51Talk released its financial results for the fourth quarter of 2017 on March 26. According to the financial data, the net revenue was 261 million yuan, up 103.3% year on year; Cash revenue was 393 million yuan, up 37.8% year on year; K-12 students contributed 80.3 percent of their cash income. This really illustrates the vast market for online foreign language education for Chinese teenagers. However, 51Talk posted a net loss of 160 million yuan this quarter.
Sustained losses, 51talk transfer strategic focus to save themselves
This is not the first time 51Talk has posted poor performance. In June 2016, 51Talk was the first online education company to be listed on the New York Stock Exchange in China. Listed for two years, 51Talk performance is a sustained loss, the long-term downturn in the stock price, the results of the unsatisfactory answer sheet.
Early in its losses, 51Talk laid out its strategic focus on launching a high-end online English product that was gaining momentum. In 2017, 51Talk officially launched a high-end brand for the high-end market “Hawo American primary School”, mainly one-to-one teaching by European and American foreign teachers. However, when “Hawar American Primary School” was launched, the competition of high-end products in the online English market has been white-hot. VIP Kid, Tutor ABC and other high-end online English veteran players are all carrying out big marketing activities in this field. Hiring popular stars has become the main means of marketing in the industry. 51Talk’s high-end brand does not have much recognition.
Moreover, 51Talk started from low-end Philippine foreign teacher courses, poor reputation, limited by such cognitive “prejudice”, the launch of high-end products “Havo American primary School”, will naturally be difficult to promote, also difficult to be accepted by the market. It seems that the launch of high-end products “Hawar American Elementary School” did not seize the best time in the market, but also hindered by brand recognition, for the continued loss of 51Talk financial contribution is small.
Enter 2018, 51Talk’s strategic focus shifts again. On February 28, founder and CEO Huang Jiajia said that the strategy will focus on k-12 children one-to-one mass market business, one is the gross margin of up to 60% Filipino foreign teachers one-to-one as the main force of teachers, in order to reduce the high cost of foreign teachers; Second, enter the second – and third-tier cities to find new breakthroughs and broader potential markets; Third, continue to polish a number of high-quality classes, optimize the product technology, curriculum and teacher training.
This strategy, 51Talk will focus on the Philippines foreign teachers English, trying to reshape the brand recognition, and sink to the second and third tier cities, promote the quality class. But the effect is not so obvious, according to e-commerce research Center monitoring data, 51talkrevenue in the first quarter of 2018 262.6 million yuan, year-on-year growth of 64.6%, the growth rate has slowed; The net loss in the first quarter was 112.7 million yuan, slightly narrower than the 140 million yuan loss in the same period last year, but the loss was still over 100 million yuan.
Why is the new strategic achievement so small?
From 51Talk these two years of performance statements is not difficult to see, the strategic shift around the pendulum, although in the face of the market strain faster, but often do not see the industry situation, will focus on the ground. Although the current strategy is showing initial results, it is still worrying in the macro context of consumption upgrading.
Negative impact of Philippine education reputation: 51Talk’s early focus on low-cost strategy, citing Filipino foreign teachers with low labor costs, quickly occupied the adult English market and achieved remarkable results. However, this strategy focuses on the K12 education market, which has high requirements for English learning. If we continue to expand the promotion of Philippine Education, we cannot ignore the reputation of Philippine Education.
In recent years, the reputation of Philippine Education has not been ideal. A 51Talk search on Douban and Zhihu reveals more criticism than praise. Among them, parents reflect, saw 51Talk play with professional authority of foreign teachers to try to understand the course, but after listening to the teaching process, feel the foreign teacher is a young man, and there is no teaching experience, accent is heavy, the teaching effect is not ideal. Children are the future of the family, for education, parents are willing to spend money, for the screening of educational institutions is more strict, 51Talk in the K12 market to promote Philippine education, the quality of Philippine education is a big check point.
Development of second and third-tier cities, the cost continues to increase: low-cost Philippine education is very attractive for the poor economic affordability of second and third-tier cities, which is 51Talk’s main card to enter the second and third-tier cities. However, developing new markets is equivalent to starting a second business. On the one hand, we need to regain users’ trust in Philippine Education and carry out marketing and promotion in the second and third-tier cities, and the operation staff will be increased accordingly. On the other hand, when the publicity in place, to open up a certain market, is bound to recruit more teachers, coupled with the fierce competition in the industry, 51Talk can only continue to invest in funds.
As scale increases, operating costs increase. Take the specific data of 51Talk disclosed in the fourth quarter of 2017 as an example, the net revenue of the fourth quarter of 2017 was 261 million yuan, and the same period of 2016 was 128 million yuan, with a year-on-year growth of 103.3%; Cost of revenue was 98 million yuan, up 115.8% from 45.4 million yuan in the same period of 2016. Total operating expenses in 2017 were 316 million YUAN, compared with 233 million yuan in the same period of 2016, up 35.2% year on year, mainly due to the increase in sales expenses, RESEARCH and development expenses and administrative expenses. Thus, 51Talk operating expenses are higher than revenue, the operating expenses are also increasing with the expansion of the scale, the market effect is not to say, the development of second and third tier cities, the total operating costs will be high.
Service and technology need to be improved: Education is an industry more inclined to service field, students and parents are consumers, for students who have no economic decision-making ability, parents with economic decision-making power is particularly important. A user feedback on zhihu, 51 talk when he tried to make a phone call to consult the personnel of the service, hope to be able to know the price of course, the personnel of the service to spy on the learning situation and grade of the user of children, and vigorously urged parents to pay, left a 51 talk to parents from interests rather than starting from the actual situation of students in teaching of bad impression. Some parents point out that the network on the teacher’s side is always delayed and even dropped, affecting the learning effect. Obviously, 51Talk network technology is not pass, from the pre-class to after-class service system is poor.
51 talk is an online education companies, mainly through the network to communicate with consumers, the user first contact the customer service personnel service attitude, and along the resistance situation of the network, not to mention how the teaching effect, the first network technology, service attitude is not correct, resulting in the loss of a large number of potential customers, in the long term, detrimental to the development of enterprises.
For K12 education market, brand and reputation are very important, which directly determine the conversion rate of sales. 51Talk has formed “low-end market training” and “Philippine foreign teachers” brand recognition in the market, resulting in a low renewal rate, although 51Talk did not disclose the renewal rate in the last two years, but from the data of 2016, 51Talk renewal rate is about 40%, Lower than the same track renewal rate of up to 95% VIPKID and renewal rate of 80% handheld one-to-one platform. Add to that rising operating costs, and continued losses make sense. And 51Talk think can improve revenue focus on the K12 market strategy to smoothly push, but also from the quality of teachers, brand strength and other aspects of the layout.
Together, 51Talk could turn things around
Online education market is full of opportunities and challenges, 51Talk test water effect seems to be not ideal, can not give a satisfactory answer. Insiders say 51Talk saw opportunities in the K12 market, but it was slow, and the business model fell into a cycle of losses. So, seized the opportunity of the tail of 51Talk how to catch up, break through the cycle, reverse the situation now beyond their means, enjoy the sweet fruit of the online education market?
First of all, we should attach importance to the quality of education, follow the law of education, and create a personalized education model. Teacher resources, 51Talk in order to reduce teacher spending, and then the Philippines as a strategic focus, this is undoubtedly a risky move. For a long time, fe teaching evaluation is not so good, 51 talk will fe teaching as the main faculty, should be strictly guard a pass fe teaching quality, to create their own Philippine teachers professional authority, rather than profit pressure, in order to seize market in some unqualified fe teaching, if the teaching effect, enterprise there would be no appeal for students and parents. In terms of teaching, it is necessary to create dynamic classes with more interaction between teachers and students, solve problems in time, stimulate students’ interest in learning and improve their learning efficiency. For example, more use of learning memory cards, more learning skills, to attract students’ attention.
Secondly, upgrade the service system; Providing good service to every consumer is the foundation of gaining and stabilizing customers in education industry. 51 talk is online education enterprise, the first step in contact with the user’s customer service online communication, which should improve the quality of the personnel of the service, for each customer service personnel unified and efficient training before induction, from language to the mind, should be based on students’ situation is given priority to, propaganda enterprise advantage is complementary, to get a user for enterprise a good first impression, In order to improve the probability of users to choose the next enterprise.
Finally, build their own brand advantages; Any enterprise want to obtain flow, cannot leave the brand sound volume. 51Talk has been the problem of high marketing costs, although 51Talk’s new strategy focuses on the lower cost of Filipino foreign teachers to reduce teacher spending, but also can not relax the quality requirements, low profile does not represent no quality. 51Talk should seize its advantages compared with the industry’s cost-effective Philippine teachers, shape its own brand characteristics, and form a profit model of high service and high quality.
In a word, in the K12 youth English market, improving reputation, improving conversion rate and reducing marketing costs is the key to achieve profitability. Blindly expanding the scale of revenue, the larger the scale, the greater the loss has become the industry consensus. K12 education market is full of challenges and opportunities, 51Talk how to grasp the opportunity, accurately grasp the market direction, develop their own road, still need to explore. 51Talk’s strategy to address the challenges in the K12 online education market is laudable, but it remains to be seen if it will help turn the tide.
Article/Liu Kuang public account, ID: Liukuang110