Prey To Their Own Success, Crashing Chinese ‘TutorTech’ Unicorns Prove The Model’s Global Value

On August 7, Beijing morning, VIPKid briefed its native English teaching community. Chinese students would be able to schedule any session already paid for. Teachers incomes will not dry up right away as long-term prepayment is fairly common. But going forward, the unicorn’s China business unit will not be able to operate abroad. In many ways, it will not be able to operate at all.

This is the evolving fate of many tutoring companies including U.S. stock market listed and EdTech unicorns. In part, a government crackdown arose doubts about the prospects of all Chinese companies, especially tech-intensive ones, following a series of revelations on fraud and financial deception. But on China’s ostensible campaign to reign in on Big Tech (in Chinese), EdTech and online tutoring became a special target. The so-called “Double Reduction” (双减, Shuāng jiăn) policy will strain the financial and marketing activities, along with imposing scheduling and subject restrictions.

A response to declining birth rates? A plea for young minds to connect with the essence of life (in Chinese)? Making sense of the country’s ruling party is best left to tenured academics —or in the comments section down below!—. Something is clear: The online tutoring model today is significant and might shape further the elearning industry going forward. And the fact that a vast majority of learners around to world have never enjoyed the support of a tutor can only attest to its potential. For the privileged parcel who have —the bulk of which is already coming from the emerging world— tutoring, mentoring, or “TTE” (Tutoring, Training and Enrichment) won hearts and loyalty. It gave daughters and sons of well-off, not quite elite groups, a fighting change in the life-defining gaokao college entrance exam that acts as the Cerberus or Saint Peter of a heavily skewed Higher Ed system. In turn, it made unicorns: Yuanfudao, Zuoyebang and VIPKid in China. Along with ByJu‘s in India, these four are the most valuable EdTech startups on the planet. And they have a dose, however slight, of human connection delivered through technology to thank for their success.

Are you a tutor or parent affected by China’s “Double Reduction” policy? We want to hear from you. Reach out to us in the comments or contact us.

Too successful for comfort?

Tutoring predates elearning. Possibly an understatement. Arguments go as far as giving tutoring a role in the origins of Western philosophy, democracy and academia. Tutoring as an industry is not a novel thing either, with Tutor.com in business since 1998.

Tutor.com and its coevals did not start as online services. Dependable live streaming technologies in the hands of a wealthy and booming class, with academic achievement among its strongest societal values, seems to be the common ingredient for the success of the latest iteration of one-on-one learning experience. Overcoming the challenge of bringing understanding between Chinese families and native English speakers from across the globe, and make the solution scalable, is also worth highlighting. It now appears the success of this model amidst a “senseless education rat race” is what’s coming back to haunt it.

Official statements on the Double Reduction policy (in Chinese) paint a picture of corporate malfeasance and opportunism on the part of the tutoring companies, but do little to either make explicit or to conceal the root causes. It starts by decrying the “burdens” out-of-school training placed on students in the “compulsory education stage.” Then it follows with measures, which include higher scrutiny for physical non-school training centers, restricting teaching of curricular subjects, higher standards for teachers, 9pm and weekend curfews, severe marketing constraints, price control and others. What’s not mentioned, but factors in every paragraph, is the fierce academic competition among students, the importance of gaokao scores and top university placement; among other cultural phenomena arising from the country of “tiger moms,” “revenge bedtime procrastination” (報復性熬夜) and “996 ICU.” To the extent that tutoring stem from existing academic pressures in society, Double Reduction will make it harder to meet demand, without necessarily touching the incentives that drive it. Concerned about inequality in access to higher education, Double Reduction might actually further them by making academic support services prohibitive for most, while the better earning families figure out ways to smuggle quality tutoring. School or standardized testing reform is nowhere a part in the conversation.

The cost of success and takeaways

• Heavy losses are expected for remaining investors, including long-time institutional supporters like Temasek, Tencent, Sequoia and SoftBank.
• ByteDance, owners of TikTok as well as several EdTech apps, has announced layoffs. English tutoring platform GoGoKid will no longer exist, and the others will reorient their business models.
• Duolingo is unavailable in some app stores in China.
• Companies listed on the New York Stock Exchange like New Oriental and TAL Education delayed their quarterly investors reports.
• Wildly varying estimates on the number of native English teachers laid off go as high as 60 thousand.
• Some $400 USD Billion in value has been wiped out of the stock markets.
• And naturally, models to overcome Double Reduction are brewing already. Duojing Capital reports on the “Research Trip” business model, in which students are taken on a vacation taking several days or weeks along the Yangtze, which are thinly disguised tutoring marathons overlooking the river as it slowly leaves Beijing. Where do I sign up?

A list of announcements from other Chinese tutoring companies is available here.

A final “Double Reduction” casualty on the human side of things, is the sprawl of online communities. Dozens for VIPKid teachers alone. From the countless groups for teachers on Facebook to /r/vipkid on Reddit, the writing is on the wall and goodbyes are in order. Despite the company promising scheduling hours would not be affected and hiring still active, teachers reflect on the good (flexibility, not much else) the bad and ugly (“demonbaos” or unruly students, no-shows, burnout, the retirement prospects of the sharing economy). Less famous and fortunate companies have gone out of business already. A growing number of teachers is looking to jump ship, a not entirely unusual recurrence.

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