March 3, 2006

Education is Web2.0’s “Killer App”

Filed under: Education,Web 2.0 — Administrator @ 12:46 pm

China use to cycle 5 to 7 years behind the West, in terms of technology/Internet business models, however with the introduction of business models leveraging “Web2.0” (this words is so overused and generic) technologies this cycle lag has dramatically narrowed; we’d argue China is only 2 to 3 years behind the West (while Japan and Korea might actually be trailblazing thanks to the proliferation of broadband).

As a result, local entrepreneurs looking to break into this Web2.0 space don’t necessarily have the cushion they once had – “hey, the train is leaving the station and you’re still trying to figure out how to buy your ticket…” – with Web1.0 business models. Furthermore, the very nature of Web2.0 ventures, being all user generated content and stuff, are significantly more global friendly (i.e. localization is bottom up, not top down) – for example, Flickr is as relevant to Xiao Wang in Xi’an,PRC as it is to Redneck Bob in New Hampshire, USA.

Not solely for this reason, but perhaps the above comment is a main driver of our belief that China based blogging communities are not financially viable over the long term (ex-advertising revenue model), for example, a recent survey revealed that over 40% of China professionals use MS Spaces, which is free and not a Chinese homegrown product. We think this certainly holds true for video storage/sharing sites as well.

Heather Green from Business Week fundamentally shares our view on blogs/podcasts/vblogs but “we thinks” Heather is overlooking one specific opportunity – Web2.0’s “killer app” – here is what Heather has to say:

But I believe the general notion here is that there isn’t a huge amount of money to be made just on podcasts and that the disruptive nature of podcasts lie in the fact that most people will be doing them for themselves and their friends and families.

So, what is the killer app (or business model) in the Web2.0 space? To Heather’s point, how are we as investors (and you as entrepreneurs) going to profit from this disruptive force – free content and storage? Well, after months (not years, mind you) of hard core research and analysis we’ve identified the perfect killer Web2.0 app/business model: Education.

We liken the Web2.0 education model (language/test prep) to online dating, but not match.com, more like Jdate.com – a dating site targeting the global Jewish community. Jdate can charge up to US$34 per month for their service because they have a captivated audience (Jews) looking for a specific payoff (a date/marriage) and are willing to pay for this (users trust the content/service).

To preempt any inflow of dating b-plans, for the record, we don’t see dating as a very good Web2.0 business.

Education is perhaps one of the only services/categories that not only leverages the benefits of community, RSS, podcasting, etc to vastly improve the user’s experience (“making learning fun”), but also does so inexpensively and, if you get the content and usability right, profitably. Furthermore, the market remains wide open (perfect environment for China based entrepreneurs) with only a handful of start-ups attacking this space (and no clear leader).

And, within the education space, we believe language and test preparation are the most exciting segments – largely because it combines both the foundation of a captivated audience (“I need to pass my GMAT to get into b-school or it’s back to the countryside for me”) and specific content (language is, well, language) with established/popular/free distribution channels (podcast, RSS) and the support of community/network (user generated content). In other words, consumers will pay for your content, while your costs associated with distribution are relatively low.

We especially like what the boys over at Shanghai-based OnDemand Training are doing with Chinesepod.com and Englishpod.com

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