Educational technology (EdTech) is the major trend of the decade
I’ve always been interested in education and EdTech (to the extent that I quit VC to create my own EdTech-startup).
In this material, I’d like to share my vision of the current state of the EdTech market, as well as try to predict in which directions it will develop, and explain why I consider EdTech one of the most promising areas of the coming years.
EdTech is a huge market and it’s only going to grow
Education accounts for more than 6% of US GDP, which is almost $ 1.2 trillion a year, while globally the entire educational market is about $ 6.5 trillion.
Moreover, the growth rate of the market will only increase, and it is expected to reach $ 10 trillion by 2030.
Now technological solutions in the education field do not account for even a tenth of the market. According to research by HolonIQ, educational technology accounts for just about 3%.
The EdTech market will grow rapidly in the current decade. Thus, Research and Markets predicts that the online education segment will grow to $ 325 billion by 2025.
Investors also believe in prospects. According to EdSurge, in the United States alone, venture capital funds poured $ 1.7 billion into educational technology through 105 deals in 2019. Globally, according to HolonIQ estimates, more than $ 7 billion was invested in educational technologies in 2019, and this amount has grown 14 times since 2010. Investments in EdTech are projected to grow threefold over the current decade.
I see 6 main reasons for such optimistic predictions:
- There are more and more students. There will be 500 million more school and university graduates in the world by 2025. This growth, by the way, will be stimulated mainly by developing countries. This is reflected in the behavior of investors: over the past couple of years, we have seen large investment rounds of Asian BYJU’S, VIPKid and TAL Education, which have raised a total of more than $ 500 million.
- The demands of a new generation of students will accelerate the development of EdTech. Young people today want to learn throughout their lives (following the concept of lifelong learning), and do it in much the same way as with all other information — on the go, fragmented, interactive and engaging. It is almost impossible to meet all these demands without the help of technology.
- There will not be enough offline resources for all students. You can already sense that the traditional system is unable to meet the growing demand for education.
- Besides, quality traditional education has become very expensive, which has even triggered the US student loan crisis. And the dynamics don’t look good. The situation has already given rise to the so-called “Second child, second college” problem. Many families spend most of their savings on educating their older child, and there is no longer enough money for teaching the second one. Therefore, they prefer to have only one child.
- Advances in technology will make education more comprehensible. In the current decade, obviously, augmented and virtual reality, as well as the development of artificial intelligence, will expand the boundaries for students. Investor interest in companies like Labster and Interplay Learning highlights the potential of VR in education. Building on the popularity of Pokemon Go, its creator Niantic Labs in 2019 raised $ 245 million for developing augmented reality education apps.
- Pandemics, particularly coronavirus, have catalyzed the transition of people to an online format, and education is no exception. Thus, more than 10 million new users came to Coursera from mid-March to mid-May, which is 7 times more than the registration rate in 2019.
Leaders feel confident, many new strong players appear
When assessing the educational technology market, you have to analyze how its leaders feel.
The flagship of online education is, of course, Coursera. At the end of 2019, more than 48 million users were learning on the platform. Revenue for 2019 was $ 186 million (up 31% YoY). Before the pandemic, Coursera predicted a 30% increase to over $ 200 million, but the reality turned out to be brighter, as I mentioned above. In this regard, the company’s CEO’s statements about targeting to reach 100 million users by 2022, which looked very ambitious at the end of 2019, now seem quite achievable.
Very strong players are Udemy with a base of 12 million users and 20 thousand content creators, Indian Byju’s with 35 million users and an estimate of almost $ 6 billion and Teachable with 3 million users, 7.5 thousand content creators and over 20 thousand courses.
Companies such as EdX, Khan Academy, WizIQ, Ruzuku, Educadium, Learnworlds, Thinkific, Academy of Mind, CourseCraft and Skillshare, and younger but very promising startups like Outlier, MasterClass, Osmosis and Degreed also have significant market influence.
Social networks are confidently entering the market. YouTube, TikTok and Instagram are obviously the leaders. 70% of millennial YouTube users use the platform to learn new skills, and over 70% of searches on the platform start with “How to”. All platforms understand the potential and are launching their educational initiatives, the most prominent of which is #edutok, launched by TikTok in India last year. The company has partnered with a number of universities and educational content makers to create short videos on a variety of topics: life hacks, career, business, etc. As of September 2020, videos under this hashtag have been viewed nearly 125 billion times.
What are the opportunities?
I see 3 major EdTech trends: microlearning, social learning, and adaptive learning.
From videos to podcasts, infographics, and blogs, microlearning is one trend that started in the past decade and will dominate the current one. Microlearning meets the basic need for today’s learners to access education no matter where they are, what devices they use, and how urgently they need certain information.
Recent research has shown that today’s learners prefer educational videos that are under 6 minutes, coveting no more than one topic.
Microlearning is the most effective form of learning. While the completion rate for traditional online courses balances between 10–15%, in the case of microlearning, it is 90% or higher. In addition, a number of studies show that microlearning increases the transfer of learning by more than 17%.
Young people who create the main demand for educational technologies now point to the lack of social inclusion in existing EdTech products.
Therefore, it is not difficult to predict that the demand for social learning will increase. After all, new generations have grown up with social media.
Social learning encourages students to learn from each other and does not limit learning to the course or classroom. This trend is highly correlated with the concept of lifelong learning and will democratize education for people anywhere in the world.
Social learning is now underestimated — and it shouldn’t be! We receive 75% of knowledge not from teachers or through academic studies, but informally from friends and acquaintances.
The accelerated development of machine learning will finally be able to fully launch the trend for adaptive learning, in which interaction with the student and the selection of relevant classes and educational tools is carried out by algorithms based on the information collected about the user. Attempts to introduce adaptive learning have already been made (for example, by the guys from Knewton), but due to imperfect technologies they have not yet been crowned with success. The chances of success for a second wave of companies such as Quizlet, Kidaptive, KidSense, and Queriumusing that are using machine learning to improve educational experiences, are much higher.
The current educational system is unfair.
I like how this problem is highlighted by Marc Andreessen:
“We have top-end universities, yes, but with the capacity to teach only a microscopic percentage of the 4 million new 18 year olds in the U.S. each year, or the 120 million new 18 year olds in the world each year. Why not educate every 18 year old? Isn’t that the most important thing we can possibly do?”
Obviously, the 2020s is a decade when education will be rethought. We must find ways to reduce costs, improve the quality of education and connect it more closely with the real world. And I am sure that the development of EdTech is the most natural way to achieve these goals. It’s breathtaking when you begin to imagine what education could be like in 2030, and the reality can and is likely to turn out to be even more incredible. Therefore, I consider EdTech to be one of the most promising and interesting directions in the coming years.