The Edtech Gap Between China And The U.S.
My town in California does the 4th of July right – especially this year, after last year’s celebrations were Covid-cancelled. We had skydivers and fireworks, marching bands and floats, and flags everywhere. As I watched the parade, waving my own stars and stripes without a hint of irony, my wife reminded me it wasn’t long ago that I’d written the following letter to our local newspaper:
The other day at the park I was disappointed to look at the flagpole and see that Old Glory was hard to make out – the colors had faded in our town’s incredible sunlight. I hope the park can rectify this sad situation by either substituting a new Stars and Stripes, or – given the importance our community places on keeping up appearances– simply raising another country’s flag that won’t fade as much.
The next week, another letter writer gave me my just desserts:
To the person who suggested raising a different flag at the park – one that won’t fade as much – I suggest thanking your lucky stars (and stripes) that you live in the land of the free, where you’re free to have your dumb ideas.
The biggest reason this immigrant loves America is it’s one of the few countries in the world where the worst thing that’ll happen when I say something like this is being called dumb. Do you know where I couldn’t get away with something like this? China. In the unsparing words of President Xi, I’d find myself “on a collision course with a great wall of steel forged by over 1.4 billion Chinese people.” But China appears to have an advantage in one specific area: edtech.
In the past decade, the level of investment into Chinese edtech has been nearly 2x the U.S. It’s a gap that’s widening. Last year, Chinese edtech attracted more than $10 billion from tech leaders like Alibaba, Tencent, and Japan’s SoftBank, 5x what U.S. companies received. China already has more edtech unicorns (private companies valued at over $1 billion) than the U.S. One China unicorn, Zuoyebang, raised $1.6 billion in a single round and claims 50 million students on its platform every day (compared with 77 million students in the entire U.S.).
With headlines like The $670 Billion College Industrial Complex Is Under Threat From Online School (“now that a generation of would-be applicants has grown used to online learning, the business of higher education will likely never be the same again”), outlets like The Wall Street Journal are driving a narrative that edtech represents the future of education, and America is falling behind. But this proposition is as ridiculous as my letter to the town paper.
Edtech companies in China have two big advantages. First, lots of students: 283 million from pre-K to university. Second, Chinese families are willing to spend a much higher percentage of income and savings on their children’s education. My partner Troy Williams, one of edtech’s most experienced and successful investors, thinks of it this way: “Dollars that American families are allocating to Netflix, Playstations, Applebee’s, and trips to Disney, are being spent by Chinese families on education. The result is tens of thousands of yuan per family on tutoring, homework help, test prep, and language learning, and now online degrees.”
Edtech in China is a Wild West (or East?) consumer Internet market where rival homework help businesses run online ads featuring the same bespectacled actress as a teacher (English for one, math for the other), lecturing parents that failing to spend $8 on the company’s service could “ruin their kids.” The closest U.S. analogy is marketing by unscrupulous online universities and their lead gen vendors a decade ago. Remember the Obama Mom ads (“Obama asks moms to return to school”)? But rather than a dominant narrative, misleading consumer Internet marketing is an ugly footnote in the evolution of American edtech.
In stark contrast to what’s happening in China, the American edtech industry is primarily about providing technology products and services to schools to facilitate learning and administration. 77 million American students, their parents, and millions of teachers and administrators now interact via technology for not only learning, but also enrollment and attendance, student support, finance, counseling and career services, and advancement. Hundreds of billions of interactions are now occurring online while maintaining some level of personalization to maintain efficacy and foster a sense of belonging. These needs have given rise to dozens of verticals and thousands of companies; the average U.S. school district utilizes over 1,000 edtech tools. At Achieve, we’re actively tracking the progress of about 1,000 American edtech platforms for curriculum, assessments, courseware, academic integrity, parent communications, mobile communications, student engagement, advising, alumni and advancement services, employment connectivity, student information systems, as well as back-end platforms for admissions, facilities, accreditation, and research.
These businesses are edtech’s workhorses, not show ponies. Few attract the headlines of China’s high flying consumer brands or America’s emerging online education duopoly of Coursera and 2U. Given the challenges of product-market fit, limited adoption cycles (only one or two per year), and a risk-averse client base that relies on reference-based sales, selling to K-12 schools, districts, states, colleges, universities, and state systems is hard. As a result, many U.S. edtech businesses take five years or more to gain even a modicum of success. But dozens of functions across America’s $1.5 trillion education sector have been successfully digitized, and the platforms doing the work are the heart of American edtech.
Driven by an underdeveloped educational system, China’s edtech model is “online-down.” In contrast, America has been building “onground-up.” Of course, China has some onground-up models. In HolonIQ’s list of China’s top 100 edtech companies, there are 10 management systems. But this compares with 18 language learning platforms, 15 tutoring and test prep companies, and 12 online learning businesses. China is mostly online-down. Likewise the U.S. has millions of students enrolled in online-only programs, and 2U’s acquisition of edX garners media attention. But the thrust of U.S. edtech is onground-up. The differences are worth exploring.
1. Students prefer onground-up
If there was any question as to preferred learning modality, Covid put it to rest. Headlines blared Kids and Their Teachers Say Virtual Learning Isn’t Working, Students Are Falling Behind in Online School, and Remote Learning is a Bad Joke. While there were some reports of idiosyncratic kids making hay online, most parents worried about their screen-addled children. College students are equally dismayed. After an annus horribilis, nearly two-thirds say college is not worth the cost (up from 49% a year ago). It seems likely, as Derek Newton posits, that “the pandemic has made students sick of online learning.”
2. Onground-up is More Durable
With thousands of point solutions now integrated into learning and business processes, onground-up edtech is incredibly sticky – the polar opposite of consumer Internet providers that can be tossed aside like I’d toss a faded flag. Once embedded, onground-up edtech renewal rates are well north of 90% and not subject to the booms and busts that characterize online-down models (RIP for-profit online universities).
3. Onground-up is More Equitable
Learning 100% online requires levels of motivation and organization that are rare in students with the greatest need for education and skill development. Stemming – let alone reversing – historic inequality in the U.S. (or China) requires immersive education, frequently with wraparound programs and services like CUNY ASAP or Georgia State’s Perimeter College i.e., an order of magnitude more than asynchronous online training. According to some estimates, 3 million K-12 students are simply missing as a result of last year’s abrupt shift online – some due to lack of reliable access to the Internet. With online as the only option, community college enrollment plunged over 10% – a drop that will “likely be felt for generation.” And no amount of online tutoring, online homework help, or online test prep is going to fix it.
Onground education – paired with onground-up edtech – works best for most people most of the time, particularly before adulthood and the relative security of a good first job. Online-down edtech is primarily about access – an important first step for underdeveloped educational systems like China (or the underdeveloped credit transfer and degree completion systems that gave rise to America’s online university boom of the aughts and Obama Mom ads). But once access is provided, we need to build it right. And besides upskilling for motivated and organized adults who’ve already landed a good first job, successful educational outcomes are less likely from online delivery than onground teaching and the thousands of edtech point solutions and integrations produced by America’s onground-up approach.
China’s government has begun to recognize these challenges. After schools reopened, teachers were reluctant to continue to utilize online tools; print materials continued to dominate. So the Education Ministry provided teachers with greater flexibility to adopt apps and launched a K-12 “National Network Cloud Classroom.” In an online-down country like China, it shouldn’t be surprising that the first answers to building a sustainable edtech ecosystem were top-down. Not only from the government, but from the unofficial national tech platform, WeChat, which committed 1 billion yuan to encourage schools to use its free “smart education solutions.”
But the Chinese government is doing more. Because it’s hard to utilize tech in classrooms where connectivity is poor (and there are “a lot of places in China” like that), the Education Ministry partnered with the Ministry of Industry and Information Technology to improve Internet connectivity in underserved regions and arranged for China Education Television to broadcast courses and resources. And rightly concerned that millions of parents are spending their life savings on bogus online classes for their children, the government began implementing new restrictions on consumer Internet models, limiting tuition and fining companies like Zuoyebang for false advertising. There are rumors that online teachers and tutors will need to be licensed, and that online courses will be banned for children younger than seven and on weekends.
There is an edtech gap between America and China. But contrary to what you may have heard, America is winning. Despite the fact that China’s Maoist flag may not fade as quickly in the bright sunshine, America’s edtech companies – in partnership with schools and colleges – have built a calmer, more sustainable edtech ecosystem and actually lead the world in leveraging digital transformation to generate skills, capabilities, and economic opportunity.