Immigrants from Yang Li

Huang Jiajia, the founder of 20 1 1, 5 1Talk, performed a play for Xu Xiaoping, satirizing the off-line English training institutions represented by Wall Street English at that time, which often sold "30,000 yuan at a time".

Maybe the plot is too vivid. Xu Xiaoping thinks online English training is worth doing, and 5 1Talk "has a great chance to surpass New Oriental". From this, Huang Jiajia got real angel investment, and officially cut into the education and training market with online adult English one-on-one.

10 years later, the development of the industry has gone through a cycle and returned to the fork in the road.

After the implementation of the "double reduction" policy in late July, training institutions are not allowed to hire foreigners to carry out training. Almost all English one-to-one platforms, such as 5 1Talk, acaso and VIPKID, have suffered heavy losses.

Hiring domestic compliant foreign teachers will be the survival way of English one-on-one track. This high probability points to two paths-

First, continue online training, spend huge sums of money to build teaching centers in China and introduce cheap overseas teachers. The one-to-one English business model is uneconomical in scale, which determines that the profit hope is even more slim.

Second, we should return to the offline English teaching and training market that we tried to subvert, recruit foreign teachers in China, and take the one-on-one mode of high-end English, but the competition in the Red Sea is bound to compete for every inch of land here.

Either way, 5 1Talk will be tangled.

The nearly 30,000 Filipino foreign teachers it recruited, the local operation center it built in the Philippines, and the submarine international dedicated line laid for the smooth teaching network have all become embarrassed at the moment.

0 1

Good news and bad news.

Including the first quarter of this year, 5 1Talk has been profitable for six consecutive quarters.

5 17 In May, 5 1Talk released the financial report for the first quarter of 202 1, with a net profit of 8 million yuan for six consecutive quarters. Revenue increased from 487 million yuan in the same period last year to 1 billion yuan.

Despite this, the capital market did not pay the bill, and 5 1Talk US stocks halved from $20/share to 10/share for six consecutive trading days after the earnings report was released. The market is not optimistic about the growth potential of 5 1Talk, and the business model itself is still backward.

Up to now, 5 1Talk has firmly occupied the leading position in English online learning. According to Bida Consulting's China K 12 Online English Education Industry Research Report (2020), the market share of 5 1Talk in the first, second, third and below cities is 46.9%, 46.2% and 48.4% respectively, ranking first in the industry.

Although the market share is gratifying, for a long time, 5 1Talk was still in a state of loss. It was not until 2020 that Q 15 1Talk found its own way of profit and successfully turned losses into profits. As the only profitable company in the online education industry, the profit logic of 5 1Talk is completely different from that of whoever studied it-whoever studied the large class of K 12 diluted the cost by the marginal effect of famous teachers, while 5 1Talk opened up an atypical profit path through "Philippine education+sinking market".

Sohu Business Review found that the course price of 5 1Talk on the online English one-to-one foreign teacher track is very low, and the unit price of VIPKID course is close to that of 200 yuan, while that of 5 1Talk is 20% of that of VIPKID as long as it is in 45 yuan.

Matching the price is a Filipino teacher with lower cost. According to a set of data disclosed when 5 1Talk 20 16 went public, the average monthly salary of Filipino teachers is $20 197.8, while the average salary for competing in North American diplomacy is $16.6, and the cost of 5 1 talk is only 650. Moreover, there is no time difference between the Philippines and China, and foreign teachers have long teaching hours and many class hours, which further enhances the cost-effective advantage of Philippine education.

Naturally, cheap labor from the Philippines has brought high gross profit to 5 1Talk. The gross profit margin of 5 1Talk has remained above 70% for several consecutive quarters. In contrast, the gross profit margin of New Oriental and Good Future is less than 60%.

Xu Min, co-CFO of 5 1Talk, once said that the gross profit margin of the foreign teacher model in North America is generally around 20%, and that of the foreign teacher model in the Philippines is basically around 70%. Huang Jiajia also said that "80% of the one-on-one income of American education is used to pay the salaries of teachers in North America, and every student recruited means a loss."

So 5 1Talk began to turn to one-on-one teaching in the Philippines. From the results, the market share of 5 1Talk is close to 50%, which is enough to explain the problem: most families in China can't afford the unit price of foreign teachers' classes in North 200 yuan, and parents have made concessions on the nationality and pronunciation of teachers for more study time.

The popularity of foreign teachers in the Philippines is also closely related to another important strategy of 5 1Talk-sinking the market. A few years ago, when 5 1Talk was not profitable, it launched "Hawo One-on-One", focusing on foreign teachers in Europe and America. However, at that time, the first-tier cities were crowded with high-end positioning players such as VIPKID, Dada English and gogokid, and "Hawo One-on-One" did not cause much sensation.

The current situation of education here is that families in third-and fourth-tier cities or even counties in 17th and 18th lines can't afford the European and American diplomatic courses at a unit price of 150-200 yuan, and the Philippine courses with tens of dollars fill this gap well.

But now, this entanglement is not the point. A paper ban has blocked foreign teachers in the Philippines, Europe and the United States in physical conditions and distance teaching, and 5 1Talk, acaso, VIPKID, Dada and gogokid are all spared.

According to the Notice on Further Reducing the Students' Homework Burden and Off-campus Training Burden in Compulsory Education issued by the General Offices of the General Office of the Central Committee of the CPC and the State Council (hereinafter referred to as "Double Reduction"), according to the relevant provisions of the state, it is strictly forbidden to employ foreigners to carry out training activities in China.

This means that the Philippine education model that 5 1Talk relies on for profit is no longer feasible. How much growth has Philippine education brought to 5 1Talk? Now you may have to spit it all out, and the process of breaking and standing is bound to be painful.

02

difficult position

Since its establishment, 5 1Talk has mainly experienced two important course iterations: one is to change from "worry-free English" in adult English teaching to "5 1Talk" focusing on young people's English, and at the same time to separate adult English and continue to use the "worry-free English" brand; The other is to launch a high-end service "Hawo One-on-One" with foreign teachers in Europe and America as the mainstay, but then return to the home of Philippine education.

So far, 5 1Talk has formed four business modules: one-to-one Filipino young teachers, one-to-one Filipino young teachers, one-to-one Filipino young teachers and one-to-one Filipino adult teachers. Among them, the one-on-one business of Philippine Education and Youth is the first pillar business of the company. In the last seven quarters, the revenue contribution of one-to-one business of Philippine youth education increased from less than 80% in the third quarter of fiscal year 20 19 to 9 1.54% in fiscal year 20021.

One-on-one business of Philippine education and youth, which accounts for more than 90% of the revenue, is the hardest hit area under the policy of "double reduction".

In fact, the adult education model that 565438+5 1Talk started at the beginning of 20 1 was not within the scope of the "double reduction" policy, and K 12 off-campus discipline (including English) training became the target of public criticism. Because of this, under the pressure of policy, many online education companies began to turn to emergency, or increase quality education, or focus on adult vocational education.

Adult English training, once marginalized by 5 1Talk, may regain a large proportion. Until then, 5 1Talk still has to solve the problem of teachers.

In the publicity of 5 1Talk, a very important part is the company's contribution to China-Philippines relations. The Philippine ambassador to China has repeatedly praised 5 1Talk for its help to Philippine society and people's livelihood. Including solving local employment, providing communication channels between the two peoples, and donating epidemic prevention materials to the Philippines during the epidemic.

It is understood that most Filipino foreign teachers on English online learning platforms such as 5 1Talk are women. A network cable, a computer and a pair of headphones can work at home, which can not only take care of the work of raising children, but also become an excellent choice for them.

This is a two-way reciprocal choice. 5 1Talk set up an operation center in the Philippines to provide employment for the local population. Philippines helps 5 1Talk achieve high gross profit with cheap teachers. Huang Jiajia has repeatedly stated that he hopes to increase investment in the Philippines. Three years ago, he said in an interview that he planned to "recruit 65,438+10,000 Filipino foreign teachers in five years and build a 10 operation center" in the Philippines. Moreover, in order to have a better class experience, 5 1Talk also laid an undersea international special line to ensure that tens of thousands of classes are online at the same time.

But at present, such layout and planning are uncertain. In the "double reduction" policy, it is forbidden to hire foreigners to carry out training activities. As a result, local teachers recruited in the Philippines will not be able to continue to participate in online training, and the operation center and submarine special line that have invested heavily will also become embarrassing.

Before 5 1Talk, there are probably two ways: either spend huge sums of money to build an operation center in China and introduce cheap teachers from the Philippines. However, judging from the fact that 5 1Talk currently has over 30,000 foreign teachers (by the end of 2020, over 25,000 of them are Filipino teachers), in addition to the huge expenses involved in visas, accommodation, transportation, etc., the substantial increase in labor and operating costs will inevitably reduce the profit space of 5 1Talk, and the profit status may be difficult to maintain.

Either recruit foreign teachers in China, return to the offline English teaching and training market that has tried to subvert, and take the one-on-one mode of high-end English, but there are still opponents waiting here, such as VIPKID, DADADAD and gogokid. Competing for the stock will inevitably mean a longer-term loss.

And unlike K 12, which relies on famous teachers to reduce marginal costs, the online one-to-one business model itself is not economical enough. 1 Teachers in the Philippines and the United States can only teach 1 students and cannot support more imagination.

More importantly, 5 1Talk has achieved its current profitability and leading position by compressing management and R&D rates. The financial report shows that the R&D rate of 5 10% is controlled all the year round, and the management rate is decreasing year by year. At present, it is stable at 10%. Compared with the management rate of nearly 30% in New Oriental, the operation efficiency of 5 1Talk is already very high.

During the epidemic, 5 1Talk did a lot of marketing actions in order to seize the market. He not only asked Karry to speak for him, but also sponsored a talk show conference. Last year, with the success of Yang Li and other contestants, 5 1Talk gained great exposure.

However, after vigorous marketing, both cash income and net profit have shrunk. In the first quarter of this year, the net profit of 5 1Talk was only 8 million yuan, a decrease of more than 80% compared with 50.8 million yuan in the same period last year. This is closely related to the fact that the cost and operating efficiency of 5 1Talk have been difficult to improve significantly, and the main business has fallen into a growth bottleneck.

Even without the pressure of "double drop" policy, there is an urgent need to find a new growth engine. Generally speaking, the strategy of 5 1Talk is embodied in AI, hardware, offline and enlightenment education-acquiring GKid, an AI English enlightenment company, introducing its AI technology and product line, and adding 5 minutes of AI tutorial before the 25-minute class; Introduce the hardware product 5 1Talk English learning machine to meet the English learning needs of children aged 3-8; Open 107 offline stores in more than 100 cities to reach markets that Internet education cannot reach; Introduce 5 1Talk enlightenment English and enter the enlightenment market.

The introduction of the policy restricts the English subject training in the early school age; Offline teaching and training also has many restrictions on time, place, form and teachers; Educational hardware is a red sea; The "online+offline" mode of 5 1Talk also means revisiting old stories.

According to public reports, the services of the 5 1Talk offline experience store mainly include: pre-class consultation service, one-on-one oral class experience for foreign teachers, and after-sales service. But going back, as early as 20 14, 5 1Talk launched a similar experience store with a similar model to popularize online English learning. At present, 107 experience stores are also distributed in second-tier cities in more than 20 provinces. The role of expanding customers is greater than the linkage with online courses. Compared with the real OMO, it needs to be integrated in learning process, student data, learning plan and other aspects.

For this newly established 10-year-old educational undertaking, internal and external troubles are coming one after another, and it needs endless life to break the game.