Balancing “free” and long term value perception

Protecting the value of Edtech initiatives

During these difficult times of pandemic, the support from society to the educational community has been enormous. Globally, there is a massive effort being made to help more than 1.5 billion students, from more than 160 countries, caught in academic discontinuity.

Michael Trucano, a World Bank specialist in education and technology, described the importance of "turning points" in driving educational technological innovation. The COVID-19 virus appears to have become a turning point for educational institutions and governments to embrace e-learning during times of emergency. There is no doubt, we are facing an increasingly uncertain world (epidemics, climate change, and other disasters) where educational technology can be used to reduce its impact. A clear example of this is reflected in China, with more than 278 million students staying home until at least April 7, where the Chinese government has injected more than six billion dollars in educational artificial intelligence and subsequently changed online education on a massive scale.

And while COVID-19 continues to expand across the globe, educational technology providers have reacted by expanding their free services or by giving away a Premium version for a set period of time. The magazine The Journal and UNESCO have both made extensive compilations of free/freemium educational initiatives that reflect this. Why are Edtech companies giving their products away?

  • First, to help with academic and learning continuity. It should be noted that those institutions that already have a digital footprint do not rely on free initiatives. There are few of these, however, because even in technologically sophisticated countries like The Netherlands, less than 20% of K-12 students are using digital learning solutions. And because of low digital adoption across institutions, in most cases they will use free charge options or OERs (Open Educational Resources) from different institutions (public and/or private entities), realizing that these resources don’t necessarily cover everything in the curriculum.

  • Second, to encourage a widespread culture of e-learning.

  • Third, to create business opportunities for themselves as a company.

But not all companies are giving it away. What is the impact of giving products away for free? Our previous experience in Asian countries, where they may be starting to slowly recover from this tragedy, seems to demonstrate this isn’t a recommended business practice.

We know that increasing the adoption of educational technology is not easy. Historically, there have been many barriers, little support, and a lack of integrations that have impeded adoption. In order to truly embrace e-learning culture, it is clear institutions must have a Learning Continuity Plan. It is unfortunate that it has taken a global crisis for institutions to see the importance of this. Therefore, many institutions and governments have now jumped onboard and begun to define their plans. This is a positive first step. Some of these projects will be able to incorporate the new technological architectures, thanks to the free service, provided that the experience has been positive.

Regarding the opportunity for business development, it is important to understand what is happening in this environment. Generally, no matter, if you are a large company or a small start-up, giving away free products, might not be the answer. Converting free customers to paying customers won’t happen for approximately 6-10 months, if at all. Some larger educational companies are prepared to eat the loss during the time of crisis. Start-ups, however, are running out of cash and cannot get financing in these uncertain markets, so they are unlikely to survive.

As it shows in the graphic, for the last four months of 2019, financing and venture capital within China declined rapidly. One exception is a start-up like Yuanfudao, having more than 400 million users, which has raised $1 billion in new financing. This is the exception rather than the rule, and in China and the rest of the world, it appears this declining trend will continue for 2020. Large companies are still able to provide free educational services, such as New Oriental Education or Tomorrow Advancing Life (TAL), while start-ups will not receive the funding they need to pull through. Small companies "probably will not resist these times, therefore, will disappear, thus creating more opportunities" for larger players, according to Stephanie Lee and James Leo, co-founders of each of the companies.

There is no doubt that e-learning is at a turning point for great growth - as has never been seen before - but it does not seem the “free” model helps all companies equally. In the face of a catastrophe like COVID-19, the first thing is undoubtedly to help, but it would be better to engage in an approach that enables all companies to survive and even thrive, in times of crisis. The culture of “free online” has historically brought many headaches to the education sector. The most important loss is the value of the projects themselves, as perceived quality diminishes when products are given away for free. Let's not fall for the same mistakes again. There are other actions we can take that enable companies to achieve the same goals but are less damaging. Let’s implement strategies that help to overcome these times of crisis together, using an approach with the survival and health of the sector in mind, that includes both large companies and start-ups. An approach ensuring that value is sustained over time, which is even more important when trying to overcome an endemic disease.

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