But since it is platform plus content, the entry barrier is quite high for someone else to create an expansive library of content.
There is an increase across metrics and we have seen conversion rates going up.
Byju’s has raised a whopping $one billion from investors so far in 2020 and the Edtech player’s valuation has doubled to a little over $11 billion. Founder & CEO Byju Raveendran tells Asmita Dey he believes the bump in users that the platform has seen, post the pandemic, will continue even after normalcy is restored and that the conversion from free to paid users will increase.Excerpts:
Byju’s is trying to grow inorganically as we saw from the WhiteHat Jr. acquisition. How is the integration progressing?
The acquisition of Osmo gave us a very strong offline to online platform which is helping us create a hands-on learning format for the younger students, especially in the kids learning segment. WhiteHat Jr. fits well into our growth model—adding more grades, subjects and being in more markets. It has brought us a complementary subject in coding; though not curricular, it is considered by a growing percentage of parents to be an important future skill and I would say rightly so. The deal will also help us accelerate our international expansion, there is promise in other developed markets. They have a good number of students in India and an equally large number of students in the US and other English-speaking markets.
As far as organic growth is concerned, are there any headwinds at all or do you just see runaway growth?
Initially, our challenge was to create the segment. Even today, the biggest challenge is to create awareness among students that they can learn on their own. In India, most parents think that students need to be spoon-fed. Our approach was always focused on creating a love for learning. Today, a lot more kids are trying out online learning compared to six months back. In the last five months, we have added more than 25 million free users on the platform compared to just above 40 million in the first four and a half years.
Has there been a jump in the conversion rates also?
There is an increase across metrics and we have seen conversion rates going up. We left a good part of our content and apps free, during the crisis, to help students as online learning is the only mode available. Students who benefited by accessing the content signed up for subscription. Even before the crisis, we have seen a 100% year-on-year growth in the past four years. And that is going to get accelerated this year.
Will you continue with the freemium model?
Since the free user base is very large today, the absolute number of people who are paying is also much higher. If you kind of reduce the free part, you might see a better conversion but that will be on a smaller base. We have been able to find that balance to get more users on to the platform and still maintain what is considered to be a very high conversion rate. We are at 4.5 million paid users on a 70 million free user base. Now, a lot of users will continue learning online on the other side of the crisis and we expect the conversion to actually increase.
How many paid users should you have to stop worrying about defraying the fixed costs?
Most of our free users come organically today, even when we are not advertising. In our core India business, we are already Ebitda Positive. Since ours is a product-based approach, gross margins are at 80%-85%. You have to get the product right, we have done a fairly good job on getting the products right. We have enough flexibility to keep aside additional 10% for R&D so that we can stay ahead and create something that will be relevant even after a decade because the moment we stop on innovation, someone else will disrupt what you are doing.
Where do you need to innovate?
It is not about the content or curriculum. The opportunity is in terms of innovating on how we personalise this content in the way it is delivered to students. We can also innovate on the format and from movie-like videos initially, we have also started creating game-like interactions. We have also added a very strong offline to online format. It has to be content first and technology as an enabler approach.
What are the risks to this model? Are the entry barriers high?
If it is only a pure platform play, the entry barriers will not be that high. But since it is platform plus content, the entry barrier is quite high for someone else to create an expansive library of content. We have been able to create a considerable amount of high quality content and we only need to innovate a certain percentage of that. Also, creating that along with a platform is important because if you are using a third-party platform and content, it will never be as effective as what we have been able to do.
Since a significant proportion of users are from beyond the top 10 cities, have all of them been able to get access to digital devices amidst the pandemic?
We have about 60% users coming from outside the top 10 cities, about 30% from outside the top 100 and all of them are paid users. All of them may not have two to three smartphones at home but when parents see them using the smartphones to learn, they will be happy to give it for an hour or so per day, three to four times a week or sometimes even every day. Today, we see a much higher engagement compared to what we saw before. I agree there is a challenge with the bottom 30% as they may not have access to even one single screen so the digital divide does exist but I am sure, three to four years down the line, most of them will have access to smartphones.
To what extent will the addition of regional languages help shore up your user base?
Addition of regional languages will help a lot more students. Those going to non-English schools have an option to learn in their own language besides having an option to listen in English. The aspiration to learn and learn in English has always been there.