What kind of economy makes EdTech work?

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When the pandemic hit, it brought an unprecedented wave of uncertainty that paralyzed the world. Despite the many obstacles, EdTech platforms have risen to the challenge and kept education uninterrupted. These platforms have seen monumental growth over the past two years by securing international funding and investment. Making education readily available and accessible to the masses was their mantra for success. They have broken down geographic and communication barriers and have become pioneers in providing home study solutions. And to some extent, has helped curb the spread of covid-19. Propelled by this great breakthrough, they strengthened their position in the Indian education market. As schools reopen, parents and students are still relying on these platforms as a complementary source of education, strengthening its stronghold in the education sector. The factors that make the EdTech economy sustainable in a highly competitive market are ones to watch. Here are some key metrics that are visibly contributing to India’s EdTech economic boom:

Increase in disposable income levels

A report indicates that nominal household disposable income in 2022 was 25% higher than 2019 levels. Forecasts also suggest disposable income growth of 9.5% on average by 2026. In addition, the Indian population mainly comprises its young people around 66% of the total population (over 808 million) is under 35 (ILO). “The income inelasticity of education in India is estimated to be 0.93 relative to other expenditures, suggesting that at any income level, Indians are more likely to spend on their education,” says a Indian Press Journal article. This strongly indicates a steady pace of growth for EdTech in India. Education-savvy Indians and cutthroat competition in academics are forcing parents to rely on EdTech platforms as an auxiliary source of education with paid subscriptions and customized plans.

Identification of the target base

The target base of EdTech players resides primarily in the K-12 or Higher Education (HE) segments, pointing to a projected national growth of $4.3 billion by 2025 in size market, according to a report. According to another report, there were 658 million internet users in India in January 2022. In 2019, at least 14% of active internet users in India were between the ages of 5 and 11, and this number seems to be increasing. There is an increase of 34 million at 5.4% between 2021 and 2022 since the start of the pandemic. Another report from BARC India and Nielsen Media found that consumption of EdTech apps increased by 30% during the covid shutdowns. By offering hybrid solutions, Edtech players can continue to grow by tapping into these tech-obsessed target markets. Additionally, parents have the willingness to pay to give their children a competitive advantage over their counterparts facilitating conversions.

Uniform Internet Access in Tier 2/3 Cities

Data published by a web service on the analysis of Internet access performance measurement reveals that the median speed of mobile Internet connection in India has increased by 5.15 Mbps (an impressive growth of 55.7% ) between 2021 and 2022, while fixed internet speed in the country increased by 32.1% to 11.51 Mbps. India also has one of the lowest costs to provide data, making it accessible even to the lowest income brackets. According to a report, at the start of 2022, 35.9% of India’s population resided in urban centers while 64.1% lived in rural India. A study indicates that rural India leads by 20% in internet usage, surpassing its urban counterparts. This could provide a timely impetus for EdTech companies to make inroads to attract subscribers from those inner pockets with multi-device compatibility and remote access.

Unique business model

It has been observed that EdTech companies have a teacher-student ratio that determines their economics. A 1:1 teacher-student ratio may be different from a 1:2 or 1:many teacher-student ratio for different EdTech platforms. The cost of acquiring a student might be the same for everyone, but the gross margins are determined by the student-teacher ratio. According to PwC’s Reimagining the Role of Technology in Education report, “In the early years of growth, platforms are known to spend 200-400% of their operational revenue on advertising and marketing. Although expenses can be reduced by 40-50% after reaching the desired scale of growth, marketing costs are one of the highest costs besides platform and content development. Additionally, some players also maintain large sales teams that act as physical touchpoints to interact with parents and students to convert them into paying customers.

Access to qualified teachers and course delivery

Unlike the traditional mode of teaching, EdTech platforms deliver content in the form of videos, simulations, animation, gamification etc, to convey in-depth knowledge of the subjects concerned. Some of these advanced platforms use AI for personalized assessment of student behavior and learning abilities. Tailored course delivery ensures an even distribution of content that allows each student to learn at their own pace and time.

Growing investments

EdTech continues to make the news by securing funding from international investors. At present, India has 7 Edtech unicorns, an article says. The current Indian EdTech industry market value is $2.8 billion and is expected to reach $10.4 billion in 2025. Offering a price advantage over its offline counterparts, providing inputs to hone skills non-technical skills and job placement assistance as value additions, skill enhancement benefits, etc., are major drivers behind the massive growth of EdTech across various verticals.

School infrastructure vs EdTech

EdTech has the advantage of meeting 1:1 or 1: many teacher-student ratios in a single classroom session. For a physical school, it is impractical to accommodate more than a thousand students in a single session due to infrastructure constraints. But EdTech can leverage a smaller investment to reach massive masses anytime because of its virtual capabilities.

Digitization in India has come to a point where education has increased in importance like never before. The pandemic has also given a massive boost to EdTech, which has led to its phenomenal growth. In addition, the new National Education Policy (2020) gives prominence to online education where the government is keen to harness the benefits of technology, the policy envisions the creation of digital infrastructure, content and capacity building to oversee online education and primary needs. and higher education.

With life returning to normalcy post covid, the huge growth is waning as students resume classes in schools. Regulatory rules can change too suddenly, leading to new requirements and changes. As they say, “without scale, purpose can disappear”. Even with all of these economic factors that make Edtech work, as an industry Edtech must continue to adapt due to the fluid environment to move forward.



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Disclaimer

The opinions expressed above are those of the author.



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