Why EdTech is a Worthwhile IT Investment

The pandemic has pushed educational technology (EdTech) to the forefront of learning. What used to be a teaching aid is now a necessity.

Currently, the use of EdTech is not only limited to schools, students, and teachers. Adults who want to learn new skills, shift careers, or recover from pandemic unemployment are turning to EdTech.

This post breaks down why building an EdTech product might be a worthwhile investment.

Double-digit growth is projected for EdTech

Global EdTech will grow at a compounded annual growth rate of 19.9% from 2021 to 2028, as schools integrate EdTech more into the learning system. This is according to an estimate by market research company Grand View Research.

The United States, China, and India stand as the biggest EdTech markets.

In the United States, the K-12 segment takes the majority of the revenue share. It accounted for 41% of EdTech revenue in 2020.

Meanwhile, China's robust growth in the domain is projected to continue at 20% per year.

In 2020, India recorded an EdTech market size of US$2.8 billion. With a massive participation in sub-domains like test preparation, online certification, skill development, and K-12, the country's market is expected to hit US$10.4 billion in 2025.

Niche opportunities exist

Teachers, students, school administrators, and parents experience different pain points. These pain points present different business opportunities.

EdTech solutions are rarely one-size-fits-all solutions. This is why competing EdTech products coexist in the same markets.

Take learning management systems as an example. There are a number of factors that affect a school district's decision to choose one system over another:

• What functionalities and features do these grading tools offer? How do the benefits weigh against associated costs?

• Do these grading tools comply with federal laws?

• Do these grading tools support school standards for reporting, assessments, and instructional design?

• How easy is it for end users to adapt to your product? How much customer support is available?

Providing a unique set of benefits creates a unique value proposition for clients. Each unique value proposition can be capitalized on to attract a specific segment of the market.

Adult learners also use EdTech

Adults are using EdTech to reskill in order to meet the demands of their job better or to switch to a new career. EdTech empowers adults to adapt to changing labor markets and increasingly digitalized workplaces.

Learning new skills outside of a fixed-hour, institutional setting gives adults the ability to balance work, life, and life-long learning.

Furthermore, EdTech is poised to help fight post-pandemic unemployment and underemployment. Adults can use EdTech to improve in the following key areas:

• Language learning
• Job training and reskilling
• Corporate learning and development
• Mentoring

Digital products can profit from different revenue streams

There are a number of ways that an EdTech product can generate revenue.

Freemium: Users get free access to content or services. They can upgrade to a premium account to access more content or services.

The biggest challenge of a freemium model is converting free users into paying customers.

Free trial: Upon sign up, users access premium services but only for a limited time. After the trial period, they will need to upgrade to a paid account or unsubscribe.

Revenue share: In this model, content is generated by third-party creators. Udemy is an example.

Creators are free to upload paid courses on Udemy. When a student purchases a course, Udemy and the content creator share the profit.

Ad-free service: Nobody likes the interruption caused by ads. This is a truth that many platforms capitalize on. Duolingo shows an example of an ad-free learning in exchange for a paid subscription. As of 2019, less than 2% of Duolingo's learners paid for a premium account. But because of its massive user base, the language-learning company generated $36 million that year.

Institutional model: In this model, a digital product generates income from a school or school district.

Pitching to administrators or other decision-makers can be challenging. Timing a school's budget cycle can also be restrictive. But the institutional model provides the most consistent revenue among other business models.

B2B model: This is similar to an institutional model, except that the clients are businesses and organizations. Udacity is an example of an EdTech company with an enterprise client base.

Enterprises purchase courses from Udacity to train or upskill employees. Additionally, individual learners pay for Nanodegrees to qualify for or increase their likelihood of getting a job.

Grants: Although not a sustainable income stream, grants offer a way for EdTech startups to turn their ideas into profitable products.

These standard models are not the only channels to turn in a profit. Ulesson, a company based in Nigeria, primarily sells streaming services. To access markets with slow or no Internet connectivity, Ulesson also sells courses on SD cards.

More educators are accepting EdTech as a central component to learning

Even before the pandemic, educators have shown an increased acceptance for EdTech as a central learning component -- not just an add-on to wow students. A 2019 survey by Gallup has revealed that nearly 9 in 10 students in the US use digital learning tools a few times a week.

Fundings for EdTech continue to increase

Chinese EdTech companies have raised $10 billion in funding. Along with China, countries like India or Indonesia are seeing the rise of EdTech companies with multi-million fundings.

Emerging countries are also seeing an increase in EdTEch adoption. This is in part to improvements in communication infrastructure and increased access to mobile devices. Government support also boosted EdTech adoption, as digital solutions are seen as a long-term solution to learning challenges.

The trend is clear: big tech companies, governments, and private investors have a renewed interest in EdTech. This interest is propelled in great part by the interest of teachers, students, school administrators, and governments towards a more intensive use of technology in a borderless classroom.

On top of private interest in backing EdTech companies, governments show willingness to boost school funds -- which gives schools flexibility to invest in more digital learning tools.

In the United States, President Joe Biden has proposed a $103 billion budget for education funding. $36 billion of the proposed budget will go to Title I grants for low-income schools. The Title I grant is the most flexible, giving schools a significant leeway into investing in digital tools.

Meanwhile, the European Commission has shown robust actions towards the development of technology for learning and assessment.

The pandemic accelerated the integration of technology into education. This creates an unprecedented need for EdTech -- and an opportunity to develop new tools and platforms to help in digital learning.

Are you considering building your own EdTech app? Talking to our chief technology officer is the best way to start.