E-Education Has No Business Model, Craves Fresh Capital, New Oriental Founder Says
Xu Wei
DATE:  Nov 20 2020
/ SOURCE:  Yicai
E-Education Has No Business Model, Craves Fresh Capital, New Oriental Founder Says E-Education Has No Business Model, Craves Fresh Capital, New Oriental Founder Says

(Yicai Global) Nov. 20 -- The Covid-19 pandemic has fueled explosive demand for online education, but the sector still relies entirely on capital injection and has yet to come up with a sustainable business model, said Michael Yu, founder of Chinese educational institution New Oriental Education & Technology Group.

The e-education business model may succeed in future, but this will demand steady exploration from people in the field, Yu said yesterday at the China Entrepreneurs Forum at the Yabuli ski resort in northeast China, The Paper reported today.

Nearly USD15 billion flowed into the sector this year, but it only logged revenue of tens of billions of yuan – single-digit billions of US dollars -- according to data Yu provided.

"The sustainability of a business model is determined by whether it has steady and efficient demand, how high switching costs are, how likely customers are to renew the service, and how likely they are to use the product constantly. Capital is an important driver behind this, and people cannot stand it when capital retreats,” Yu said.

No Future
Online education platforms such as Yuanfudao, GSX Techedu, and Zuoyebang are darlings of the capital market. TikTok owner ByteDance Technology announced its setup of its independent Dali Education brand last month. The Beijing-based firm does not expect it to profit for the first three years, however, or even long term, said Chen Lin, its chief executive.

New Oriental, which started with offline education, has also tested the waters of online education, though Yu has not invested heavily in the sector since he is “unable to see its long-term development.”

New Oriental is still making various forays into the online field, however, spending several billion yuan, Yu noted.

Some online platform operators hope to win after striving their utmost to make it to the finish and beat out all rivals. “This will never happen in the field of education. Alibaba Group Holding, JD.Com, or Pinduoduo have never managed to achieve supremacy even in the field of e-commerce. And it will be less likely to happen in the education field, which is supported by individual needs,” Yu stated.

Editor: Ben Armour, Xiao Yi

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Keywords:   New Oriental,Online education,Yu Minhong