Editor's note: a more concise article on this theme was initially published by EdSurge
If the US is the world’s education technology leader, Asia is fast becoming its most critical testing ground. The reasons for this are unambiguous: Asia is home to the world’s largest pool of K12 and college enrollments, has acute needs for educational access coupled deep internet and social media penetration, fosters hypercompetitive examination systems and offers a wide dispersion of household affordability that ranges from the world's richest countries to its poorest.
Yet the most profound impact from Asia’s education breakout is going to be felt on many US-based education companies, Universities, investors and entrepreneurs who are operating today in what is arguably a mature, advanced but relatively low-growth and saturated American market.
Consider a recent list of EdTech’s “most loved” companies in the United States: more than half depend (or will soon depend) on global students to drive revenues, and logically so. The MOOC value proposition of low cost or freemium access is unquestionably global in its value proposition (forget about US higher education dominance) and this is borne out by directional enrolment and early revenue trends at Coursera, EdX, Udacity, Udemy and, at the elite end, Minerva. Language Learning start-ups Open English, Duolingo and the latest edtech darlings in this space are by definition tied to future Asian and global student demand if they expect to gain any reasonable scale (indeed the largest funding round for a language learning start-up was the Chinese investor led $100 million round for the China-based Tutor Group. Adaptive learning innovator Knewton, in announcing a recent partnership with Chungdahm Learning in Korea and Sebit in Turkey (not to mention the very rationale in having the international fund Atomico lead their Series B round), signaled both its nascent expansion into Asia as well as the limitations of its own home market.
I can think of several structural changes in the world’s addressable education market that will further drive Asia to its epicenter in terms of both technology application and innovation.
First, for all the talk of discreet education technologies and ventures that offer positive value to students, any education competitor hoping to provide the most sustainable and meaningful impact over time will need to operate at significant scale, across multinational populations, address local systems needs and offer a level of technological or service solution that reaches beyond the US school system.
The fact that Asia's education markets dwarf American levels by a magnitude of 10 times the number of K12 enrollments, as well as provide an unmatched diversity within a system of 600 million students at varying levels of economic development, should therefore grab every education entrepreneur and executive by the neck. According to an OECD report, of the 204 million 25-34 year olds with a tertiary education in the world by 2020, Asia will account for well over 55 per cent of them, with China and India accounting for 29 and 12 per cent of degree holders, respectively (notably, the US will lag behind India at 11 per cent). This expansion is now snowballing as gross enrolment rates in less developed Asian countries still remain far below OECD levels while K12 numbers multiply. In short, education demographics matter, and even moreso when combined with concurrent growth in middle class wealth.
Second, Asia is now the fastest-growing e-learning market in the world with outright leadership in a number of key areas, including games-based, mobile, and social-based learning.
According to recent data:
- The region currently accounts for 8 per cent of global revenues for self-paced e-learning but this proportion rises rapidly to 23 per cent out of an estimated $53 billion worldwide in 2018 with Asia the seeding ground for seven of the world’s top ten fastest growing self-paced e-learning markets: Vietnam, China, Thailand, Malaysia, Indonesia, Myanmar, Nepal and Pakistan.
- Asia’s mobile or M-Learning market is set to rocket from US$2.3 billion in 2014 to $12.3 billion by 2020, an increase of almost 4.5 times and nearly reaching US levels (projected at $14.7 billion by 2020).
- Global language platforms, especially English (and incrementally, Mandarin Chinese) are part of the $247 billion global language market demand led by Asian students. In China, despite over 100,000 native English speakers teaching on the ground, proficiency is low, as it is in other countries the region, spurring further demand for supplementary Edtech language solutions.
- In gaming and adaptive learning products, Asia occupies a dominant 64 per cent of the global games market by revenue and is expanding at a 36.5% CAGR per between 2012 and 2017 compared to 16.2 per cent in the US over the period. Even more relevant, the global simulation-based learning market or “serious play” games is expected to reach $6.6 billion in revenue by 2017, with Asia is projected to account for approximately 27 per cent of it, from just 15 per cent in 2012.
Third, pressure on Asian governments to create jobs is immense, unleashing vast opportunities for education-to-work and skills-based platforms. The key difference with the US—where online education can often be synonymous with flexibility and convenience—is that online learning in parts of Emerging Asia can represents the only viable method to overcome geographic access and affordability challenges.
According to a Stanford Center on Longevity forecast, working age (16-64 year) populations in Asia will expand rapidly through the year 2050 with the most profound "worker bulges" occurring in countries of South Asia--specifically India, Pakistan, Bangladesh—which also suffer from relatively low educational attainment. To cite one example, India's employment segment must add 300 million more people of working age in the coming decades yet it has woefully inadequate educational infrastructure and capital to deliver these outcomes without mass technological solutions.
Fourth, as global R&D shifts to Asia so will the needs for higher-order human capital, setting the stage for a larger regional carve-out of the estimated $300 billion corporate training market. Traditionally led by American companies, over half of industry training revenue is now derived from non-US markets and much of it online. In a recent survey, corporations reported dramatic gains in the use of online and blended learning for training purposes with over 54% of surveyed companies using some form of online learning, and blended learning rising from 39% in 2012 to 43% of companies surveyed in 2014. Asian companies, and individuals who are self-funding additional training in places such as India, are following suit.
Fifth, Asia’s education ecosystems are addressing specific market failures with solutions that offer deeper local context, better user interface, and lower cost structures than many US education ventures can offer. Examine the leading education ventures in places like India and China and invariably they are local, not foreign transplants.
There has also been a renaissance in education-related venture and capital markets funding. According to Asia Venture Capital Journal, the region’s venture capital activity has reached record highs in 2014, posting $14.2 billion into 1,600 deals, a 40 per cent increase over 2013 and far exceeding levels a decade ago. As a subset, education-related deals have been on the upswing, with corporate investors such as Xiaomi, Alababa and CITIC in China, Wipro in India, and education giant Benesse in Japan headlining key investments.
Further down the food chain, Asia’s current crop of education start-ups and early stage ventures are geared toward providing wider education access, extending the student lifecycle from early childhood education to career skills, and improving outcomes for both schools, teachers and students. Recent funding examples include adaptive learning platforms KnowRe in Korea and KungFu Math in Singapore; social learning networks Kelase and Zenius in Indonesia and Brainly in India; online learning ventures such ClassDo in Japan, vocational MOOC platforms such include Uniquedu, Guokr and Geek College in China, DeltaViet in Vietnam and online exam platform Rankjunction in India; early education QLL in Taiwan and Taamkru in Thailand; improvements in Asia’s vast test preparation industry through Mana.bo in Japan and Rockit Online in Vietnam; and the education app provider RevoTech in recently awakened Myanmar.
As with many other industries, from TMT to healthcare, Asia’s shrewd localization and creation of new technologies has historically brought forth waves of local competition, from well-connected start-ups to opportunistic conglomerates, that end up seriously challenging foreign entrants. This is now happening across education content, technology and services, with the participation of well-resourced investors and technologically advanced partners.
So here’s a succinct memo to education investors and entrepreneurs in the US: your chances of “putting a dent in the universe” will increasingly require conquering Asian markets first.