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Education is having its ‘Netflix’ moment as a result of the coronavirus pandemic

While almost every industry has undergone a digital revolution in recent years, the education sector lingered at the back of the class. The coronavirus crisis, however, has been a game changer for educational technology, known as EdTech.

In the future, 2020 will likely be regarded as the pivotal point at which the traditional education system began to undergo extensive disruption. “This is education’s Netflix moment,” says Kirill Pyshkin, Senior Portfolio Manager at Credit Suisse. 

191 countries implemented nationwide closures, affecting around 98 percent of the world’s student population, according to UNESCO monitoring. What that meant was approximately 1.7 billion students were studying remotely; disruption borne of disruption. 

Ruangguru, Southeast Asia’s largest EdTech company was quick to launch a free online school in mid-March, as schools in Indonesia shut down. Online classes ran for five hours every weekday simultaneously across 18 live streaming channels, with tutors covering all school subjects from Grades 1 to 12. Mirroring a normal school, students could learn a different subject each hour and also had access to free live quiz sessions in the afternoons and evenings.

“The number of users and downloads of our app increased significantly after we launched the free Ruangguru Online School program,” states Arman Wiratmoko, the company’s Vice President of Corporate Strategy and Finance. “In the first 24 hours, more than 1.5 million students accessed our app, surpassing more popular apps such as WhatsApp and TikTok.” A total of seven million students had accessed Ruangguru’s free program by the end of the school year.

Many EdTech companies also witnessed a similar surge in subscribers in the month of March. Language learning platform Duolingo saw a 101 percent increase in global traffic. Seesaw, which allows students to build a digital portfolio of work to share with parents or teachers, increased its reach tenfold within a month of schools shutting down. In China, Koolearn, GSX and Youdao – three pure online after-school tutoring services, each had over 10 million enrolments in free courses during this period.

“EdTech offers a very exciting investment opportunity because the companies are small, but they are growing fast.”

“Covid-19 was a massive catalyst for the sector. Last year, before the crisis, we’re talking about a digital penetration rate of two to three percent in the education sector. That’s what mobile phone penetration rates were in 1998-99. At the peak of the crisis we were above 90 percent.” observes Credit Suisse’s Pyshkin. 

“EdTech has been a popular investment theme for venture capitalists for the past five to ten years. As those venture capitalists look for an exit, we have been seeing that the most successful companies are getting publicly listed.” says Pyshkin. “This offers a very exciting investment opportunity because the companies are small, but they are growing fast.”

According to a recent report by Credit Suisse whilst the global education market was worth $5 trillion before coronavirus, only two or three percent of that was spent on digital. However, that share was already rising pre-pandemic. Today, a smartphone will cost around the same price as the purchase of a basic mobile phone with very few capabilities twenty years ago. As the cost of data and all personal devices continues to drop, new technology functionalities will increasingly integrate into education models and enhance learning. Furthermore, 4G became the dominant mobile technology in 2019 with more than four million network connections. As 5G gathers pace, the number of IoT devices will more than double by 2025 according to GSMA Intelligence.

The confluence of the coronavirus crisis and changes in our world shines a light on the adult education sector, with EdTech set to play a crucial role in re-training people.

“We're talking about the possibility of a recession with lots of people being out of jobs that would need to be reintegrated quickly. And the way to do that is to reskill yourself, which is why e-learning for adults will be very important as well,” observes Pyshkin.

Longer term, according to the World Economic Forum, almost a third of the global workforce, more than one billion people, will need to be reskilled by 2030 as jobs are transformed by technologies of the Fourth Industrial Revolution. 

By improving access to education for all, EdTech can help bridge inequalities by lifting people out of poverty, granting access to quality goods and services, and materially upgrading health outcomes and saving lives.

“For impact investors there’s an added layer because education is directly linked to the United Nation’s Sustainable Development Goals.”

Coronavirus put EdTech at the head of the class, but it also exposed a digital divide. In low income countries many children do not have access to their own devices, broadband or indeed a supportive learning environment. And while broadband subscriptions are significantly higher in developed countries, the crisis exposed a gap here too between students who were equipped for online learning and those who were not. In the world’s richest economy, only two-thirds of rural Americans have a home broadband connection.

More than four billion people worldwide have access to the internet, but that access is unevenly distributed and, in some cases, expensive.

“The speed in which everyone in the country was asked to adopt online alternatives of their offline activities unearthed a lack of digital infrastructure in many regions in Indonesia,” says Ruangguru’s Wiratmoko. “We understood that our users needed further support to access the free online school program with as little disruptions as possible.” 

Within the first week of the program’s launch, Ruangguru partnered with five major internet and telecommunication providers in Indonesia to provide the public with free internet data packages up to 30GB/month for anyone to access their app. 

This is the silver lining for EdTech - it’s not only introducing a different way of learning; it’s also making learning more accessible.

“Many EdTech companies have software-like business models with a high operating leverage, which means that when they grow the incremental margin is very high.” adds Pyshkin. “For impact investors there’s an added layer because education is directly linked to the United Nation’s Sustainable Development Goals, and its halo effect is particularly visible in developing countries, where it helps reduce poverty.” 

After a slow start, EdTech is now getting top marks for investment and impact.