Decent financials to push Youdao toward profitability in a burgeoning industry
- A not-so-promising first annual report post IPO (2019) – but an improved 2020
- Increasing Internet penetration rate, state support, educational spending are the factors that will aid Youdao's growth
- Risks might include regulatory intervention and upcoming competition from the likes of Alibaba, Tencent, Bytedance, etc
Youdao is likely to find its way of making money in the education service track and product business in the future, with revenue growth points coming from educational smart hardware.
Youdao is a search engine and an online education platform launched by NetEase back in 2006. It is now operating as China's most popular dictionary and translation app with over 700 million users in early 2021. According to 36Kr, the company raised its Series A financing round at a CNY 7.58 billion valuation in April 2018.
Meanwhile, NetEase, the parent company of Youdao, is listed on NASDAQ as one of China's largest Internet companies.
Youdao's business spectrum comprises four types of products:
Online knowledge tools: Youdao Dictionary is one of the classic examples as China's top language app in terms of monthly active users in the first half of 2019. Youdao uses these free online tools to promote the company brand and attract traffic to the other business sectors, such as online courses.
Online courses: These courses include Youdao Premium Courses that focus on K12 students. NetEase Cloud Classroom and China University MOOC are two other course formats provided by the company. This part of the business generates the largest revenue stream for Youdao.
Interactive learning apps enable students to study multidisciplinary subjects, including maths and English, with a virtual teacher. Through social media such as WeChat, users may access these apps and share their results with friends.
Smart devices: This type of device includes Youdao Smart Pen, Youdao Dictionary Pen, and Youdao Pocket Translator. These devices connect with the Youdao interactive learning apps and online courses to help students keep on track with their learning progress.
NetEase Youdao's core business mainly includes online market services, learning services and products.
Before 2018, the company's revenue mainly relied on advertising from online market services. Since 2018, with the continuous growth, Youdao's main revenue streams are now divided into three parts, including online course business, educational smart hardware products, learning services and products. Last year, revenue from learning services and products reached CNY 852 million, accounting for 65.28% of total revenue with a year-on-year increase of 98.7%. Online market service revenue was CNY 453 million, accounting for only 34.7% of total revenue.
Youdao is likely to find its way of making money in the education service track and product business in the future, with revenue growth points coming from educational smart hardware products and online course business.
A not-so-promising first annual report post IPO (2019) – but an improved 2020
Youdao released its first annual financial report since its listing on October 25, 2019. According to disclosed figures, the online education arm of NetEase achieved an annual operating income of CNY 1.305 billion, an increase of 78.28% year-on-year. Gross profit was CNY 370.6 million, an increase of 71.17% year-on-year, the gross profit margin was 28.4%,...
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