Digital learning has never been cheap as many people tend to assume. A teacher of Physics needs a blackboard and a piece of chalk only to conduct a lesson for a room full of students. By contrast, in remote learning settings, the same teacher requires proper studio lighting, audio equipment, cameras, an online education platform, technical support to address any issues, if they arise, and the list goes on. No sane student would commit to watching a janky video for one hour straight with outdoor noises in the background and a cat giving nose kisses to a camera.
Decent EdTech solutions cost money, both students and institutions need to pay for them to facilitate proper learning. At the same time, educational startups need to think of effective ways to make their customers want to spend their money on their services. In this read, the JatApp team would like to lay out innovative business models in education, so you won’t fall victim to the spray-and-pray tactic and could make the right choice.
EdTech business models that are getting noisy
EdTech startup business models fall into two distinct categories: bottom-up and top-down. A bottom-up approach means selling an educational tool directly to end-users, namely students and/or their parents. A top-down approach presupposes choosing educational institutions and enterprises as the target audience. No matter which approach you choose, it’s essential to know what your customer wants to avoid the bust.
Bottom-up: Bring educational tools to student’s homes
In the last couple of years, the direct-to-consumer EdTech is vying for attention. During the pandemic, students got used to learning through apps every time they felt bored and, judging from the statistics, this habit is likely to persist in the future. The EdTech market amassed global revenues of nearly $10.85 billion last year and is expected to grow to $11.6 billion by 2025.
The size of global EdTech market
Experts claim that the new target market has emerged in the industry: parents. Parents want to remain involved in their children’s studies, even when the schools’ doors are re-open after the pandemic. Since many children lag behind their curriculum, being unable to adapt to remote learning, the role of a homeschool teacher cannot be overestimated.
Nowadays, family-friendly educational tools have a competitive advantage in the market. If EdTech companies want to stay afloat, they should no longer assume that teachers are always available for academic help. Allowing parents to participate in children’s learning makes it easier for startups to sell an educational solution. Parents don’t want to spend hours explaining quadratic equations and therefore need technology to save time while remaining actively engaged in their children’s learning process.
Our client, Pre-Quest, read the room and created a solution that allows parents to track academic progress of their children, as they prepare for tests to enter top schools in the United Kingdom. Pre-Quest is a web-based educational application that helps 6-7th grade students pass the ISEB pre-test. Parents can register on the test preparation platform and monitor how much time their child spends using this app and what outcomes they achieve.
Pre-Quest app functionality
Moreover, parents can log in as a learner without ever leaving their panel. Once they sign in, they can see the main page with key study areas, such as Mathematics, English, Verbal and Non-Verbal Reasoning. Parents can track not only the total progress, but also see their kids’ leadership numbers and points they got. Not only was there a jump in subscriptions thanks to this functionality, but also 97% of parents recommended this app to their friends.
Top-down: Sell to institutions and enterprises
When using a top-down business model, you need to be ready for some challenges along your way. Schools and universities usually have tight budgets and are generally unwilling to spend extra money on innovations, especially when everything is working just fine. After the pandemic, the funding has decreased both at the state and local levels, leaving institutions feeling hungry for thousands of virtual reality goggles for their learners.
Another barrier is high levels of competition among vendors. In fact, schools and enterprises usually have high expectations from these providers in terms of customer service. Still, if you win the competition with lots of market players, you’ll have a chance to sign large contracts and generate decent profits.
To receive such multi-year deals, EdTech startups need to solve schools’ major pain points. One of the most common problems that institutions are currently facing is that students often feel isolated, having little to no chance to directly interact with a tutor. Since a typical class has approximately 20-30 students, it’s nearly impossible to pay attention to each learner’s knowledge gap. To bring more value, many successful EdTech startups have decided to move forward with a more personalized approach to learning.
Volley makes a good example of such a solution. The educational application allows learners to point their smartphones’ cameras at a textbook and immediately view resources about the complex concepts, as well as study guides and online classes explaining tricky parts they were struggling with. Instead of searching for information manually, the app does it all automatically, thanks to innovative natural language processing (NLP) and machine learning (ML).
Many school networks opt for Volley, because it provides students not only with such popular sources as Wikipedia or Khan Academy courses, but also with little-known documents uploaded by a tutor on the other part of the world that they would never be able to find by themselves. Another advantage is that the solution determines what a learner needs to know to understand a given part from a textbook, which helps to shift learning from a one-size-fits-all to student-centered strategy. For example, to understand ions, you need to know the concept of electrons. If a learner missed a lesson or had difficulty comprehending some English words, the app can help them to catch up with the rest of the class.
Volley app functionality
Volley makes money by charging education service providers, textbook companies, enterprises, and institutions. For instance, the startup helps textbook makers identify which pages are most confusing for readers and what can make the text more clear and comprehensive. The given solution also assists teachers by automating the tedious process of creating lesson plans. Meanwhile, educational establishments can use Volley to figure out what type of learners are at risk of dropping out.
EdTech pricing models
Business models aside, the next thing you need to take care of is choosing the right pricing model. There are four common EdTech pricing models: freemium, ad-based, subscription, and marketplace.
Freemium refers to the pricing model when you provide a free version of your solution along with the paid subscription option. Under this model, users have access to a limited number of features to show the value of your service. The main challenge is, however, is to motivate end users to pay in order to access additional functionalities. There are also non-profit organizations that offer their services completely free of charge and are funded by the government.
CommonLit is an example of an EdTech non-for-profit organization that, thanks to government support, delivers its services for free. Here’s how it works: learners get reading tasks and quizzes that align with their reading levels. Educators can monitor the progress of each student, identify where a learner is struggling, and grade their work.
CommonLit app functionality
Even though freemium may seem like a solution that addresses the needs of learners from low-income families, it may actually contribute to “digital divide”, as some of these students suffer because they don’t have personal computers or tablets to make use of such apps. To solve this problem, CommonLit lets students print reading materials, so that they don’t have to worry that they don’t have enough computer time to complete their tasks online.
An ad-based pricing model means that you capitalize on your service through ad space on your platform instead of charging your customers. One of the edtech titans, Duolingo, has implemented an ad-based model, by showing ads after each lesson. It’s worth admitting that the application has more than 40 million users that either watch ads and enjoy the language learning content for free or pay for offerings without being disturbed by advertisements. In such a way, you can make money from both advertisers and users who don’t want to have an interrupted learning experience.
Duolingo pricing model
This pricing model hasn’t escaped some disadvantages, though. You need to make sure that the ads you’re placing on your platform don’t discourage users from using your EdTech product. Too many ads or pop-ups with orthopedic footbeds in your educational app may distract and irritate your customers to the point that they would want to delete your solution, regardless of its benefits. Therefore, you should think of a strategy to wisely fill the ad space.
If your education solution is designed for long-term use, the subscription model can be exactly what you’re looking for. It presupposes charging your customers on a regular basis, usually monthly or annually. Today, this model is insanely popular, as people buy everything, from movies on subscription basis to weekly avocados delivered to their doorsteps. And certainly, EdTech is no exception.
Back to our clients, Pre-Quest is the startup that opted for the subscription model for selling its content, because children usually prepare for their entry tests months in advance. With this model, Pre-Quest can package its product in the most effective way, helping parents focus on their kids’ learning rather than constantly making one-time transactions to multiple educational services.
Pre-Quest app functionality
This pricing model can be quite beneficial for your business, as it would allow you to predict sales as well as gain loyal customers. As an example, Pre-Quest’s students use the application for six months on average.
If you host educational content from different vendors, a marketplace pricing model can be your go-to solution. Our recent client from the United States, an online marketplace for homework help, provides a platform for different teachers to help students and takes a percentage of their sales through the platform. One of the biggest advantages of this type of pricing is that it helps to attract different types of learners, since each digital educator has their own pedagogical methodology, teaches different subjects, and so on.
Functionality of the marketplace for homework help
Speaking of potential challenges, you need to have a sufficient number of tutors who are willing to sell their services as well as students who want to place an order on your marketplace. Also, be ready to manage teacher-student relationships, since both are your users. Even though you’re not always going to control the whole process, it’s essential to minimize the risks that a student might receive help from an incompetent teacher. To prevent this from happening, our client asked us to create a verification feature for the marketplace. More specifically, tutors need to upload documents that prove their identity and education in order to be able to view learners’ orders.
Internal panel for teachers
Choose the right business model for your EdTech brainchild
There’s no doubt that the EdTech industry is hot right now, and in order to reap all benefits you need to make sure you choose the right business model for your online learning startup. The JatApp team can help you not only to perform business analysis and settle down on the most appropriate business and pricing model, but also to build a great product that has thousands of active users. Our EdTech projects get half a million dollars of funding and witness 20% of annual growth.
Want to cooperate with us? Don’t hesitate to drop us a line and we’ll write you back as soon as possible.