Cost of consumer acquisition which includes marketing spends is expected to rise to 70-80% of revenue of edtech platforms
All that glitters is not gold, and edtech firms should be completely aware of that. Edtech platforms currently continue to enjoy a high user base with the rise in infection due to the pandemic. However, these platforms will have to gear-up for a tough road ahead. According to industry estimates, edtech platforms, which posted about 30-40% decline in cost of customer acquisitions (CAC) post the spread of Covid-19 – are expected to see an increase again. Before, Covid-19, edtech platform’s CAC stood at about 70-80% of its revenue. This was largely due to the fact that a lot of marketing spend was skewed towards mass media including TV and print. Also, as most of the content was behind paywall with edtech platforms driving subscription – CAC remained high. “Offline institutions are also going to get more aggressive about customer acquisition. As people try to go back to living a normal life, edtech companies will have to start reaching out across multiple locations, and adopt a 360 degree marketing approach,” Rajat Wahi, partner, Deloitte, said. Moreover, tier 2 and tier 3 cities are expected to contribute to the next phase of use growth. But, industry watchers point out that companies will have to focus on programmes or courses, which are not easily available either elective or niche courses.
Edtech companies claim that the process of expansion has already begun. “Currently, non-metro markets contribute to 70% of the traffic,” Zishaan Hayath, CEO and co-founder, Toppr, said. The company claims to have seen a 50% month-on-month growth in users in the August -September period. Byju’s too claimed that 65% of its students are from outside the top 10 cities of India. “We are working on expanding into the regional market, with learning programmes in regional languages,” Mrinal Mohit, COO, Byju’s said. The company claims to have added 25 million new students since the lockdown. This takes the total number of students on the platforms to over 70 million students and 4.5 million paid subscribers with an annual renewal rate of over 86%, Byju’s, stated.
Interestingly, in the coming months, most of the platforms plan to reduce ad spends on digital platforms. “We will plan to spend more on mass media properties mainly TV and print. On digital much of the ad spend will be skewed towards video OTT platforms. Through that audience we will be able to target a different market,” Mayank Kumar, co- founder and MD India, upGrad said. Meanwhile, the company has also tied up with Star and Hotstar to run its recently launched ad campaign – ‘Sirf naam ki nahin, kaam ki degree’ during IPL 2020. Kumar claims that the company is on track for its forecasted Rs 1200 crore annual run rate. The company has upped its marketing spend by 150% to Rs 175 crore in CY2020, as compared to Rs 70 crore in CY2019.
Further in an effort to tap into tier 2 and tier 3 cities edtech firms are developing new products and services. “One key strategy is developing a product which can also be available in lower speed and internet bandwidth. Secondly, we are working on driving affordability to expand penetration,” Shivani Suri, CMO and category head, Vedantu, said. The company claims to have recorded a 330% growth in its user base compared to the pre-Covid period.
Industry experts believe that despite a rise in cost, edtech companies will survive. “There is an asymmetry in the quality and methodology of education out there. Quality differs in delivery, not in pedagogic content. Edtech bridges that vital gap and delivers,” Harish Bijoor, brand strategy expert, said. What is required from here on is to offer quality education at the best of cost.