Zuoyebang, the edtech provider that is home to the largest user base in China, scored a landmark USD 1.6 billion investment at the end of 2020, giving it financial momentum as the company rang in the new year.
The Series E+ round builds upon USD 750 million that it raised in June 2020. Recognizing Zuoyebang’s scale and competitiveness, existing and new investors poured in cash for a stake in the company in December, including Alibaba, Tiger Global, SoftBank Vision Fund, Sequoia Capital China, Fountainvest Partners, and Ontario Teachers’ Pension Plan Board.
Formed in 2015, it has taken merely half a decade for Zuoyebang to become a leader in the K–12 supplementary online education in China. Its tutorials were developed to be applicable nationwide and address the uneven distribution of teaching resources. The firm runs a series of apps that serve the needs of students that seek to strengthen their existing education curricula.
The AI-driven Zuoyebang Super app provides one-stop, all-encompassing access to more than 300 million academic questions drawn from China’s education curricula. Image and voice recognition gives students the capability to search for solution keys, adaptable exercises, live streaming courses, and VIP services. The app is also able to grade students’ assignments.
In all, the Zuoyebang Super app provides responses to 43 billion queries from users each year.
The company’s other app products include Zuoyebang Live Courses app, the Zuoyebang Oral Arithmetic Calculation app, and YAYA AI courses app which encloses a variety of AI-driven courses for kids.
Zuoyebang has also branched out into proprietary hardware for students that utilize its services as well. Zuoyebang’s Paperang P3 series miniature printer uses optical character recognition to spot mistakes made by students in their assignments, and provides printouts for immediate corrections, ensuring well-rounded study and homework sessions. With 7.5 million registered users for these printers, Zuoyebang’s hardware is the most popular in this category in China.
Half of the top 10 “best unicorn investors in the world” named by Hurun in 2020 have invested in Zuoyebang. The company will channel its new cash to shore up its main business line—live streaming courses for students in kindergarten to 12th grade. The company will develop new elements for its product line and upgrade the technological tools that power its platform.
Skyrocketing growth for a household name
Consistently ranking first in app stores’ education category, Zuoyebang is China’s most popular online tutor. Each day, 50 million users log on through its apps for an extra edge in their next test. Its apps have been downloaded onto 800 million devices, serving 170 million monthly active users—a significant leap from 2019’s count of more than 100 million, when Zuoyebang was at the top of market research firm QuestMobile’s Honor List of China Mobile Internet 2019.
That year, Zuoyebang was the sole online education provider to break into China’s top 30 apps, and the only name in its sector to top 100 million MAUs. The company has kept its crown in 2020 too.
Among Zuoyebang’s users, 65 million students have sat through its livestreamed classes. Just last autumn, as a new academic year began, 10 million students signed up as paying customers, including 2.2 million who paid regular prices with no discounts. Since 2017, the company has demonstrated the fastest growth for live, web-based education platforms in China and setting a new high for Zuoyebang.
The company stands out among the competition by keeping marketing expenses low—a key strategy at a time when demand is spiking and these costs have been consistently on the rise over the past two years.
With a well-established product line and recognizable brand name, Zuoyebang converts a steady flow of users in its high traffic volume into paying subscribers, particularly on the popular Zuoyebang Super app.
Over the past 18 months—beginning before pandemic-induced lockdowns—Zuoyebang logged a tenfold increase in its subscribers for paid classes. With a high conversion rate and a limited external marketing spend, Zuoyebang’s customer acquisition cost is significantly lower than its typical competitors’—at less than half the industry average. In fact, Zuoyebang spends less on customer acquisition than all of its counterparts in China’s online education vertical.
Zuoyebang also pulls ahead of the pack by retaining customers—it maintains the highest proportion of students (and parents) who renew their subscriptions.
Redistributing education, one student at a time
As parents across China seek to secure their children’s future through extra-curricular academic training, tech companies of all stripes are providing services to meet their demands.
Zuoyebang stands out from the crowd because of its steady traffic, name recognition, and a broad user base, particularly in tier-three and below cities outside of China’s most developed locations.
One investor, GGV Capital executive director Erica Yu Hong, recognizes these factors converge for a unique blend. “Investing is about looking at the difference in essence, which is something ‘I have but you don’t,’” she said. The real difference that Zuoyebang embodies is that it “owns traffic and user base that other players do not have,” giving the firm a steady lead that leaves competitors in the dust.
Zuoyebang specifically targets potential users in geographical areas where its services are most needed. More than 70% of its 2.2 million student subscribers who paid full price as the 2020–2021 academic year kicked off were located in tier-three and tier-four cities—marking a 10-point bump from the same time in 2019, and well above the sector’s 30% average mark.
Hou Jianbin, Zuoyebang’s CEO and founder, believes customers are his company’s most valuable champions. Online education platforms rely on parents and students who provide word-of-mouth endorsements. Zuoyebang’s product line, customization options for difficulty levels, and fair value—as well as its staff of 35,000—are the reasons behind the company’s success. With these factors in place, Hou sees a bright future for China’s online education.
This article is in partnership with Zuoyebang.