Interview With Zhang Yuejia, Co Founder And President Of Vipkid

In August this year, online education organization vipkid announced that the unit operating profit (UE) was positive for two consecutive quarters, and 90% of the channels achieved profit for the first time.

This has shocked the industry. Vipkid's main business is online one-to-one foreign teachers in North America. Due to the high wages and huge marketing expenses of foreign teachers in North America, vipkid once made an annual loss of 2.2 billion yuan. Its business model is generally considered as "diseconomic in scale".

To a certain extent, vipkid has created a business chain of "massive financing large-scale burning money to gain customers, loss occupying the market, forming barriers - refined operation and profit". Today, a batch of online education companies are walking in the old path of vipkid.

Vipkid has become the head company of online education. It has also been plagued by rumors such as unscientific business model, large-scale turnover of employees, financing difficulties, etc., and has been deeply involved in the fierce competition of crazy launch of the whole track and poaching by competitors.

"The one-on-one track for foreign teachers in North America has formed certain barriers, and we have fought all the battles that can be fought in this industry." Recently, in an exclusive interview with 21st century economic reporter, vipkid co-founder and president Zhang Yuejia said that he gave a detailed response to the company's operation status, product strategy and analysis of the industry trend.

Nowadays, one-on-one foreign teachers are no longer the tuyere of online education, and no longer the most expensive track. When the competition for money burning tends to be silent, the market suddenly finds that the 800000 high willingness to pay students accumulated by vipkid has become a solid barrier and a "flow pool" for vipkid to continuously develop high margin products.

Vipkid how to stop bleeding and how to make profits may become a template for other online education companies in the near future.

Profit yield growth

When Zhang Yuejia joined vipkid in January 2015, the number of students was only 102, and the number of new students per month was 230. At that time, the number of students from competitors was more than ten times that of vipkid.

In October 2015 and August 2016, vipkid completed round B and round C financing of nearly US $20 million and US $100 million respectively, and then began large-scale advertising. In 2017, vipkid received 200000 new students, with a loss of 2.2 billion yuan the following year.

With the growth of vipkid scale, the biggest controversy is its high customer acquisition cost. In January this year, the New Oriental Enterprise Development and strategic planning department and the Oriental coordinate Institute jointly released the report "innovation and wave prospects of China's education and training industry in 2019". According to the report, the cost of customer acquisition of online one-to-one institutions is about 5000-15000 yuan. This means that the tuition fee can only cover the marketing cost of each new student, so it will bear the huge loss of teachers and operation.

But in the early stage of market development, profits give way to growth. Before the absolute leader of the market appears, the players on this track have not stopped burning money.

"We can see these losses all the time. The cost of getting customers in the early market is too high, but it has to be so in the face of fierce competition. Because everyone is burning money. If we don't match our competitors' market share with us now, then in fact, this battle will last longer, and we will have no energy to expand to other tracks. " Zhang Yuejia said.

"At that time, the vipkid brand was still unknown. If you don't launch, there won't be any students. If a brand wants to get up quickly, there are basically only a few channels: subway and bus advertisements for transportation, sponsorship of popular variety shows or IP cooperation. It is impossible to say that an online advertisement can make a brand In 2016, there was not much money on vipkid's account, but 60 million yuan was invested in the first advertisement, Zhang said.

In fact, vipkid realized as early as early 2018 that the company needed to be profitable. At that time, vipkid's main competitors were dada English and vipjr from Shanghai. In May 2018, the gogokid of bytecomb was launched, which accelerated the fierce competition in this track: Zhang Ziyi was hired as the spokesperson, named "where is Dad going" at a high price, and the course was sold at half the market price.

At that time, vipkid held "war meetings" almost every day to monitor whether students and teachers were losing to competitors. "At that time, we had to control the cost. But it's not easy for you to adjust to the competitive situation like that. It's a very fierce battle. " Zhang Yuejia said.

"In September 2019, the advertising of one-on-one track for foreign teachers in North America suddenly drops. In fact, it also means that the market pattern has taken shape in stages." Zhang Yuejia told 21st century economic report that although the war lasted for a year, there was no problem with vipkid's cash flow. According to the public data, the total amount of financing obtained before and after vipkid exceeded 1 billion US dollars.

Increase revenue and reduce expenditure in marketing

In October 2019, vipkid received $150 million in round e financing led by Tencent. Due to the long time of this round of financing, vipkid is negatively entangled. There are even rumors from parents that vipkid has run away.

The reason for the delay was that an email was sent to several potential investors of vipkid's round e, claiming that vipkid's business data had been falsified. Since then, Tencent, the leading investor, conducted a second due diligence survey and determined that the data was true before deciding on financing. However, the financing time has been delayed for three or four months.

Zhang Yuejia told reporters that the amount of e-round financing did not decrease, just because the "anonymous email incident" was a little late. The company's valuation is close to $5 billion.

At that time, the scale of viid and its sales team were reduced rapidly from the current round of "viid" to "the next round of sales". This action is also interpreted by the outside world as vipkid business model does not run through, is cutting staff to save themselves.

Zhang Yuejia said that the reduction of sales team is active. "We must consider the possibility of profit when considering the quality and scale of products. At that time, there was a lot of room to improve the human efficiency of the sales team. Every sales lead obtained by the company has a certain cost. We must let more capable sales obtain more resources and help the company cherish every bullet. "

After joining CTO Zheng Zibin, the efficiency of management tools such as CRM system, leads distribution system, data center and business analysis has been improved. "We have made a balance plan for sales, and the core is to grade every sales lead after it comes in." Zhang Yuejia said.

Other costs are also being squeezed. The company's afternoon tea and snacks are available every day in 2016, provided every Friday in 2017, and basically cancelled in 2019. The office of Beijing headquarters has been moved several kilometers away from Chaoyang Joy City. The office space has been expanded and the rent has been greatly reduced.

But more important is the reduction of marketing costs. Some high-cost customer acquisition channels, such as billboard advertising and search bidding, are strictly restricted. At present, about 90% of vipkid's customer acquisition channels have achieved an average customer acquisition cost of 3000 yuan, which is even lower than the current large class products on the market, and the market price of the latter is only a quarter of that of vipkid.

As an example, Zhang Yuejia said, "the average price of a class is 146 yuan. Some institutions have lowered the price to seventy-eight or eighty yuan for a class. This is not profitable because the cost of foreign teachers in North America is about 70 yuan per class, and there is also the cost of service performance."

"At present, the average unit price per student of vipkid is 8760 yuan. The gross profit margin is much higher than the 20% previously thought in the industry. After deducting about 10% of the cost of the middle and back office, there is still a lot of gross profit for each order, which is far beyond our previous goal of" making 1 yuan per class. " Zhang Yuejia said.

"The one-on-one track for foreign teachers in North America has formed certain barriers. We have fought all the battles that we can fight in this industry. Whether it is a start-up company, or a company invested by an education giant or an Internet giant, we have all fought against all the competitors we can face, unless there is another one abroad." He said.

High margin product matrix

Vipkid has accumulated about 800000 users paying for reading, including more than 200000 users in Beijing. This is an extremely high-quality "flow pool", with an average annual cost of 13000 yuan per student, which is far higher than the current live broadcast class in the tuyere.

These students with high payment ability are more willing to buy other high-quality and high gross profit value-added products. Vipkid has launched some special course packages with low customer price, which are well sold among the students of regular price courses. And these sales have almost no customer acquisition costs.

On August 18, vipkid disclosed its current product matrix. In addition to the main one-on-one price courses for foreign teachers in North America, children's English products also include Chinese and foreign excellent teaching and training courses and English Enlightenment courses. In addition, the new online products also include children's mathematical thinking and K12 live class rice online school.

Zhang Yuejia told the 21st century economic report, "now all new businesses are required to be profitable, and the profit margin is higher than that of one-to-one products. Otherwise, it is meaningless for me to use a high margin product to guide a low margin product. The gross profit rate of new products is basically above 70%, which is similar to that of large class products. "

What is more unexpected is the excellent course for Chinese and foreign teachers. This product combines Chinese and foreign teachers, and AI class is one-to-one with real people. It not only meets the students' examination needs by teaching grammar, vocabulary and other knowledge points by Chinese teachers, but also reduces the tuition fees by appropriately reducing the proportion of foreign teachers' one-to-one courses. It is an age-up and regional sinking product. After half a year of internal polishing, we have achieved a good result of 10000 sales per month.

The distinctive feature of these new products is that vipkid is maximizing the differentiation and optimization of the use of foreign teachers in North America, thus building a more reasonable cost model.

"Good teachers are the core of education. We have let outstanding North American foreign teachers participate in many new projects. With the curriculum system becoming more and more abundant, teachers can also get higher wages, and children have more needs to meet. There is a lot of room for expansion. " Zhang Yuejia said.

Zhang Yuejia believes that in the future, the number of users of one-on-one track will continue to grow, and the current team of 90000 North American foreign teachers in vipkid is expected to grow to 230000.

However, due to the increasing number of users, how to match the number of foreign teachers?

Zhang Yuejia said, "with the development of technology, foreign teachers can be gradually replaced by AI. For example, there is no need for teachers to teach pronunciation, and students can practice with AI. The average age of vipkid's foreign teachers is 7.5 years. If you ask these teachers to teach children pronunciation, they will also feel boring. We will gradually separate these things from teaching and research, let foreign teachers do more things to interact with children in the classroom, and extract some vocabulary and grammar content for Chinese teachers. Therefore, the effectiveness of teachers can be improved. "

The English track is still evolving. Vipkid has launched an English Enlightenment Course for the 3-5-year-old age group. The benchmark is the zebra AI course of ape guidance and the newly launched guaguagualong with byte skipping. The latter two are setting off a new round of advertising campaign.

Compared with the one-on-one and live large class classes, the business model of children's Enlightenment course is more fragile. Its course price is low, and students' willingness to renew is weak. Industry insiders believe that the strategic significance of this kind of products is to block the low age group of students and guide the high customer price products.

"Vipkid's main business is now verified to be profitable, and the volume is not small. At this time, it is relatively easy to advance and retreat, because different products meet different user needs, and large classes and enlightenment classes will not threaten the main business of vipkid. " Zhang Yuejia said.

In this case, for the emerging children's Enlightenment products, "we will match the products of our competitors, but we can't put them into their advertisements." Zhang Yuejia said that compared with short-term burning money, long-term "product strength" and learning effect are the key to retain users.