Above the Crowd

A Really Interesting Online Education Company in Korea: Megastudy

June 2, 2009:

Megastudy_logoToday’s New York Times has half page article on a billion dollar (US$) public Korean company named Megastudy.  My partner Peter Fenton and I had the luxury of meeting with this company a few years back, and I always had hoped to find the U.S. equivalent.  Truth be told, Business Week profiled the company two and a half years ago, but I dont think that U.S. entrepreneurs have created anything qutie like it.

Here are some quick notes on the company:

  1. Megastudy is at it’s core an online learning web site.
  2. The business model is subscription for each course.
  3. The “teacher” of the course gets something like 23% of the revenue for each class they teach.
  4. Because its online, a teacher can have an unlimited number of students.
  5. As a result, there are Megastudy teachers making over US$1mm/year in a country where the average teacher makes something like US$40K.
  6. In order to sort to the top of the list (and be popular), these teachers must be promotional, funny, engaging, effective.  Bottom line, they must be entrepreneurial.

Point #5 and #6 would create an interesting conundrum in the U.S.  Many here argue that U.S. teachers are underpaid, so in that sense it should be a huge welcome.  That said, I don’t think any teacher union in the U.S. would support the “eat what you kill” business model in use at Megastudy.  

grockit_horizontalWe have an investment in one interesting company that is borrowing part of its model from Megastudy, and part of the MMORPG world.  its a collaborative learning web site called Grockit.   Here is the TechCrunch review.

Like I said, I had always hoped to discover the “Megastudy” of the U.S.  I think its great for the teachers, and an awesome business to boot.  If you see something like it, please let me know.

Note:  Many commenters will likely note that the market for elective education is much different in Korea, where parents are obsessed with their children’s education, is far different from here in the U.S.  This is a valid point, but I would still be interested in this model here in the U.S.

36 Comments

  1. Chris Hopf June 2, 2009

    Thanks for the heads-up Bill . . . I too would be interested to learn of similar approaches here in the US.

    Reply
    • Jon Bischke June 3, 2009

      What we’re building at eduFire has a lot of parallels with MegaStudy (they’ve been one of our inspirations). I think it’s quite fair to point out that Korea is very different than the rest of the world in terms of education. However, I also see a strong likelihood that the world moves more to a “rock star teacher” model as the technology to deliver courses over the Web improves.

      If you’re interested feel free to check out our blog at blog.edufire.com where we’ve talked a lot about our thesis for revolutionizing education.

  2. Chris Lee June 2, 2009

    If you look at the demand side of the equation, namely the student consuming this service, you’ll see why this business model may not get directly applied in the U.S.

    The whole K-12 education system depends mostly on the private education. It is very typical and accepted practice for students to take a nap in school and get schooled elsewhere.

    As you can see, getting into college in Korea, unlike that of the U.S., is almost like life or death situation. So, how do they learn stuff necessary for the college exam? A typical student in a middle class family would get multiple private tutors costing at least $2-3k/month.

    Most of the families can’t afford this, and this is where Megastudy comes handy. Some might argue that U.S. tuition is way more expensive and would be as costly, if not more, in Korea. Remember, there’s no loan or financial aid for private tutors.

    Lastly, I just want to point out the college admissions situation in Korea. While we worry about WHICH college to attend, Koreans worry about WHETHER THEY’LL GET INTO 1. Not directly related to the biz model discussion, but an interesting contrast.

    Reply
    • bgurley June 3, 2009

      i agree with these points, which is why i added my note. College admission in US is getting much harder for average Joe.

  3. Bob Monsour June 3, 2009

    Not the same model, but 2tor.com is working to bring current higher ed institutions into the online learning world. If you’d like to connect with the CTO, let me know.

    Reply
  4. ginsu June 3, 2009

    Brightstorm is similar, though afaik without the teacher revenue share, yet. One of the co-founders is of Korean background, and was possibly influenced by Megastudy.

    Reply
    • bgurley June 3, 2009

      Personally, the teacher revenue share is the piece that is most interesting to me. it builds in switching costs for the great teachers.

  5. ginsu June 3, 2009

    sorry Bill, I posted before bothering to look at the website – they do have a teacher rev share.

    Reply
  6. Dave Schappell June 3, 2009

    Bill — folks like EduFire, Tutor.com, TutorVista.com and Global Scholar have been pursuing the online video learning market like mad — it’s just that none of them have cracked thru in a big way yet. I’d bet on Jon (EduFire), but others have bigger bankrolls.

    In addition, you have things like Lynda, YouTube, and others.

    We’re (www.teachstreet.com) betting on the more traditional face-to-face learning, and empowering that with tools to help people merchandise themselves… and believe that the online video learning component will be a feature on top of that successful platform, but time will tell.

    Now… Benchmark… put your money where your mouth is :-)

    Dave

    Reply
    • bgurley June 3, 2009

      Looking for the right play! I don’t think any of those have the self-reinforcing model of Megastudy.

  7. bumsoo June 4, 2009

    People tend to see only the surface of the Korean market. I grew up in Korea myself and now raise my kids in the U.S.(I have two 9th graders-to-be). It looks much different because of the different education system, but there are more common things than we think.
    IMO, the total effort made for college entrance is almost the same, but American students have to allocate their time to multiple things. If we can deeply understand why the Korean online education service evolved like that, we’ll be able to find things we can adopt to U.S. Regardless of age, we all have experience that one teacher’s great teaching made difference. That’s what megastudy did, at a more affordable price. I don’t see a reason why affordable great teaching will be less valuable here in the U.S., where average tutors are Min. 3x more expensive than in Korea, and parents have to drive 5x more distance to take their children to the nearst tutoring center.

    Reply
    • bgurley June 5, 2009

      Thanks for your comment — this is extremely helpful and encouraging. I agree 100%.

    • kareem July 16, 2009

      bill, can you elaborate a little more on what you mean by megastudy’s “self-reinforcing model”?

    • bgurley July 16, 2009

      Simply of the teacher is getting a large piece of the action, and MegaStudy has the students, than the teacher has no incentive to cosider going somewhere else.

    • kareem July 16, 2009

      thanks bill. it doesn’t seem that any of the edu startups mentioned above have yet captured the demand side of the (huge) market, though it will happen.

      and btw, edufire gives the supply side large incentives to stay – 85% of the fee that the teacher charges. (disclosure: i co-founded edufire).

  8. Benjamin June 6, 2009

    Great post.
    I am not that surprised Korea is at the forefront of e-learning:
    - Greatest ultra-broadband infra on Earth (the general term “broadband wouldn’t do Korea justice)
    - Hyper-competitive education environment (see Malcolm Gladwell’s Outliers on Asian culture of hard work)
    - Micro-payments sorted out for years (Cyworld, online games were first)
    - Very high trust in online services and sophisticated behaviors thanks to over 10 years of broadband practice.

    I would not be surprised either if the next big thing in Japan with mobile was an education-related service. I know of at least one startup making over 5 million USD / year for language learning over mobile. And it targets only the nice of foreigners learning Japanese via mobile in Japan.

    Reply
  9. carleighmckenna June 8, 2009

    Website Cramster.com offers community-driven online learning, similar to Megastudy. A few key differences:

    If educators “recruit” students on Megastudy, the opposite is true on Cramster.com. Students post questions for the experts-at-large of the Cramster.com community to find and answer, and engage in a follow-up chat if necessary. In this way, the students are able to ask questions that will be answered by the most qualified members, rather than working with only one tutor/teacher.

    Although the educators that participate on Cramster.com aren’t likely doing so for financial gain (though there is a ‘karma point’ reward system), Cramster.com provides a space for educators to connect with students, share resources, teach, and learn.

    I’m interested in your take on the Cramster.com model. Is Megastudy to educators what Cramster.com is to students?

    Reply
  10. Stu June 10, 2009

    K12 (NYSE: LRN) is an interesting company to take a look at. They provide content and train teachers for K-12 certified online public schools. They’re currently in 21 of the 50 states, $300M in revenue, 40K students, 27% revenue CAGR since 2006, and I believe they make their money from government sponsorship. They obviously have a different model than a Megastudy, but I think they’re an interesting company to watch. They’re getting traction, and they’ve been cranking out quality content.

    Reply
  11. Eric Hung June 28, 2009

    Hi Bill, I wonder how I missed this post!

    I’m Eric Hung from Educator.com which just launched in May and I think we’re pretty close to being the “Megastudy of the US.”

    We’re searching for the best teachers and opening their classrooms to the world. We are a subscription based service and our instructors receive a % of revenue.

    Our company goal is to equalize education through offering the best instruction at an affordable flat rate for all subjects.

    Please let me know what you think.

    Reply
  12. Andrew Hillhouse September 1, 2009

    email of Megastudy

    Reply
  13. David September 8, 2009

    Hi Bill,

    I think most of the people from Korea on the comment list hit upon the key points of the education sector here in Korea. There’s another competitor here called Hackers that is actually gaining a good rep for test preparation. They essentially have the same model in terms of revenue sharing with their teachers. My friends used to work there and they use to get paid 45% of rev. per student. If it was a weekend class, it would be 50% of rev. per student. Now, of course, they were limited by physical space.

    There are some who have taken the Megastudy model over to China where they share similar motivations for learning English: state-administered exams for specialized schools. In order to get into the top middle school of your district which ensures getting into the the high school, which ensures getting into a top-notch college, you must excel at certain state administered test where English is a main component. That’s very similar to what is happening in Korea, especially in the children’s market (5th grade to high school).

    I don’t think the U.S. market shares entirely the same characteristics as Korea simply because there are more choices for colleges than here in Korea where if you don’t get into the top three colleges, you’ll pretty much face an uphill battle for your entire professional career.

    However, the AP and SAT market is something that many people predict will take off. In fact, that market here in Seoul is gaining a lot of traction. There are many great ESL teachers here in Korea that have migrated to that field because of the much better pay.

    So I think to further understand if a Megastudy-like model will work in the States, we have to first be able to identify the target group.

    Anyway, if you’re interested in learning more about the Korea education market please feel free to email me at david@paedea.com. Also, here’s a link to a comment I made on Fred Wilson’s post, “Hacking Education”: http://www.avc.com/a_vc/2009/03/hacking-education-continued.html

    This post is getting too long so I’ll just refer you guys to the comment I left on fred wilson’s post on Hacking Education.

    Reply
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  15. Benjarong November 9, 2009

    I can see that http://www.englishcafe.com as one of the best that runs from US base. Its yet to get there, but fast catching up.

    Reply
  16. juliene gschwend November 20, 2009

    I know Asia and Korea have a different educational schema- but I think this model could be popular here. Online learning has taken off and the biggest users in the US are college students already enrolled on a campus who choose to take classes online as well. Maybe because of their schedules, possibly because they prefer online over actual classroom environments?
    Online is very convenient. We are thinking of using the Teaching Company DVDs with our 10 year old. Private schools for her are anywhere from $12,000 to $30,000 per year here and that’s kind of hard to pay for the sixth grade.
    There was a major financial guru who just bought an online University in the US and is offering his own MBA program- I read about it in the WSJ but I forget who it is.

    Reply
  17. shyam January 31, 2010

    i seen something similar in India. they traing students for competitive exams..www.smartlearnwebtv.com

    Reply
  18. Reddy February 25, 2010

    I took the demand side of this Megastudy model from the 2 web links given by the blog post and summarized here.
    These 3 factors on ‘demand’ side of the equation are missing in US that is why it is hard to succeed that model in US.
    Think about the US system, here our KIDS work on average less than 2 hours a day outside of the school, that is what the society demands here where are in Asia the society expectation is at least 3x of it.
    —-
    http://www.nytimes.com/2009/06/02/business/global/02cram.html?_r=2&scp=1&sq=korean%20studaents&st=cse
    1) Last year, South Korea spent 55 trillion won, 6 percent of its gross domestic product, on public education. But private education expenditures amounted to an additional 20 trillion won
    – so total 8.5% of GDP on EDUCATION

    2) Eight of every 10 students from elementary school through high school take after-school classes from private tutors or at cram schools, online or offline.
    – that is 80% of K-12 kids takes after-school classes

    3) Demand created by society culture: http://www.businessweek.com/magazine/content/06_50/b4013056.htm
    Koreans will endure just about any hardship to make sure they get into a top university. A degree from a leading school isn’t just the key to a good job–it’s a prerequisite for finding the right spouse and establishing high-powered connections that can last a lifetime.

    Reply
    • bgurley March 4, 2010

      This is a really strong point and one that may mean you will never “re-create” MegaStudy here.

  19. study abroad September 2, 2010

    According to my view online education quality website is constantly increasing as online technologies become a bigger part of the educational process, and as students and prospective students turn to the internet for information.

    nice post

    Thanks

    Reply
  20. benjunnenarciso September 22, 2010

    Son Joo-eun was a success in South Korea’s hypercompetitive business of preparing students for the national college entrance exam. He had an annual income of 720 million won — the equivalent of $573,000 today — as a private tutor helping children from rich families in Seoul win admission to elite universities.

    In relation to this, you may want to visit our online English academy is bases in Cebu City, Philippines. It is an institution with competent, effective, and efficient ESL teachers well-equipped to provide easy and fun way of learning English at a minimum amount of time per session.

    Reply
  21. Peter Nicholson November 4, 2010

    Please advise me as to web address of mega study.

    Reply
  22. Clyde Smith November 25, 2010

    “Because its online, a teacher can have an unlimited number of students.”

    Part of the difference in markets is also that in S. Korea you have lower expectations for individual interactions between teacher and student, not to mention teacher and parent. Currently parents are more involved in U.S. education than ever before. It’s a Gen Y thing.

    In any case, such a model might work for education settings where the “education” part has been turned into rote memory and regurgitation of facts, i.e., the standardized exams that have become a bigger part of the U.S. K-12 system as a stumbling block and benchmark for students, teachers and schools.

    So, inasmuch as people value a sterile education or are forced to work at the level of a regurgitation unit, this is a great business model.

    Personally, though I valued my friendships with S. Korean students made during my doctoral work at Ohio State University, I would be very saddened if U.S. students became the submissive, compliant and somewhat robotic creatures these grad students were in the classroom.

    Hey, but if you can make some money off it, go for it! And if you can raise test scores without caring that students don’t actually seem to know much about anything, then you can be a savior of education!

    I’m still waiting to find a youngster that can tell me why Wikipedia was banned at their school rather than just saying it’s not allowed.

    Or an education system that can get them to the point of understanding why such a rule might exist, not simply that it exists. Yes, they can count the fish but do they know how to catch them or what to do with them after they’re counted? Usually not.

    Reply
  23. Clyde Smith November 25, 2010

    Case in point, followup to my previous comment about teacher/parent/child contact, from http://www.businessweek.com/magazine/content/06_50/b4013056.htm

    “The stage of Seoul’s biggest indoor arena is flanked by two giant video screens to ensure that even folks in the nosebleed seats won’t miss a thing. As the performers take the stage, the crowd of 10,000 breaks into thunderous applause. But the stars of the Nov. 25 show aren’t a pop band or a rap group. They’re instructors from Megastudy, the biggest of Koreas 28,000 “cram schools” that help students get ahead in everything from physics to French. “With his signature, I feel his energy,” 18-year-old Yang Hae Jin beams after scoring an autograph from one of the celebrity teachers.”

    I’m so proud. I got my teacher’s autograph and it was written by his no. 1 assistant!

    Sorry I missed out on all that. Let’s bring it to America! Cause everybody here loves a celebrity.

    Reply
  24. Lee Welter February 12, 2011

    I like this article, but found a couple of typos:
    “…Megastudy is at it’s core an online learning web site….” “it’s” should be “its”– the possessive form of “it.”
    “…Because its online, a teacher can have an unlimited number of students….” “its” should be “it’s”– the contraction of “it is.”

    Reply
  25. Tyler Vossler May 7, 2013

    Bill,

    My name is Tyler and I am the co-founder and CEO at Anyone Can Teach. Anyone Can Teach is an early stag startup that launched last October with the goal of implement the “Megastudy” of the United States.

    -Tyler Vossler
    (360) 931-1288

    Reply
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