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China's education tech startups score new pupils in pandemic

AI homework app from Zuoyebang finds answers in a flash

When users send photos of problems through Zuoyebang's homework-help app, artificial intelligence provides the answers along with an explanation. (Photo by Shin Watanabe)

BEIJING -- Educational technology companies are booming in China, propelled by artificial-intelligence-equipped startups, as students find online platforms a convenient way to keep learning during coronavirus restrictions.

Beijing-based startup Zuoyebang has picked up about 50 million users over the past year, and now boasts a total of 170 million.

"When I get stuck on homework, I can find an answer right away, so my studying is efficient," said a 16-year-old high school student in the Xinjiang Uighur Autonomous Region. Zuoyebang's service helped bring up her grades, she said.

Zuoyebang's homework support app is a big reason for its rising popularity. Students in elementary to high school can upload a photo of a problem and the app shows an answer and an explanation in just several seconds.

The app's AI searches its enormous trove of big data. The app has roughly 250 million problems on file -- up by 70 million over the past year. Beginning this year, the system can handle multiple problems in a single photo. Problems previously had to be sent one at a time.

Zuoyebang is using its free app to reach out to students and parents and gain business for its fee-based online lessons, the company's mainstay operation. "Our name recognition has increased and we are getting students for tuition-based lessons," said a public relations manager. Zuoyebang had about 7.8 million students taking courses this past summer, five times the figure in summer 2019.

The company, which said in June that it had raised $750 million from investors, is ramping up personnel and technology investments.

The startup's value has surged to an estimated $10 billion -- roughly quintuple the figure at the end of 2019, according to information service provider IT Juzi. Zuoyebang is China's second-biggest educational technology "unicorn," with the top five boasting a combined value of $36 billion this month -- up 180% from December 2019. A unicorn is a startup valued at more than $1 billion.

That growth for the ed tech sector is staggering compared with other industries. The aggregate value of the top five unicorns in online retail jumped about 100% during the same period, as did their counterparts in health care. But growth was around 6% and 3% for those in the automobile and travel industries, respectively.

China's ed tech market is projected to expand 22% on the year to 423 billion yuan ($64 billion) in 2020, with users surging 23% to 331 million people, projects With the coronavirus lockdowns, "people have developed a habit of learning online," said an education market insider. Remote learning also makes educational parity possible between students in far-flung farming villages and those in coastal cities.

Yuanfudao, China's leading ed tech unicorn, also offers a homework app and online courses. To extend its customer reach, the Beijing company in June added videos that introduce infants and toddlers to English.

Yuanfudao's English classes for older children use AI-based technology that automatically measures pronunciation accuracy. The company raised $2.2 billion in the latest funding round, it said last month, bringing its value to $15.5 billion.

These companies are adding technology engineers as well as instructors. Zuoyebang plans to increase its staff to roughly 25,000 by year-end, up about 60% from a year earlier, according to a source. Yuanfudao now has about 30,000 employees, twice as many as this spring. Third-ranked VIPKid expanded its workforce to about 8,000 from 6,000 a year ago.

These startups are all backed by domestic tech titans. Yuanfudao is a portfolio company of Tencent Holdings and VIPKid is linked to Alibaba Group Holding. Zuoyebang's investors include Baidu as well as Japanese conglomerate SoftBank Group's Vision Fund. These tech giants are not only providing capital but creating technology and other synergies.

Even operators of conventional in-person cram schools are embracing ed tech, with TAL Education Group and New Oriental Education & Technology Group bolstering their online offerings. The online learning market for adults, including those studying for bar and other exams, as well as foreign languages, has been growing at an annualized rate of about 20%, according to research firm iResearch.

China is home to 16 ed tech unicorns as of this month, says IT Juzi. That number is up by two from the end of last year, and competition is expected to heat up. "Companies with low-quality services will not be around for long," said an employee at one unicorn.

Meanwhile, a debate is emerging over how students use the rapidly expanding services. "Some children just copy answers" off of homework support apps, said a school teacher in Dalian who does not want his students using these technologies.

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