Youdao: A Marriage of Teaching and Technology

Youdao pursues an aggressive brand strategy to capture market share in China's fast-growing education industry.
CapitalWatch StaffOct 05,2020,17:30

With Covid-19 controlled in China, online education companies are facing more competition. The growth of the internet has increased the growth and demand of the education industry. Yaodoa sands to benefit from such an industry sea change.

Growing Revenue In Six Consecutive Quarters

According to the financial report, the company’s net income reached 620 million yuan in the second quarter, representing an increase of 93.1% from last year. The learning services and products take the biggest part with 520 million yuan, shows an increase of 190% year-over-year.

The increase in learning services and products was mainly attributed to the increase in users of online courses. In the second quarter, the number of users who paid for Youdao online courses reached 329000, representing an increase of 358.9%.

In the second quarter, revenue from “Youdao Jingpin” courses achieved 460 million yuan, up 214.5% from the same period of last year. K12 online courses, as the main growing sector, achieved 310 million yuan revenue in this quarter, shows an increase of 228.5% year-over-year.

Due to thje improved quality and variance of online course offerings, student renewal rates jumped 1,000 basis points from April to May.

Youdao's gross profit in the second quarter was 281.5 million yuan, representing an increase of 165.4% from 106.1 million yuan of the same period last year. Additionally, its gross profit margin was 45.2%, showing an increase of 32.9% from the same period of last year.

However, Youdao’s loss widened to 283 million yuan, compared with 83.1 million yuan from last year the same period. The operating loss rate rose to 45.4% from 25.7% of last year.

Feng Zhou, the CEO of Youdao, believes that strengthening service capabilities is the company's priority. In the second quarter, the number of Youdao tutors increased to 2,699, which tripled from the first quarter.

Also, Youdao increased its brand marketing expenses in the second quarter to support its qualified courses.

"Aggressive" Brand Strategy

In the post-virus period, parents are paying more attention to the Internet products and teaching capabilities of education institutions.

Finding a balance between the education industry and the Internet industry is important for online education players.

Zhou mentioned that the third quarter is an opportunity to expand the number of paying users. Youdao has already confirmed the strategy for the third quarter, which is to substantially expand the number of paying users. Enrollment events have been divided into three parts: The first is to carry out brand marketing activities through TV advertising and community advertising; the second is to acquire customers through multi-channel performance-based online; the third is to strengthen the user conversion rate.

After Lang Ping, the current head coach of China women's national volleyball team became the spokesperson of Youdao this year, Youdao churned out many advertisements feauring the celebrity athlete.

Youdao also utilized online channels to generate more viewers.

On July 19, Youdao announced it will sponsort a knowledge-based variety TV show made by Hunan TV.

Challenges

Youdao faces some challenges. Marketing expenses are high, but necessary in order for Youdao to be in first place in the K12 live broadcast class market.

Zhou said, “The investments are designed to sustain our long-term growth and to build our student community and expand our brand reputation.”

The Stock Price Rose 200%. Why?

The perfect combination of technology and teaching can help the company win the top place in the online education market. Among these online education institutions, Youdao is unique. Its “famous teacher courses” contain many advantages. These courses are using technologies such as AI, network real-time communication, and interactive design to solve the problems online courses are facing.

Youdao’s stock price increased by more than 210% in one day after it went public. Lei Ding, the CEO of NetEase mentioned that the education industry represents an important part of NetEase’s investments. He hopes everyone can get the benefit of a great education through the Internet.

NetEase and Youdao make a great team. So far, Youdao has posted steady growth, capitazlizing on the sustainable and fast-growing education industry in China.

Will Youdao keps earning profits? We will see.

This article translated from https://mp.weixin.qq.com/s/oMsxNLDxL2O7QMohYgYMtA

Topics:Youdao; China; U.S.
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