YY Inc. (US: YY) recently launched its educational platform (100.com) and has received positive feedback from both students and teachers. Traditionally, the company focused on providing online music and broadcasting services to the public, but has now expanded its offering to include education. This article provides an overview of how 100.com's classes work, discusses several advantages of online education, explains why the platform is beneficial for both students and teachers, and suggests how the company can monetize 100.com.
TOEFL Classes. 100.com's intensive TOEFL courses are offered two times a night, at 7:30 p.m. and at 9:35 p.m. (with five minute breaks in between), from Mondays to Saturdays. At the end of every class, a question and answer sheet will be distributed online, and students will be tested on a variety of topics covered in class. Afterwards, the teacher will also host a 20-minute session to answer any questions that students may have regarding the topics discussed on that day. The scoring system for 100.com is similar to that of Taobao's.
Advantages of online education:
1. Elimination of geographical barriers. One major advantage of providing online education is that it helps to eliminate geographical barriers, especially in large countries like China, where students may not have direct access to schools (many educational institutions are located in major cities such as Beijing and Shanghai). Currently, many students commute for one to two hours a day just to be able to attend their registered classes. During rush hour, this commute may turn into three or more hours. It would not be surprising if many students have skipped classes or have been late for many of their classes. With YY's 100.com, this problem will be resolved; students around the country will be able to listen live to their teachers' lectures, sitting comfortably at home, saving time on their commute. According to statistics, the average number of students per online class is 1200 (distributed evenly between North and South China). Although YY is currently more well-known in the southern part of China, the company can leverage its 100.com platform to penetrate the northern part of China.
2. Promoting discussions. In traditional classroom settings, many Chinese students have been reluctant to speak up or to answer questions. Classroom sessions have been very dry and boring, with the teachers lecturing on the podium, watching their students drop down notes. With YY's education platform, students and teachers can now interact online on a real-time basis. The lower-right corner of the screen allows students and teachers to discuss topics relevant to the course and, when the teacher asks a questions, students can answer instantly (whether they get the answer right or wrong, it does not matter because they do not know anyone else who is taking the same course).
3. Curriculum system. Although YY's 100.com classes are currently offered free of charge, the company tries to enhance the quality of its education through establishing curriculum system. Every day, the system will track the number of classes that students have missed, and will alert those students automatically through text messages. In addition, students will receive a text reminder that will include the class times for the classes that they have enrolled in. To prevent students from leaving their classes early, the download link for the courseware will be released five minutes after the end of the course.
4. Low computing requirements. Due to YY's powerful video broadcasting technology, 100.com is capable of running smoothly on almost any computer, as its system requirements are minimal. Students can choose to install a software directly on their computers, or they can choose to view their virtual classrooms directly through the 100.com website. As long as a speed of 15kb/s is maintained, the quality of the imaging and sound should be decent.
Why should instructors teach through 100.com? Although 100.com is a relatively new platform, the long-term benefits that it can provide to its teachers is evident. Through 100.com, YY can increase the reputation and awareness of its teachers, promote/advertise the online courses that its teachers offer and, after monetization, share profits with its teachers. For every course offered, there is an instructor, a teaching assistant, 2-3 officials responsible for maintaining the 'online classroom' environment, and around 80 people responsible for marking the students' homework. With a large team of people supporting to the head instructor, the quality of education provided to the students is expected to be high.
Monetization of 100.com. Currently, all education content provided through YY's 100.com platform is free; the company is expected to monetize its education segment in around a year. Once YY establishes a strong reputation for its educational services, it will have greater bargaining power, and the company will have the ability to increase the price of each course offered from 0 Yuan to 100 Yuan, 300 Yuan, 500 Yuan, or perhaps even 5000 Yuan - depending on the quality and demand of the course. As long as the price points for YY's online courses are below those of similar offline courses, there will always be demand. One of the benefits of offering courses online is that theoretically, there is no limit to the number of people that a 'virtual classroom' can support. This implies that even if YY keeps its prices low (which is necessary to attract and to maintain students), it can still generate substantial operating leverage.
Disclosure: I am long YY. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: Business relationship disclosure: The article has been written by a senior analyst at Central Asset Investments. Central Asset Investments is not receiving compensation for it (other than from Seeking Alpha). Central Asset Investments has no business relationship with any company whose stock is mentioned in this article. This article provides general information only. It does not constitute an offer to sell or the solicitation of an offer to buy any interests in any securities, investment product or fund. Investor should consult their own financial advisors prior to making any investment decisions and should not rely solely on these statements or any information presented in order to make such investment decision. Investors should verify the accuracy of any information mentioned in this article. CAI may or may not have an interest in the companies mentioned in this article.