Photo: CFP

Online education has become a hot new trend among Chinese Internet companies. Since the beginning of 2013, numerous companies have joined the sector, including both start-ups and big-name Internet giants.

Around 1,000 online education firms have been established since early last year, according to data released in March by consulting firm Zero2IPO Group.

Leading Internet firms have all established a presence in the sector. Baidu Inc, Alibaba Group and Tencent Inc have all launched their own online education platforms since last year, and they have also shown enthusiasm for investing in online education projects.

Media reports said that e-learning platform chuanke.com secured investment of $3.5 million from Baidu at the end of last year. In February, US-based online education provider TutorGroup said that Alibaba had contributed $50 million to its second round of financing.

This has posed a serious threat to traditional training institutes like New Oriental Education and Xueda Education, and they are also making efforts to boost their online business at present. Recent media reports said that New Oriental, a language training school, is planning to form a joint venture with Tencent to explore the e-learning market.

Venture capital firms have also shown their interest, investing about $197 million in domestic online education sector since the beginning of 2013, data from Zero2IPO showed. 

Internet invasion

Market watchers believe 2014 will see a surge in Internet firms expanding offline and competing ever more strongly with brick-and-mortar companies. This has already started in retailing and catering, and now online education is also threatening traditional training schools.

The trend of e-learning first started in the 1990s along with the development of the Internet, when an increasing number of people started to seek learning materials online. But it was not until 2013 that the market started to see rapid growth.

The same trend is also happening abroad and major overseas firms are aiming for a global presence. In February, US-based language learning site Duolingo secured a new round investment of $20 million and media reports said that it was planning to enter the Asian market.

Compared with off-line training, e-learning is economical and convenient. E-learning firms usually come in two types. Some companies just serve as a platform to bring teachers and students together, while others hire teaching professionals and offer their own online training programs.

"I think firms that consolidate the two operation types are more likely to see better development," Liu Dongmei, an analyst at Beijing-based iResearch Consulting Group, told the Global Times Thursday.

Several firms in the sector have already gone public. Tarena Technology Group, which offers IT training services, floated on NASDAQ on April 3, the first Chinese company to get listed in the US stock market this year. Guangdong Qtone Education Co, which offers courses for primary and middle school students, also floated on the Growth Enterprise Market of the Shenzhen Stock Exchange in January.

Liu said that the online education sector will see fast development in the future. In 2013, the market in China was worth 83.9 billion yuan ($13.4 billion), up 19.9 percent year-on-year, with around 67.2 million users, and the market is expected to double to 173.4 billion yuan by 2017, data from iResearch showed.

Where's the profit?

"The key point of running online education is to be fast - otherwise the whole era will end before you can come up with a decent product," Li Shanshan, vice president of operations at Beijing New Vision Educational Technology Co, told the Global Times on Sunday.

The company, backed by software developer Kingsoft Corp, runs an education website called haowj.com. The website hires Western education professionals to offer English language training.

Li said it took less than one year for the company to plan the project and launch the website.

Several experts have referred to the "Internet mindset," which is a basic operational approach of first luring users with free services, and then cashing in on their growing user base by offering tailor-made services that they charge for.

On February 25, NASDAQ-listed Internet entertainment firm YY Inc launched its online education website, 100jiaoyu.net. In order to attract users, the website launched a series of free trainings for the TOEFL and IELTS English language tests.

Over 20,000 people have enrolled for the free programs, a marketing official at YY's online education branch, who declined to be named, told the Global Times Thursday.

"For Internet companies, a large user base means everything," Huang Jialang, a Guangdong-based independent industry commentator, told the Global Times, adding that online education firms could profit from enrollment fees and advertisements.

Liu from iResearch said that online education users still have low willingness to pay and it will take time for online education websites to be able to make a profit.

The marketing official with YY said they weren't worried about profits, as "the market is so promising."

Li was also upbeat about the prospects for e-learning.

"Besides individual users, we are cooperating with some primary schools in second- and third-tier cities to offer online language classes," Li said, noting that parents of primary school students are more willing to pay for online tuition.

Li's firm offers online English training packages priced from 5,499 yuan to 8,999 yuan, targeting college students or young white-collar workers, she said.

Room for more

Internet firms usually offer live classes, but some traditional training institutes merely put up videos of off-line classes, experts said.

Internet firms may lack education expertise, Li said, but they are better at online business than traditional training institutes as they know how to design appealing programs and how to promote themselves using new media.

"It might be the future trend for Internet firms to design products while traditional training institutes provide the content," Li said.

The boom in group-buying websites was followed by many of the new firms going out of business, but industry watchers said that it will be different with online education.

"A significant number of companies will survive, as education has many different segments and we can offer differentiated services," Li said, though she noted that those who are backed by Internet giants do enjoy a head start.