A Really Interesting Online Education Company in Korea: Megastudy
Today’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:
- Megastudy is at it’s core an online learning web site.
- The business model is subscription for each course.
- The “teacher” of the course gets something like 23% of the revenue for each class they teach.
- Because its online, a teacher can have an unlimited number of students.
- As a result, there are Megastudy teachers making over US$1mm/year in a country where the average teacher makes something like US$40K.
- 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.
We 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.
i seen something similar in India. they traing students for competitive exams..www.smartlearnwebtv.com
shyam
January 31, 2010
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.
juliene gschwend
November 20, 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.
Benjarong
November 9, 2009
[...] video instruction space. Turns out Bill Gurley of Benchmark was looking at this too, and wrote a great post about the company. Here’s his summary of what Megastudy is [...]
Interesting Links on Games and Learning - Venture Sprout
October 28, 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.
David
September 8, 2009
email of Megastudy
Andrew Hillhouse
September 1, 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.
Eric Hung
June 28, 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.
Stu
June 10, 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?
carleighmckenna
June 8, 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.
Benjamin
June 6, 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.
bumsoo
June 4, 2009
Thanks for your comment — this is extremely helpful and encouraging. I agree 100%.
bgurley
June 5, 2009
bill, can you elaborate a little more on what you mean by megastudy’s “self-reinforcing model”?
kareem
July 16, 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
Dave Schappell
June 3, 2009
Looking for the right play! I don’t think any of those have the self-reinforcing model of Megastudy.
bgurley
June 3, 2009
sorry Bill, I posted before bothering to look at the website – they do have a teacher rev share.
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.
ginsu
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.
bgurley
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.
Bob Monsour
June 3, 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.
Chris Lee
June 2, 2009
i agree with these points, which is why i added my note. College admission in US is getting much harder for average Joe.
bgurley
June 3, 2009
Thanks for the heads-up Bill . . . I too would be interested to learn of similar approaches here in the US.
Chris Hopf
June 2, 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.
Jon Bischke
June 3, 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.
bgurley
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).
kareem
July 16, 2009