Just past summer vacation, Zhang Ting (not her real name) signed up for 10 online courses for her daughter. Her daughter is less than one year old this year.
Yes, her daughter can't walk or talk. Zhang Ting didn't plan to let her daughter study these courses. She jokingly said that she was "collecting wool". These courses are all experiential promotion courses ranging from 0 to 9.9 yuan. As long as you sign up, you can get gift bags such as dolls, handmade toys, stationery, picture books and word cards.
This scenario has been staged in the summer vacation last year, and several head companies have burned 4-5 billion yuan in marketing expenses in a short summer. At that time, the market mainly promoted the 49 yuan experience course. In the summer vacation of this year, it directly dropped to 9 yuan or even 3 yuan.
The craziness of online education marketing can be seen.
In 2020, the marketing cost of online education will exceed that of last year. Chen Xiangdong, founder and CEO of the school of learning from others, said in a telephone conference with whom to learn the second quarter's financial report on September 2, according to third-party estimates, the summer sales volume of the top 10 online education institutions in July and August may exceed 10 billion yuan.
Online education companies are losing money because of the craze. In the second quarter of 2020, the company will lose 161 million yuan and Netease Youdao will have a net loss of 258 million yuan. The losses of unlisted companies may be even more serious, Chen Xiangdong said at the above-mentioned telephone conference. Some investors predict that the financial losses of companies that are more aggressive in increasing enrollment and cash income may reach more than 7 billion yuan in 2020.
"Other institutions are putting in, we have to invest, and we have to ensure our position in the industry." "But the market is so big that we don't have to think about competitors, we just need to grow," the financial director of an online education organization told 21st century economic news
King of variety
According to the financial director of the above online education institutions, this year's marketing activities are generally advanced to the second quarter, earlier than the start of the summer marketing war in 2019, hoping to seize the opportunity.
In July this year, according to the self-Media report of Danan finance and economics, the budget of ape counseling, XRS online school, homework group and who to learn from in summer was 1.5 billion yuan, 1.2 billion yuan, 1 billion yuan and 800 million yuan respectively. After that, it was reported that after the summer vacation, the budget of 4.5 billion yuan for the four companies actually turned into 6 billion yuan.
According to the above data, the amount of marketing expenses reported in the future is only $1.25-1.2 billion.
The marketing method of online education is particularly clear. First, it creates a brand through large-scale online and offline hard broadcasting to form a deep impression in users' minds. Then, online accurate flow is used to sell free and low-cost experience courses. When these short-term experience courses are conducted, they are converted into regular price courses through sales or tutoring old teachers.
"Education is an industry that particularly relies on brand and word-of-mouth. If there is no brand launch, no students will sign up, and there are only a few channels to quickly form a brand: subway, bus platform advertising, famous variety show ip cooperation, etc." Vipkid co-founder and president Zhang Yuejia told reporters.
In the summer war this year, almost every online education institution has joined forces with variety shows. The distinctive feature of these variety shows is that they are all broadcast before the beginning of summer vacation. In the fifth season of trump vs. trump, which was launched from February to may, ape coaching has more than 400 million users worldwide, and its advertising language has been broadcast repeatedly. In the sixth season of extreme challenge, which was launched from May to July, when the guest Yue Yunpeng encounters a challenge problem, he will connect with the famous teacher of gaotu classroom. The fourth season of "yearning for life", which is a one-on-one cooperation between homework group and its leader, is also broadcast from May to July.
According to the financial report from who learned from, in the second quarter of the sixth season of "extreme challenge" and "dear little desk", the cost of launching two variety shows was 35 million yuan, which is the first attempt of brand advertising.
"These two variety shows may not be new programs, or they may not be as attractive as other programs, but they do provide a stable audience, and it is easier for parents of the younger generation to accept this brand promotion method." Who to learn from CFO Shen Nan said.
Ape tutoring, which invested 700 million yuan in marketing last summer, is a big investor this year. Some people in the industry estimate that its investment in this summer is 1.5 billion yuan. In terms of brand launch, ape guidance has reached cooperation with three variety shows of "China Poetry conference", "the strongest brain" and "trump vs. trump". It also sponsored CCTV Spring Festival Gala and became the official sponsor of Beijing Winter Olympic Games.
Offline, ape guidance chooses the office elevator for "bombing" advertising, targeting white-collar parents. In addition, ape counseling also put a lot of advertisements in elevator lobbies of some residential areas and schools.
But the brand launch of "burning money" is not always a successful precedent. In 2018, an online education institution exclusively sponsored a variety show with top traffic. Previously, the naming fee of this program was as high as hundreds of millions of yuan. However, although this launch started the brand at that time, it failed to support the success of this online education institution. Now, the organization has not had much market share.
Compared with effect delivery, online education brand investment only accounts for a small part of the marketing cost. This is because there is only online channel for 9 yuan promotion class, and online traffic is too expensive.
According to reports, the person in charge of the commercialization of education on a short video platform said that during the summer vacation, an online education head company invested 700 million yuan on its platform in a single month. In just two or three months, the average investment of each head company exceeded 1 billion yuan, and some even reached 2-3 billion yuan.
In June, during the traditional promotion period, the traffic price of byte hop's advertising delivery system increased by half, and the rise of platform traffic price was largely due to the promotion of e-commerce and online education industry.
Some people in the industry said that compared with last summer vacation, K12 online education company's advertising frequency on short video platform has increased by twice this year. "For every 100 short videos last summer, there were 10 K12 online education advertisements. This summer, for every 100 short videos, there were 30 K12 online education advertisements."
In the face of such expensive traffic, some companies have their own way. According to the data released recently by the live class of homework help, more than 67% of the new students in the regular summer class come from their own traffic, which greatly reduces the cost of getting customers.
The live class of homework help did not specifically introduce the source of its own traffic. However, it is generally believed that there are two free tool apps for homework help and homework help. These two apps have a large number of users and provide free services such as photo search, composition materials, question bank, and mental arithmetic correction.
Although self owned traffic can reduce the cost of customer acquisition, it may also mean more serious losses. This is because homework helps app access to special courses of 3 yuan, including 5 famous teacher courses, 5-day wechat group counseling, 8 sets of materials and 3-year unlimited course playback. These costs are considered to be no less than 130 yuan, and the main types of external traffic delivery are 9 yuan and 36 yuan promotion courses.
Ape tutoring with similar product matrix also started to use ape question bank, little ape search question, little ape mental arithmetic and other tool app to guide, and launched 3-yuan special training courses, including 5 subjects, 10 courses, 10 day tutor service, 99 yuan electronic teaching assistant gift package and permanent unlimited playback.
"Ape tutor's previous positioning of the tool app is different from that of the homework group, and it does not rely on its guidance. Even the little ape's mental arithmetic has not been commercialized for quite a while." A mentor close to the ape told the 21st century economic report.
"But the lower the price of promotion courses, the lower the willingness of users to convert into positive price courses in theory, because the mentality of users to sign up is to experience or" collect wool. " The financial director of the above online education institutions said.
It is also reflected in the cost of online education. At present, the teaching team of the head online education institutions has reached 10000 people. Although there are only a few hundred lecturers, their annual salary is often one million yuan. If the average monthly salary of tutors is 10000 yuan, the overall amount is 100 million yuan.
Online education also costs a lot of technology. Take the free courses launched by various platforms during the epidemic period as an example. On the first day of the free course for ape guidance, 5 million people attended the course online. For this reason, 10000 servers were invested during the epidemic period.
"What's embarrassing is that the free courses during the epidemic period, in addition to winning" acclaim "to the institutions, have little help to attract customers, and the conversion rate is almost negligible." The financial director of the above online education institutions said.
As a result, almost all online education institutions are losing money, which makes people worry about their capital chain. On August 31, it was reported that ape counseling was about to complete a new round of $1.2 billion, just five months after it completed the previous round of $1 billion.
Ape tutor was founded in 2013. If the $1.2 billion financing news is true, this will be the h-round financing of this Unicorn enterprise. It has been unable to go public or announce profits, which makes people worry about whether the high-rise buildings will collapse suddenly.
"In fact, since its establishment, ape counseling has maintained an average annual financing frequency. The $1 billion financing in March this year should actually be completed in 2019, but it has been delayed for some reasons, resulting in a too close gap with the $1.2 billion financing this year." The person close to the ape told 21st century business reporter, but the official reply of ape counseling said it would not comment.
"It is not ruled out that some enterprises will be crushed because of their crazy investment, resulting in serious losses and permanent losses. Because there are many factors that affect an enterprise's capital chain, such as consumption too fast and too much, financing is not smooth, income side problems, income can not offset expenditure, and so on. Once a certain factor has a major problem, it may lead to the fracture of its capital chain, so we also call on the industry to invest rationally. " The financial director of the above online education institutions told reporters.
"Burn money" game
"Ape tutoring, although losing money, is probably one of the best cash flow online education institutions, and it has always had money." The people said. Since its establishment, ape guidance has raised more than 1.5 billion US dollars, and the operation group has also completed the e-round financing, with a financing amount of more than 1.8 billion US dollars.
Summer marketing war reflects that online education industry has become a "burning money" game initiated by capital and facing capital.
"They have to meet the high growth requirements of investors or the next round of financing will be a problem." Deng Zhiliang, general manager of Jinghan education cloud business department, said in an interview with the media that, for most online education companies, when they can't hand over beautiful profit statements, making big growth is undoubtedly a better proof of strength.
In the second quarter of 2020 financial report telephone conference, Netease Youdao said that the increased marketing expenditure will put pressure on the operating cash flow in the next one or two years.
Some media believe that this year all online education companies are frantically expanding and irrationally burning money in the summer. But Zhou Feng, CEO of Netease Youdao, believes that this is a simplified one-sided view. In the face of an industry with a very high ceiling, it is a very wrong strategy to "make a little rich and then be safe" in the rapid growth stage of the industry. Therefore, investment and loss itself is not a problem, the key is to see whether the money is worth spending.
In terms of revenue, users and teacher scale, Netease Youdao is in the second echelon of online education. In front of it are "four mountains" of XRS online school, ape tutoring, homework help and who to learn from. This summer war may be a battle of life and death for it, either to speed up catch-up or to speed up falling behind.
The strength of online education companies to "burn money" marketing lies in that among more than 200 million primary and secondary school students in China, less than one tenth of the users pay for the regular courses of online education, which means that the growth space of this industry is extremely considerable.
But whether the game of "beating drums and passing flowers" can play well depends on whether online education institutions can retain users.
"If the continuation rate is 80%, then LTV (total value of life cycle) is equivalent to 5 points, but if the continuation rate is 40%, LTV will only have more than 1 point, and the gap is very large." Chen Xiangdong told the 21st century economic report.
If an organization's LTV is 5, that is to say, if these users are well served, they can pay to renew their classes five times. "Then, behind the 1.2 billion yuan operating income in a quarter, the total revenue is 6 billion yuan, which is the charm of k12 education market." Chen Xiangdong said.
This means that online education will not be a pure business. "For K12 online education companies, if the teaching service and product quality are not up to standard, even if they can" buy "a large number of users in the short term, they will also lose quickly." The financial director of the above online education institutions said.