The pandemic has driven demand for remote services of all kinds. Chinese online education companies are now building war chests for another round of fierce competition, which investors say will likely continue until one emerges as the industry’s dominant player.
“You have to spend two bucks before you earn a dime,” Michael Yu, founder and president of the after-school tutoring agency New Oriental Education and Technology Group Inc., said in a speech last month. The sector saw $15 billion of investment last year, but only had revenue of a few billion dollars, he said.
“If you don’t raise money when everyone else is, you’ll fall behind”, said Liu Zhanxiang, an education analyst at investment bank China Renaissance Holdings Ltd. “Even though there is abundant money coming into the online education sector from investors, the strong players are likely to get stronger, and the weaker ones will get weaker,” he said.
However, people at one leading company said that most of the cash these companies are raising is not going to wards improving the quality of their services but instead spent on marketing as retention of customers and students remains elusive.
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