The COVID-19 outbreak and quarantines have driven hundreds of millions in China to discover online education technology platforms based on recent earnings conference calls from listed China Edutech companies:
GSX Techedu (NASDAQ: GSX) shares shot up as much as~19% from February 17th to 19th, around the company’s recent earnings, after management said in their earnings call that they added 15 million new enrollments in free live classes offered due to the COVID-19 outbreak. GSX also highlighted that the virus heightened awareness about online learning across the nation, potentially reducing the industry’s total required acquisition costs by RMB 240 billion in the long run, making it easier to convert new enrollments.
Youdao (NYSE: DAO) is capitalizing on the current virus situation by rapidly raising awareness of their EduTech offerings by 1) offering free online courses, which have added 10 million new enrollments. 2) Low-cost trials incentivizing users to try paid courses at low prices. Management has stated that results for these trials were good with resulting in lower acquisition costs and higher conversion rates. 3) Increased marketing spend - the Company is increasing ad spend to accelerate brand awareness and adoption among potential customers during the current outbreak.
We believe that much of this new adoption for GSX and Youdao will become permanent given that these companies were already growing extremely rapidly even before the virus. The current situation has merely added more fuel to the fire.