Introduction: On July 16th, Chen Lin, senior vice president at ByteDance, said in an internal speech that the mission of Bytedance in education is to "innovate education and achieve everyone". He believes that the biggest advantage of Bytedance in education space is not Internet traffic, products, and technology, but its strategy determination and organizational culture. Chen said the company plans to invest “a huge amount” of capital into its newly-established education technology business but warned that the unit would be unlikely to profit in the next three years. So JMDedu will show our overseas readers ByteDance's educational initiatives and future possibilities through this article produced by He Peikuan, who is focusing on frontier trends and in-depth research on online education.
Over the past year, China’s Internet giants such as Tencent, Alibaba, Baidu, and Netease have undergone great changes in education space, as well as video-sharing platforms like Kuaishou and Bilibili. But no one has made such a huge investment of human resources in the education business line like ByteDance, the owner of TikTok.
Starting from 2017, ByteDance has tapped into the education sector through investing in different companies. Three years later, ByteDance has become one of the most valuable unicorns and officially goes all-in on the educational business with recruiting 10 thousand staff even if the environment is austere. While how will ByteDance push forward its education business? What are the underlying logic and prospects?
ByteDance's basic logic of education business
Zhang Yiming, the founder of ByteDance, once said in an interview: “You shouldn’t be in the core business what other companies are devoted, because you don’t have a competitive advantage... We should innovate, and look at the strategies on businesses and areas that others have not done well, which is also significant for running an enterprise.”
Actually, the content platform Toutiao (“Headlines") launched by ByteDance in 2012, has changed the way that how people get the reading content that they really want. The algorithm-based recommendation is the core engine of Bytedance’s development. Specializing in developing AI systems, the company does actually have in-house tech that it can apply to its EdTech strategy: behavior-driven predictive recommendation algorithms. But how will ByteDance stick with this idea in education space?
At the beginning of 2020, Zhang Yiming said in the letter to all the employees that he would focus on global expansion and new initiatives such as education. “We still at a very early stage, our education business should be fundamentally innovated; of course, the premise is that we have a deeper understanding.” This indicates the mission of ByteDance’s education business: beyond boundaries. Covering learners from infants to the silver-hair, ByteDance can map a blueprint including all kinds of services for each learning stage.
ByteDance's education business scope and expanding directions
ByteDance’s education business has covered several sectors, including Pre-K, K-12, competency-based education, higher education, and vocational education. Among them, the company invests most heavily in K-12 and competency-based education. Plus, the company has been making attempts on the business of educational informatization and hardware. After reviewing existing products, we will figure out ByteDance’s potential opportunities.
In China, K-12 education generally refers to the after-school tutoring for students from Grade 1 to 12, and the kindergarten stage is classified as an independent track. K-12 learning is regarded as the largest segment, accounting for about 40% of the national financial investment in education, and the money is mainly for the ToB business focusing on educational informatization. And in recent years, K-12 track has received approximately 30% of investment in the primary market, and the fund usually concentrates on ToC tutoring and ToB informatization tool providers.
In this sector, ByteDance is more like a follower. Starting from a relatively mature business model of K-12 big-sized live-streaming course, the company launched “Daliketang” (大力课堂) and acquired the online education platform Qingbei (indicates best content and team) Online School with 20 million yuan to make up for its educational business capabilities and experience. Then ByteDance went on to the small-sized live-streaming courses while 1-on-1 has not been piloted.
Besides, it is reported that ByteDance is eyeing acquisition of leading tutoring institutions in some provinces. The company may start its education layout from online then vie for offline market shares, and finally, there will be a big intersection with TAL’s offline business. Therefore, we predict that offline small-sized classes that have been initially verified to be feasible and offline 1-on-1 model will be the possible directions for ByteDance.
Competency-based education is of significant importance since the beginning of the 21st century in China. Apart from all levels of schools responding to the policies, institutions focusing on competency-based education have also ushered in a burgeoning age, especially after the year of 2010. As education technology developed, many online institutions with new sub-sectors have emerged, including language learning, STEM, mathematical thinking, art, etc. At the meanwhile, offline projects like sports and study tour also increased.
Among them, products for competency-based language learning are represented by VIPKid and DaDa. Codemao and Hetao101 stand out at Kid programming track, and Huohua Siwei tops in the sub-sector of mathematical thinking. For art education, Meishubao for painting and VIP Peilian for the musical instruments are the leading companies.
For ByteDance, the company has tried video English courses named aiKid, but it has been integrated into the company’s 1-on-1 live-streaming product GoGokid in the end. As we know, 1-on-1 live-streaming course usually has a relatively high unit price, and the target audience is concentrated in first- and second-tier cities. Thus ByteDance launched Tangyuan English with AI technology and video courses, focusing on the third and fourth-tier markets. STEM with coding and robotics, mathematical thinking, and online art education are the directions that ByteDance can explore in the future. In contrast, study tours and sports that mainly conduct in offline scenarios may not be a good choice. On the one hand, none of the leading companies has achieved Series D round of financing, and the market has not verified the profit model. On the other hand, ByteDance has few advantages of offline business.
▍Higher Education/ Vocational Education(Especially for on-the-job training)/ Pre-K
In terms of higher education and study abroad, Bytedance has invested in the Minerva Project. This movement is regarded as the most “innovative” direction of the company’s educational business so far. For ByteDance, tapping into this market with the platform-based products may be preferable.
And when we talk about vocational education in China, there are several hot segments including exam-oriented tutoring like Civil Service Exam and National Graduate Entrance Exam, language learning, and knowledge payment. Except for adult language learning, ByteDance has not made any other attempts.
In the digital age, people have increasing demands for skill improvement. Thus new technologies for interaction are worthy of exploration. In general, from the perspective of the population base and market environment, we think that there are still large spaces and possibilities in the track of on-the-job education.
As for the Pre-K layout, similar to K-12, competency-based education, and on-the-job education, ByteDance entries this sector from language learning to the mathematical thinking education for children. Picture book publishing with storytelling, games, and animation can be expanded in the next step.
▍Educational Informatization/ Education Hardware
Unlike the sectors relying on content service, these two tracks play the role of an intermediate layer. Both public and private schools, as well as educational institutions, need the support of such products for digital operations. The existing products are mainly in the three stages of Pre-K, K-12, and higher education.
For Pre-K, educational informatization products can be divided into four categories: home-school communication, resource sharing, parenting applications, and basic intelligent software. But ByteDance has no movement in this segment as of now. But in the K-12 stage, ByteDance has made great efforts on the products covering teaching, assessment, practice, and basic tools. For example, ByteDance has acquired Xueba100.com(学霸君)’s ToB business and invested in its intelligent education system named Fclassroom(极客大数据). Moreover, ByteDance has invested in homework tools like 17zuoye(一起作业) and school management tools like Xiaoyang Education(晓羊教育).
ByteDance has also acquired part of Hammer Technology's patents and teams in 2019, which was said to be used to explore mobile phones and educational hardware. At the current stage, no attempts have been made by ByteDance in the business of higher education informatization and hardware.
Not just "icing on the cake", education will be ByteDance's pillar business
After reviewing ByteDance’s educational movements in each sector, it is not difficult to derive its current business structure and future directions. And when horizontally comparing ByteDance and other platform-based companies, we can find that from the perspectives of both basic logic and product coverage of education business, ByteDance is devoted to changing. Neither does it want to stop at a platform-based company with tools and technology nor be like the newcomers only having traffic advantages.
Trying, failing, and trying again, will ByteDance achieve its ambitious goal of “Go bigger. Be Better”. in education space?
A leading education company’s founder once said: if you want to run a successful business, teaching and research, product, operation strategy, and service delivery at the executive level can be made up by key personnel flow from leading companies. In other words, even if it is a newcomer, Bytedance still has a great chance to overtake.
The purpose and determination of Bytedance’s founding team in the education business allow the executive level to have relatively sufficient resources to explore new directions, and education seems to be ByteDance’s pillar business. However, if ByteDance only expands the education business footprint through acquisition and without the founding team’s follow-up participation, the company is challenging to have a more long-term development in a certain vertical track.
This article was produced by He Peikuan. It has been translated and edited by JMDedu from the original version.
He Peikuan operates her own WeChat public account(ID: zaixianEdu2020), reporting on the frontier trends, in-depth research, and exclusive content of online education.