Saturday, Oct 25, 2014, 4:40 AM CST – China

Economy

Online Education

The New Class

China’s growing online education market has attracted the attention of more than a few major market players, from all different backgrounds. They’re going to have to teach themselves how to turn a profit

An online course by Shanghai Jiaotong University launched in April 2013 Photo by CFP

Shanghai Jiao Tong University inaugurates its online education portal, April 2013 Photo by CFP

Michael Minhong Yu, founder of New Oriental Photo by IC

Investors in the New York Stock Exchange-listed New Oriental, the largest private educational service provider in China, have good reason to share in the pride of Michael Minhong Yu, who founded the company in a shabby makeshift Beijing elementary school building in 1993 and recently celebrated its 20th anniversary at Beijing’s illustrious Great Hall of the People. Over the years, 17 million students, from kindergarteners to white-collars, have enrolled in their courses, the majority of them opting for foreign language training. Share prices have been rising fast since March this year.

Speaking at a forum the day after the company’s anniversary celebrations, Yu said that looking towards the next 20 years, he found himself “in severe anxiety and misery.” The only way to secure his company’s future, he declared, was to change its “genetics,” and prepare to enter the increasingly competitive online education market.

All China’s Internet giants, including search engine Baidu, e-commerce company Alibaba, and social media empire Tencent, collectively known as the “BAT” companies, have pitched their tents in this new battlefield this year. “The BAT founders are all my friends, and they are not hesitant about rushing into education – my area. This is business,” Yu said in his speech.

Leading Chinese public universities are also feeling the pressure that the global online education surge is applying to their long established market dominance. They have responded by joining the game, domestically and internationally, providing online academic courses – some degree-certified, some not.

Neither the skills- or exam-oriented training offered by private players nor the academic courses from public higher educational institutions is new in China, or anywhere in the world. What has attracted analysts’ attention is the speed with which the trend is developing, and the uncertainty ahead.

Pitfall? Windfall?

In early December, Alibaba, the world’s largest e-commerce company, launched an education section on its main B2C platform Taobao, where courses in anything from accountancy to karaoke are listed alongside traditional online shopping favorites like clothing or furniture. Several US-listed Chinese private training companies have already joined up.

Pei Binfeng, who led the new Taobao operation, told the media that their market research has shown that potential customers are college students and white-collar workers, aged between 20 and 30 years old – the same demographic as Taobao’s current target users.

Gong Haiyan, founder of NASDAQ-listed Jiayuan, one of China’s largest dating and matchmaking web sites, reportedly sold one of her houses to fund her new online after-school education for K12 (kindergarten through 12th grade) students. She has already invested heavily in building a team of hundreds of teachers.

Hujiang.com, a website focusing on foreign language training, raised US$20 million in venture capital in July. According to Zero2IPO, a venture capital and private equity research institution in China, the total online education investment in 2012 was just US$17 million. The interest from operators whose main business is not education, like Jiayuan and the BAT companies, shows that the structure of investors and their services are more diverse than ever.

This is not surprising in a country with nearly 600 million Internet users, where fierce career competition begins in childhood. A dynamic tech industry has also helped – Mei Jingsong, head of education at major online media portal Sina, said at a packed forum at the end of November that the company used the data from its microblogging platform Weibo, China’s Twitter equivalent, to analyze the educational demands of high school students.

While this market may be capable of attracting huge investment, this isn’t necessarily smart money. Zero2IPO’s research shows that investment in China’s online education market has fluctuated sharply since 2005, due to the lack of a clear profit model from this new line of business. Mei said that in any online market, only the top three companies will ultimately survive, and online education companies have to offer high-quality courses at low prices – or even for free – to beat out the competition. Chinese Internet users, she added, have become very accustomed to free online services.

For offline institutions, the short-term cost of going online may be particularly high. Yu of New Oriental said he was concerned about whether his 30,000 staff members would support his online efforts, since they may ultimately result in job cuts of up to 50 percent.

Education standards are another problem. A recent joint survey by Sina and Nielsen, a market research company, showed that due to insufficient interaction with teachers and the sense of distance online, nearly half of all online education customers are not satisfied with the service they have received.

Beyond Walls

With more than 7 million views, a lecture on love by Dr Helen Fisher, an American anthropologist with Rutgers University, is at the top of Sina’s most-watched video lectures, most of which are by professors of prominent American and Chinese universities. A speech by the late Steve Jobs is second, and a lecture on Roman architecture by Yale Professor E. E. Kleiner places third. Though these are just learning aids rather than formal academic material, their popularity shows the strong and diversified potential demand for academic education outside of college campuses.

In May 2013, Beijing’s Tsinghua and Peking universities, China’s top two higher education institutions, became two of the six Asian members to join the edX, one of the world’s leading Massive Open Online Course (MOOC) platforms, founded by Harvard and MIT.

In July, Shanghai’s Fudan and Jiao Tong universities joined Coursera, another leading MOOC institution founded by two professors from Stanford University, which provides students with a certificate if they complete a course.

Though MOOC courses are free and do not award degrees, they help universities raise their profile by giving people around the world an easy and flexible way to experience first-hand their teaching quality. This is important, since universities today have to compete for students globally, explained Han Yanhui, associate professor with the Open University of China, which now has more than 3 million enrolled students nationwide.

With full confidence in the prospects of online education, in 2002 Han gave up his job as a face-to-face English lecturer at Beijing International Studies University to take up a position at the Open University, where the Internet had already replaced bricks-and-mortar lecture theaters. He thinks one of the biggest barriers hindering the growth of online higher education around the world is that certificates and degrees attained this way are not widely acknowledged by society and the job market as much as those earned on campus. This is the reason why Han has been impressed by the recent enthusiasm towards online education from respected conventional universities. “It will help promote the branding, quality and societal recognition of an online college education,” he said to NewsChina.

 Inevitably, the trend will leave some behind. Colleges and teachers who are less tech-savvy and less prepared to improve their own academic profile will be more likely to lose their jobs.

“The online courses provide so many choices for any learning requirements, and we can compare universities and teachers globally – this is not possible for offline education,” said Shen Yunyu, a 25-year old PhD student in economic law at a university in Beijing. Though he did not complete the probability theory course he started with the Khan Academy, another MOOC platform, he said that what he had learned was very helpful, and the service impressive. Han believes that the next five years will see many colleges close down due to increased competition, and MOOC institutions will gain the requisite approvals to provide degree-certified education.

 The interaction problem, however, is tougher to solve. A single online teacher may be lecturing to a far larger number of students than they would be in a traditional university, making it difficult for the teacher to pay enough attention to each student, or organize intensive class discussions for students scattered around the world. “This is just the initial stage of the new way of education. Where there is demand in the market, there will be a solution,” Mr. Shen told our reporter.

 This is why Mr. Han stressed that MOOCs are just one of many possible future directions of online college education in China, and all players in the market have a long way to go. “Chinese universities and companies should also make their own efforts to explore new solutions for better online education, rather than taking it for granted that MOOCs are the only direction and that everyone will succeed just by following suit,” he noted.

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