs just INR30,000 ($400). Smart phone affordability has improved penetration a lot,” explains Testbook’s Kumar. “We shifted our approach from a desktop-first to a mobile-first approach 18 months back.”

Finding the formula

It implies immense room for growth, but start-ups must recognize the challenges related to pricing and computer literacy to truly serve India’s hinterlands. They might also need to go offline to reach and convert such users – as some of their Chinese peers have done.

“They could eventually become national brands as online education leaders. Will they need to have an offline presence to achieve this? Yes, definitely,” says KPMG’s Ramaswamy. “But that alone is not reason enough for creating a branch network. At that age, kids need counseling and face-to-face tutoring. Even for regular fulfillment, they might need brick-and-mortar centers eventually.”

Start-ups have at least a year to experiment given uncertainty over the continued spread of COVID- 19 and what this means for in-class education. Rustogi of Classplus observes that “the worst is far from over,” but draws some positives from the opportunity it presents for online specialists. “We’ve hardly scratched the surface of the problem,” he says. “There is no reason for us to stop dreaming and stop building.”