The EdTech market is rapidly gaining momentum, and people are becoming the new oil. The capitalization of unicorn startups in this sector is measured in billions of dollars; they raise up to $1.5 billion a year in investment. Global EdTech investment exceeded $36 billion at the end of 2020. Corporations are interested in securing a share of this market — through M&A or development of their own products. This is also true for the Big Tech. How does their presence in the EdTech sector affect the market and who sets the trends there?
How FAANG affect the global market
FAANG is an acronym that refers to five prominent American technology companies: Facebook, Amazon, Apple, Netflix and Google. Their total capitalization exceeded $6 trillion in Q4 2020, and the share of their S&P 500 stocks reached 18%.
The Big Five are definitely opinion leaders as well, because lesser-known entrepreneurs follow in their steps when it comes to business models, product development and general business growth strategies. They set trends not only in the technology sector, but in other industries as well. As soon as Netflix released Queen’s Gambit, the demand for chessboards soared by 87% within the first month of its US premiere; chess manuals sales surged by more than 600%. Everybody knows about Apple’s influence on tech companies. Other industry players copy iPhone designs all the time. When Apple released iPhone X in 2018, the market was immediately flooded with other smartphones with a recognizable ‘monobrow’ at the top of the screen. Amazon set the trend for one-click buying that boosted e-commerce.
Smaller companies are always closely watching the Big Tech, preparing to replicate their strategies. For example, the corporations treat the EdTech market as a blue ocean where they are trying to unlock more market niches as quickly as possible. The earlier you begin, the higher the chances of seeing an impressive profit later. The Big Five realized this a long time ago and began working in two ways — create their own products and acquire small promising players. At the same time, they expanded their ecosystems, and other market participants picked up this trend as well.
What the Big Tech offer
Google is ahead of the rest of FAANG in the actual number of proprietary products: the corporation already offers seven products in the EdTech segment. One is Google Workspace, a set of cloud computing, productivity and collaboration tools: email, documents, spreadsheets, disk, and calendar. There are Google Meet and Jamboard, a video conferencing tool and a digital interactive whiteboard (a hardware product, not a service) for meetings. For schools, the corporation developed Google Classroom that facilitates creating, distributing, and grading assignments. Google Assignments is a learning management tool for college students, and Google Scholar is a search engine for scholarly literature. In addition, there is Google Expeditions, a virtual reality platform with an add-on, Tour Creator, where students can take virtual trips. The corporation plans to shut down the project at the end of June 2021 though. Google plans to make virtual educational tours more accessible to students and educators.
Other FAANG companies can boast fewer products. In 2012, Apple released an update for its iBooks app which allowed users to download and read electronic textbooks, both conventional and multimedia, with informative video clips, quizzes at the end of each section and interactive visual aids. Almost simultaneously with this innovation, Apple was developing iTunes U, an app for school and university teachers that helps working with lessons, home assignments, tests and textbooks. The app also has features for communicating with students, holding group discussions and posting study courses.
Amazon is not too far behind with its AWS Academy, a proprietary free certification program on cloud technology for college and university students. The courses are available to teachers, students, educational institutions and employers. Next came Amazon Small Business Academy with webinars and workshops on e-commerce skills for small businesses.
Netflix has not created any academies of study courses; however, the streaming platform can easily become an EdTech player focusing on lifelong learning. In the first three months of 2020 alone, the number of new Netflix subscribers reached 16 million, the majority interested in documentary films and series — which are not trigonometry, of course, but still a helpful source of knowledge. Netflix has long made it possible for schools to show documentaries in class without fees and opened access to the same media library to teachers during the pandemic. In the fall of 2020, Netflix partnered with Norfolk University Virtual Bootcamp to launch a virtual boot camp.
Investment, collaboration and acquisition
Besides creating proprietary products, the FAANG corporations acquire and partner with small promising EdTech companies. This trend is gradually growing. For example, in 2017, Google joined forces with Coursera so that Coursera’s IT students could eventually get jobs with Google or other large corporations like Bank of America, L’Oréal and PNC Bank.
Before that, Google had only invested in educational projects — such as Duolingo in 2015 ($45 million). In 2018, Google bought Workbench, an online library of lessons and projects on various school subjects. Workbench is also integrated with Google Classroom.
Back in 2013, Amazon bought TenMarks Education, an educational project for English learners, although it was soon shut down without an explanation. During the pandemic, Amazon once again ventured into the EdTech market — this time, targeting the niche of exam preparation in India with its Amazon Academy (previously JEE Ready). The service helps students who plan to apply to engineering schools. Amazon and AWS also launched an EdTech accelerator with its own program focusing on cloud technology and AI (artificial intelligence).
Facebook, or the Chan Zuckerberg Initiative owned by Mark Zuckerberg and his wife Priscilla Chan, to be precise, can boast the most successful EdTech investment of the five. In 2016, the Chan Zuckerberg Initiative invested $50 mio in BYJU’S, a startup and the second most profitable educational project in the world. In 2020, this charity organization also invested in Eruditus that cooperates with 30 top universities to offer executive education.
Predictably, the trend set by FAANG has been picked up by other industry players. Russian corporations are actively acquiring and investing in educational services. Mail.ru Group and Sber are trying to take as many promising startups under their wings as they can. Thanks to mergers and acquisitions, K-12 companies (for school students) in particular are growing. It is expected that the mergers of small educational companies on the domestic and international markets will be more frequent.
Asian market vs FAANG
Despite the fact that FAANG is actively expanding its presence in EdTech, Asia remains at the front line of innovation and technology. It is Asian companies that still set trends to be followed by companies elsewhere in the world.
For example, BYJU’S in India created a global education ecosystem. After several M&As, the ecosystem of the Indian EdTech giant has grown out to include laptops and tablets with uploaded video tutorials on school subjects, a study program for grades 6 to 12, an English learning service, educational games, a coding platform, an exam preparation service and a simulator for science students. As a result, BYJU’S has 64 mio students, more than 4.2 mio paid subscriptions and an annual membership extension rate of 85%.
The FAANG companies have not shown as much interest in developing educational super apps. Although Google releases quite a few of its own services and acquires others’, they do not constitute an ecosystem yet. Before the pandemic, the corporation tried to work with Facebook to create a free platform for schools, Summit Learning, with personalized learning. However, after testing, the concept faced serious backlash, with 77% of parents being against their children using the platform for health reasons. The service does not include any means of communication between students and teachers and requires continuous use of computers, which neither children nor their parents liked. Still, some could not do without the platform during the pandemic.
Google also has Workspace for Education, a platform with various cloud tools and services developed for schools, universities and home schooling. Fundamentals is a free version, with expanded versions available for a fee. There is, however, one restriction: the tools are available only to schools that meet certain requirements. For example, К-12 schools must be accredited and recognized by the government, with a national or international certificate of approval.
It should be noted that Chinese IT corporations are major investors in EdTech companies in India and China, such as Yuanfudao which raised funds from the holding company Tencent, and Zuoyebang which received investments from Alibaba. Thus, the largest Asian IT companies are consolidating the national EdTech market around themselves. FAANG will definitely follow the similar scenario to operate in the US educational market.
As a result, despite FAANG being key players in the EdTech field and opinion leaders in numerous industries, it is the Asian market that sets trends in today’s educational environment. Investors will further focus on developing ecosystems and creating super apps.
By Andrei Ilingin, CEO Russia, YaClass