Who Will Take The Initiative To End The "Money Burning" War With Online Education

In the third quarter of 2020, the net income from who to learn from online education company reached 1.965.8 billion yuan, but the marketing expenses of 2.055.8 billion yuan were burned down, resulting in a net loss of 932.5 million yuan.

This is the first net profit loss in eight quarters. The last one was in the second quarter of 2018, with a loss of 400000 yuan.

Who to learn from is a company that even people in the industry can't understand. After it was listed in June 2019, it not only maintained 3-4 times of revenue growth, but also was the only online education company with large-scale profits at that time. In the fourth quarter of 2019, the net profit of who learned from reached 174.5 million yuan.

Just as the outside world thinks that learning from others will continue to maintain high growth and high profits in 2020, the situation has changed dramatically in the summer. In the second quarter of this year, only 18.627 million yuan of net profit was left from the school. In the third quarter, a huge loss of more than 900 million yuan was made.

In a live program on the evening of November 25, Shen Nan, who learned from CFO, explained the original reason: "in this summer vacation, the situation has changed, we suddenly see a lot of capital into the live big class track. When the external environment changes, our strategy and strategy should be adjusted to a certain extent."

Such changes are obvious. At the end of August this year, ape counseling was exposed to raise $1.2 billion. On October 22, ape guidance officials confirmed the financing news, and the real financing amount was 2.2 billion US dollars in two rounds; on June 29, the operation group completed $750 million in financing.

With enough ammunition, online education institutions began to "burn money" for marketing. Who learned to join the "war" with? The marketing cost has reached 4 billion yuan since this year, and only 1 billion yuan in 2019.

After the release of the third quarter financial report, some people in the industry believed that learning from whom was exchanging short-term losses for long-term high-speed growth, which was only half right. In the third quarter, learning from who really gained 252.9% year-on-year net income growth. At the same time, Shen Nan said another reason in the live program: "the more we put in, the faster other people bleed."

This is because although the whole track is crazy "burning money", the efficiency of "burning money" is different. "When we can exchange 1 yuan for 1.3 yuan, while others can only get 70 cents for 1 yuan, we are the company that should launch large-scale investment." Shen Nan said.

Of course, such a launch is unlikely to last. In fact, when the "myth" of high-speed growth and high profit is ended with the initiative from whom, it means that the live big class track will usher in the final battle of tianwangshan.

Chen Xiangdong, founder and CEO of who Xue, told the 21st century economic reporter that the "burning money" of the whole market has been irrational until now, but 2022 may be the time for the market to return to rationality. "If an institution is inefficient, more investment will lead to greater losses, and investors will not agree with it."

The cases of failure in the madness have appeared in the Internet industry and even in the online education industry. After next year, who will be the loser of the live class track? Now no one can tell.

More and more expensive advertising traffic

In the summer war just past, the "burning money" marketing of the track of live big classes is crazy. Learning from who spent 2 billion yuan from July to September, tal spent 380 million dollars from June to August, and Netease Youdao, a smaller company, also spent 1.1 billion yuan.

But they may not be the most expensive companies. "We can see from third-party data that the marketing expenses of some companies in the third quarter of this year may exceed 4.5 billion yuan," Chen Xiangdong said on the third quarter earnings call

The marketing channels of online education are particularly homogeneous, focusing on elevator, bus and subway platform, variety show sponsorship, and network traffic of byte system and Tencent department. In almost every channel, ape counseling and learning from others are in the lead.

All the Internet traffic pools are waiting for the carnival of online education. In the e-commerce platform, which is not the traditional position of education marketing, the 21st century economic report reporter learned that Taobao will launch IP marketing activities in the education industry in December. In the past "double 11", an online education institution sold 300000 orders through a live broadcast.

The bad news for online education institutions is that traffic is getting more expensive. In the past two quarters, the ROI (input-output ratio) of online education institutions dropped to 2, then to 1.3. In the third quarter of this year, compared with the third quarter of last year, we recruited 327000 more students with regular price courses, but spent 1.725 billion yuan more in marketing expenses.

In the 21st century, Chen Xiangdong is still the most efficient track in terms of economic efficiency.

Who can learn how to spend money efficiently? The answer can be found in history.

Just at the beginning of this year, Shen Nan, who learned from CFO, also publicly said that he had not paid for any road sign advertising, light box advertising and television advertising, etc., and his investment in advertising was much less than that of the industry leaders.

I didn't have money to advertise before. At the end of 2018, there was only 236 million yuan in cash in the account of who learned from. In this year, the marketing cost of learning from whom was 100 million yuan.

At this stage, we have grasped the rare wechat dividend, drained and realized it through thousands of public account matrix and community fission, and achieved explosive growth through precise operation of private domain traffic.

However, Chen Xiangdong introduced in May this year that "learning from who really has a wave of wechat dividends in 2017 and 2018, but this wave of wechat dividends has disappeared in April and may 2019."

The reason is very simple, "if you put a company in the middle of a fast-growing situation, internal traffic can be ignored in many cases, so even Ali has to buy traffic all over the world today." Chen Xiangdong said.

The financial data also shows that after the listing in June 2019, the sales expenses began to rise. In the second three quarters of 2019, from 100 million yuan to 300 million yuan, and then to 400 million yuan, and in the first quarter of 2020, the sales expenses directly soared to 700 million yuan.

The third quarter of 2019 is the first summer war with whom to learn. The results can be rated as excellent. With a sales cost of 330.4 million yuan, 800 million yuan of cash income was received, and the ROI was higher than 3. That is to say, for every 1 yuan invested in by anyone who studied with him, he could earn more than 3 yuan. After this summer vacation, we have transformed about 800000 new students of regular courses.

Among them, the key is who takes the lead in promoting sales. Before that, the mainstream promotion class type of live class industry was 49 yuan class.

"This model is a sales promotion course model that we have carefully polished for 15 months." "In theory, the threshold of the 9-yuan class is lower, and the conversion rate is also lower. However, we have found that the customer acquisition cost of the 9-yuan class is even less than half of that of the 49 yuan class," Shen Nan said at the second quarter financial report

Although the pool can be used for intensive education, it can also follow the extensive education of potential customers.

In the live broadcast on November 25, Shen Nan said, "other organizations have tried to follow who they are to learn from the public account launch strategy, but because this job is too tired, everyone has to spend money to find the fastest way, for example, to launch on the information flow platform. It is just the so-called" problems that can be solved by spending money are small problems. ".

In other words, the current strategy is to use high-efficiency and large-scale marketing investment to consume the extensive marketing investment of competitors, forcing the industry to reach a balance after a year. The effectiveness of this strategy depends not only on its own executive ability, but also on the attitude of the capital behind the competitors.

Growth or kingcraft

"The issue of making profits in online education is very difficult, because it is estimated that any founder who raises profits will be criticized by the board of directors. Is it a little bit of a matter of getting rich and not making progress so early? After all, growth is still king for online education. " Online education institutions 51talk CFO Xu Min said in public recently.

After a net loss of 878 million yuan in the third quarter, Zhou Feng, CEO of Netease Youdao, still made it clear that "our strategy is to achieve long-term sustainable development with a healthy and stable growth rhythm, rather than focusing on the issue of profit schedule."

At least in terms of cash reserves, the "ammunition" of each institution is enough to support the continued "burning money". He has more than 2.7 billion yuan in cash and equivalent, and more than 1.9 billion yuan in deferred income has been collected in advance. Tal has $2.7 billion in cash and equivalents. The ape tutoring and homework group, which has just completed the financing, naturally has no shortage of money.

Moreover, the growth scale of institutions in the fourth quarter will be significantly increased. "The enrollment of live class industry has obvious seasonality. Generally, there are more new students in the first quarter and the third quarter. In the second and fourth quarter, in addition to recruiting new students, there are also renewal students." Chen Xiangdong told the 21st century economic reporter.

Therefore, the income and the number of new students in the fourth quarter of the live broadcast large class class institutions are generally higher than those in the third quarter.

In addition, if the freshmen recruited in the third quarter renew in the fourth quarter, it also means that the marketing expenses spent on the student in the fourth quarter are zero.

As online education institutions are burning money in homogeneous marketing channels, the cost of online education is rising. Xu Min said in the above public occasions, "this summer vacation, several head companies to obtain a 1000 yuan long-term class user cost more than 3000 yuan."

In the fourth quarter of 2019, the cost of learning from others is only 399 yuan. By the third quarter of this year, the cost of getting customers has risen to 1600 yuan, and the average selling price of each newly paid student is also 1600 yuan. In other words, the tuition fees collected in the quarter are all used in recruiting new students. As for the service and teaching materials of the course at this stage after enrollment, the loss will be borne.

In this way, the cost of acquiring customers may still be low in the industry. At a financial report meeting of a listed education company, the CFO of the company neither denied nor admitted the question about whether the cost of acquiring customers of the company had risen to RMB 4000.

This has come to the brink of danger. The key to maintain the chain of "burning money" for growth is the rate of continuation. In the live program on November 25, Shen Nan, who learned from CFO, said that in April this year, the continuation rate of individual departments and sections with whom to learn exceeded 80%, which has exceeded the continuation rate of many offline institutions.

Yu Minhong, chairman of New Oriental, recently publicly said, "80% of the class continuation rate is the lifeline of online education institutions. No matter whether it is a large class or a small class, or one-to-one, as long as it is online education, the continuation rate does not exceed 80%, and it is basically impossible to make money."

Therefore, the real sustainable growth of educational institutions is to continue classes through high-quality services, rather than blindly recruit new students.

According to an industry source, the advantage for online education institutions is that "when parents choose which online education institution for their children, the decision-making process is very long, but once they choose one institution, they are less likely to move to another."

For those who learn from, while achieving large-scale growth, we also need to realize the transformation of growth structure. Who to learn from the master teacher directly results in that a large number of students are high school students at the initial stage, which brings about two problems: limited space for students to renew their fees; and the proportion of short-term courses and special courses for examination in students' purchasing courses is relatively large.

Therefore, in the past two quarters, the focus of large-scale customer acquisition from students is primary school students. When the number of primary school students in an institution accounts for a considerable proportion, the space for continuing classes and expanding subjects will be greatly improved.

Be cautious in AI class

There are also risks in the operation mode from whom to learn. Previously, the decision-making of all in live broadcast large class lesson can make the internal organization focus on a business, so as to maximize efficiency; on the negative side, too single business is not conducive to risk dispersion.

At present, learning from others is expanding business. In October this year, we integrated all K12 businesses into gaotu classroom, focusing on adult business such as postgraduate entrance examination, certificate examination and public examination. According to the third quarter report, the adult business achieved 100000 new students and 200 million yuan of net income.

At the same time, there are also early Enlightenment for young students, providing AI courses of Chinese, mathematics and English thinking. This is a hot track, almost become the head education company's standard configuration. The 21st century economic report reporter learned that the homework group is also preparing products for thinking AI class.

The zebra AI course of ape coaching has the highest market share of this track. According to data disclosed on November 25, its users have exceeded 1.5 million, with monthly revenue of 500 million yuan.

Thinking AI class is actually a recording and broadcasting course. The interaction between students and videos is realized through AI technology. Therefore, its content is mainly to provide entry-level discipline literacy, and the student group is mainly preschool children.

With whom to learn although the introduction of early enlightenment, but the view of this track is extremely cautious. "We have done a lot of tests and found that the track is not good at the moment, so we are controlling the scale." Chen Xiangdong told the 21st century economic reporter.

Chen Xiangdong believes that thinking AI class is an independent market, and it is impossible for young students to renew their fees all the way to primary school. After entering primary school, students in pre-school stage will not learn thinking AI class again, nor will they be diverted to live class products of the same company, "because parents will definitely choose the best products in this market".

At present, the price of thinking AI courses is relatively low, about 2000 yuan per year. If such products can not be renewed to primary school stage, it means that each student can only renew about 3 times at most, and the whole life cycle value is only more than 6000 yuan. This poses a challenge to how to make profits.

However, if the thinking AI class is integrated with other products, it may be a completely different scenario. For example, it can be used as a teaching auxiliary product of live class, or as a supporting teaching method for developing low-cost live broadcast course, which can be used for high-frequency exercises.