So, hey everyone, my name is Navdeep, and in this video we're gonna talk about EdTech business
model, which means you will combine your education with technology.
Let's understand the EdTech business.
model. So if you look at global EdTech market, you have different types of business
model. You have direct to consumer business model where you will sell the courses or the classes directly
to students or to parents.
Then you have business to business where you will sell software or classes directly to different universities,
school or different enterprise.
Then you have hardware business and Software as a Service, which is also known as SaaS.
And this is the global EdTech spend in 2019.
So you can see that there is a lot of money that is flowing into the EdTech market.
You have a D2C or direct to consumer global EdTech spend of hundred billion dollars.
You have B2B global EdTech spend of $84 billion, hardware at $17 billion, software, $90 billion
and services $77 billion.
Let's look at the business model in EdTech.
Number one, we have Freeremium subscription.
Now we all know freemium is made up of two word, free plus premium.
That means you will give the product for free and then you will ask them to upgrade for that specific
service.
If you look at platforms like Coursera, Coursera will allow you to complete their courses, but as
soon as you ask them about the certificate, they will always ask for money.
And that's the typical example of freemium.
Some part of the product is free and if you want something else or if you wanted to
use some premium feature, then you have to pay for that.
If you look at the product type, all of these EdTech platforms, where you can prepare for a test
for exam, or you can develop any skill or you want to get a certificate for that specific skill.
You can do that with freemium subscription type of EdTech businesses, like coursera.
Then you have benefit.
Obviously, you can quickly acquire a customer, and those customers will generate re-ocurring revenue
for you.
Re-occuring means you're generating revenue every single month from the same customer.
If you look at the downside of this because you are giving the free service to all these student.
So the time you ask them about the money, they will not upgrade or they will not pay for your product.
And also you need to have a very high customer acquisition cost.
Then you have free trial.
And companies like Skillshare and Byju's is using free trial kind of business model.
If you look at the product type, they also have the exact same product type, which means they will
allow you to learn all of these different professional skill.
You can do test preparation and you will also get a certificate if you look at the benefit of this specific
kind of business model.
It's exactly the same like freemium.
It will generate re-occurring revenue for the brand.
But because you are giving free trial to these people at the first place, you're not basically hiding
any feature away from the customer.
Customer can use every single feature that they want, and obviously free trial business model also
have some of the same problem.
I mean, it's super difficult to convert them into a paid customer or ask them to pay for your product,
and they will not use your product once the free trial is over.
Then you have your EdTech marketplace.
One of the best example of EdTech marketplace is Udemy, which means you will have different types of
courses available on that specific marketplace and you can purchase any course you want.
That means you have to pay for every single course.
So let's say you wanted to learn web development, then you can purchase a course or a bootcamp course for
web development.
Same goes with business.
So you have to purchase every single course and you will have a complete marketplace just like Amazon
and you can learn whatever skill you want.
That's the EdTech marketplace kind of business model.
Then we have ad based revenue business model, and this kind of business model is used by Duolingo.
It's a language learning app which you can use in your mobile, and it is super easy for other people
to learn any language. Now because learning a language is kind of a commodity right now.
So it's super difficult for them to monetize the service directly from customer.
I mean, they cannot really ask directly from customer saying that please pay us $5 because we wanted to
sell you the subscription of this specific product.
And that's why they usually run all of these different types of in-video ads or popup ads inside the
app so that they can generate the revenue, although right now we have some form of subscription for
that specific product.
Let's say if you want one to one mentorship or you wanted to talk to an expert or you wanted to have
some feedback, then they have a small subscription of their product.
But previously they were generating revenue by showing you different types of ads, which includes in-
video ads or pop up ads.
All of these different types of ad, and that is the typical example of ad based revenue.
Then you have institutional or B2B sales.
So if you are using some SaaS product or software as a service like Schoolzilla, that's the typical
example of B2B sales or B2B SaaS kind of product.
Now imagine you are the owner of a school or a university.
It's super difficult for a person to manage the university.
That's why you use these kind of SaaS product because they will allow you to manage your staff, your
university, their payroll system, fees collection.
You can manage the operation, exam scheduling and all of these small, small tasks, which is super
difficult to manage by a single person into excel sheet.
Because you need to manage the database, you need to manage, you need to get the confirmation for
every single activity that is happening in that specific university or school.
And that's why you will have these kind of ERP solution or SaaS based product.
Now let's understand how exactly these companies make money.
So let's start off with our coursera.
So
So Coursera will allow different students to learn different skill from a specific university.
So let's say you wanted to learn a specific skill from MIT or from Harvard.
Then you can do these mini courses from Coursera and you will get a certificate and whatever amount
that you will pay to Coursera, they will take a small part of that specific amount and they will pass
on the remaining amount to that specific institute or university.
Then you have Udemy and whatever amount you will pay to Udemy.
They will take a very small cut and they will pass on the remaining amount to different instructor.
For example, if I have courses on Udemy and if you will pay or you will purchase those courses, Udemy
will pass on small amount to me and they will also take a portion of it.
It depends whether they take 60, 70 or 80 percent of the portion, so they will take like 60 to 70 percent
of the course amount and they will pass on the 20-30 percent of the amount to us.
Then you have 2U, which also provide the same kind of course material or videos to different
student from different universities.
Then you have Byju's and Byju's have their own content, which means their own teachers make their own
courses or videos or material, and then different people will purchase their
complete range of courses for that specific standard.
Then you have Byju's and Byju's is a e-learning app for student.
So let's see if you are in your 10th standard or if you are in your 8th class and byju's
will give you a complete subscription of 8th class or 9th class, so called yearly subscription, and then it will
allow different students to learn those concepts with the help of Byju's app in that specific class.
Then you have Skillshare and Skillshare will give you a annual subscription, so you have annual
subscription of $50, and with the help of that subscription, you can learn whatever still you want,
and there is no limit or threshold as such.
It's a subscription service and whatever amount you will pay to Skillshare, they will also pass a small
chunk of that amount to different instructor who is teaching on Skillshare.
If you look at EdTech as a industry, EdTech is growing at the rate of 16.3% and
it will reach to a market cap of $404 billion dollar.
Now this is your TAM, which is your Total Addressable Market and your TAM will distribute among these different
categories of your EdTech.
And if you look at which category will occupy the maximum total addressable market.
Here goes the diagram, so you can see that the maximum global EdTech expenditure goes to the K-12 category.
Then you will have post-secondary, then you have Pre-K and then you have your Workforce.
So this is the final list of all the different types of business model that is there in the EdTech space.
So you have freemium business model, which means you will provide some feature of the product for free
and then you will charge for premium features.
Then you have the free trial subscription, which means you will give free trial.
to access all the different types of features of that specific product and then you will ask your customer
to upgrade for that product.
That means you do not have any, which means you do not have any restriction that is there in freemium
business model.
Then you have EdTech marketplace which will allow people to discover what they wanted to purchase from
that specific platform.
Best example is Udemy.
Then you have ad based revenue business model.
When you cannot really monetize your platform directly from customer by asking them to pay for a service,
then you will start showing them Ad, then you will start showing them ads just like You Tube, and that's
how you will generate money.
Obviously, different apps have different types of ad, so you have interstitial ad, you have skippable
ads, you have popup ads, and you have other different types of ads as well that you can integrate
inside your app or their application.
Then you have institutional or B2B sales, then you have institutional or B2B sales, and it includes
all the different types of sales that happen in a university or in a school.
So whether they are using a SaaS product or if they are purchasing a subscription of a platform where
student can learn anything that they want, the typical example of your institutional or B2B sales.