From annual salaries of one million to large-scale layoffs—winter has arrived for online education!
Produced by | Pai Caijing
Text by Wang Dezheng, Edited by Mr. Pai
"This year, at least half of the online education companies will disappear," Lin Dong (a pseudonym), founder of a K-12 education institution, told his colleagues at an internal company seminar.
Yet just a year ago, spurred by the pandemic, the online education industry ushered in a spring of explosive growth. That year, the entire sector was brimming with confidence and forging ahead at breakneck speed. Even as traffic acquisition costs soared nearly twentyfold and most players continued to burn cash without turning a profit, the industry still drew massive amounts of capital. Professionals riding the wave enjoyed unprecedented success: post-90s teachers routinely earned annual salaries exceeding one million yuan, while fresh graduates could expect starting salaries of 200,000 to 500,000 yuan.
The craziness of the past has given way to stark desolation today. After a year of explosive growth, the industry has taken a precipitous downturn. In early June, leading online education firms such as Zuoyebang and Gaotu were successively exposed by netizens for carrying out large-scale layoffs.
"Stringent regulation is merely the final straw that breaks the camel's back," several industry insiders told Pai Finance. The root cause of this crisis, they say, is that after capital entered the sector, institutions engaged in reckless, cash-burning expansion, stoking educational anxiety and pushing an education-centric industry to an extreme.
So, what does the future hold for the online education industry after the period of growing pains?
Round 01 of Layoffs
June 7, overcast.
At the entrance of the Zuoyebang building in the Qunying Science and Technology Zone, a group of people stood on the steps, their eyes filled with confusion—these were employees who had just been laid off by Zuoyebang.
The news of layoffs at Zuoyebang first surfaced on the Maimai platform, where a user revealed: "Both Zuoyebang's K12 division and its 'Ya Ya' business are facing layoffs, with the 'Ya Ya' unit experiencing a particularly high attrition rate—essentially a complete purge. In total, nearly a thousand employees are affected."
Subsequently, Zuoyebang told the media that the layoff rumors were untrue: "We are making business adjustments in line with the company's strategy, including routine workforce optimization and internal mobility, while recruitment for key business areas is ongoing."
Luo Yi (a pseudonym) is one of the employees laid off—or, more accurately, "optimized"—by Zuoyebang this time. He confirmed to Pai Finance: "The early-childhood education business has been shut down, affecting as many as a thousand employees. The company's stated reason is 'affected by policy changes.'"
Luo Yi is deeply worried about the outlook ahead, and just the thought of having to keep going to one interview after another leaves him feeling utterly drained: "If I hadn't just paid the rent, I'd be heading back to my hometown."
"Affected by policy changes" is also the case for college student Zhang Ke (pseudonym). Zhang Ke is a prospective summer intern at Gaotu; she's only a "prospective" intern because, not long ago, Gaotu backed out on her.
On the evening of June 1, a Gaotu employee posted in the WeChat group for Gaotu's summer interns in Changsha: "Due to the impact of the May 21 policy, all internship placements for the summer entry-level program have been forcibly canceled." Zhang Ke told Pai Finance: "There are 144 members in this group, most of whom are this year's summer interns in Changsha. I had originally planned to report to Gaotu on July 1; I received my offer as early as May 26—only to be suddenly informed that the internship has been canceled."
Zhang Ke's three friends have also experienced the same thing: "They, too, were stood up by online education providers." Zhang Ke admits, "Everyone is very anxious. With the spring recruitment season now largely over, it's no longer easy to find an internship."
A former regional sales director at an education company in Beijing told Pai Finance that he now hesitates to even glance at WeChat Moments, "Many of my friends have been laid off, and the posts on their Moments are rather pessimistic."
Working professionals are left scrambling by the sudden upheaval, and executives at online education firms are having a tough time too.
In the WeChat group for GaoTu's summer interns in Changsha, a GaoTu representative explained: "The May 21 policy has imposed significant restrictions on K-12 education institutions at present—GaoTu is by no means the only one affected."
"Today, I received calls from 10 heads of educational training institutions, and they're all extremely anxious—what should we do next?" On the evening of June 10, the COO of a leading online education company posted on WeChat Moments, lamenting, "Emotions are contagious; now I'm feeling a bit anxious myself."
On June 1, Lin Dong, founder of a K-12 education institution, convened an emergency internal meeting. "The main focus was on the recent developments in the online education industry," Lin Dong told Pai Finance. "Everyone is scrambling to find ways to weather the storm."
In fact, as early as several months ago, industry insiders began to sense an unusual atmosphere. Three months ago, Yu Yang (a pseudonym) voluntarily resigned from Zuoyebang.
He told Pai Caijing that at the time, the online education industry was already showing signs of decline. Business volume began to shrink abruptly; Yu Yang revealed, "We used to earn 1,000 yuan a day, but then that figure plummeted to just 20%–30% of what it had been."
"There have already been some rumors and faint clues circulating within the company." Nevertheless, Yu Yang never imagined that the wave of layoffs would arrive so quickly—and on such a massive scale.
Lin Dong predicts: "This year, at least half of online education companies will disappear—though that's probably an understatement; the entire off-campus tutoring sector could shrink by half as well."
The golden age of online education feels like it was just yesterday. Back in early 2020, as the pandemic brought nearly every industry to a standstill and in-person learning ground to a halt, online education experienced an explosive surge.
In April 2020, a head of the teacher and HR department at Zuoyebang posted on Maimai: 'During the pandemic, many companies have been laying off employees and cutting salaries, yet Zuoyebang is still preparing to raise pay.'
In an all-hands letter, Hou Jianbin, founder of Zuoyebang, stated that by June 2020 the company had reached over 50 million daily active users and served more than 1.3 million paying students in live courses in a single quarter. Six months later, the company closed a $1.6 billion funding round. This round was just one example of the many financing deals in the online education sector in 2020. According to relevant data, total funding for online education throughout 2020 exceeded $103.4 billion.
"This is undoubtedly a banner year for the online education industry," Lin Dong said.
02 The Last Straw
Over the past year and more, the industry has surged ahead, attracting a flood of major players and capital. Yet amid this seemingly rosy landscape, it is now facing unprecedentedly stringent regulation. What underlying factors are driving this shift?
"This year has seen the strongest regulatory crackdown in history," Lin Dong said at an internal company meeting. In January 2021, a document issued by a state authority directly addressed the chaos and regulatory shortcomings in the online education sector. In Lin Dong's view, this may have marked the starting point of the entire regulatory storm. Shortly thereafter, central media outlets such as People's Daily and Xinhua News Agency also weighed in one after another.
On May 14, the revised Regulations for the Implementation of the Private Education Promotion Law of the People's Republic of China were officially promulgated, once again targeting online education. The regulations explicitly require the standardization of online education provision, covering such areas as the regulation of educational operations and funding, tuition fee setting, and advertising and publicity.
Behind the stringent regulatory measures lies the abnormal development of the online education industry.
Yu Yang believes: "Over the two-year period from 2019 to 2020, institutions experienced rapid fundraising and a sharp surge in customer acquisition costs, pushing the online education industry into a state of frenzy." This frenzy was primarily manifested in two ways:
On the one hand, it's splurging on traffic.
"In the past few years, our customer acquisition cost per lead was only a few hundred yuan—sometimes as low as 100 to 200 yuan," Yu Yang stated bluntly. By 2020, however, online education's CAC had skyrocketed to several thousand yuan. "Because Zuoyebang has its own traffic pool, our CAC is around 2,000 yuan per lead, while other players' CAC ranges from 3,000 to 4,000 yuan," Yu Yang revealed. By this calculation, in just two years, the CAC for acquiring a single online education customer increased nearly twentyfold.
"In fact, the pandemic merely accelerated the rise in traffic acquisition costs; the underlying reason is that people now have more money at their disposal, so they've naturally started pouring funds into competition to grab market share," Yu Yang said.
Yu Yang used Baidu's ad placement as an example: if several online education institutions, such as Zuoyebang, Yuanfudao, New Oriental Online, and Xueersi Peiyu, are all competing for clicks from the same user profile, then the one that places more ads will receive more platform support, "which leads to intense competition." He added, "This is a bidding-based ranking mechanism, and the same applies when promoting on Baidu."
"However, this model of acquiring customers through capital investment and shortening the time-to-market is easy to launch but hard to sustain; without strong product reputation to back it up, it's bound to end up as cannon fodder in the industry," said Zhang Ranran (a pseudonym), an online education researcher at a Beijing university.
On the other hand, Crazy is pouring money into manpower.
Yu Yang revealed: "During the period when the industry was flush with cash, young professionals were earning top salaries—some post-90s instructors were raking in annual incomes of as much as a million yuan."
"I have a friend who holds a master's degree and has risen to the position of team leader for instructors at Gaotu, with an annual income exceeding one million yuan," Yu Yang said. He added that many fresh graduates from 211 and 985 universities who join the company can expect a minimum annual salary of between 200,000 and 500,000 yuan. He then did some quick math: for instance, if a single course session attracts 2,000 students and there are five sessions during the summer break, and instructors earn a commission based on student numbers—say, a few dozen yuan per student—"the total earnings for one summer could easily surpass 500,000 yuan."
However, teachers at online education institutions and those in public schools are fundamentally different, Zhang Ranran told Pai Finance. "Their working conditions are entirely dissimilar; taking such a teaching position is essentially a trap." Zhang believes that during the rapid expansion of online education, teaching has become overly productized, making it difficult for instructors to develop their own unique style and pedagogical approach.
More importantly, there is very little room for career advancement in this industry. "A tutoring teacher typically has only two to three years of time to move up the ranks; beyond that, there's hardly any further growth potential," a veteran in the online education sector with seven years of experience told Pai Finance. Due to long-term disruptions to their circadian rhythms and grueling workloads, many of these teachers are in poor health—pharyngitis is particularly common. And when some teachers leave the industry, it's often difficult for them to find positions in mainstream schools, meaning their career options are actually quite limited.
From traffic to human resources, online education has increasingly gone down the path of burning cash—until stringent regulatory oversight finally delivered the final blow that broke the camel's back.
03 Tracing Back to the Root of Profit
Where is the future of online education?
Lei Yanhao, CEO of Taoliyuan, believes that education has always been about cultivating individuals and transmitting society's production and life experiences—and this is precisely what sets education apart from other human social activities.
Online education is both education and business," said Lei Yanhao. "And as a business, it relies heavily on word-of-mouth promotion—only in this way can it achieve scale.
In the eyes of some online education professionals, it is nothing more than a money-making enterprise, increasingly divorced from the very essence of education.
Many online education providers build their brand around a handful of star instructors, while the rest are often teachers who have just passed the teacher certification exam—or even recent graduates who do not yet hold one. For many years in the past, most of our school's instructors did not have teacher certification," revealed Lu Peng (a pseudonym), a former senior executive at an online education company in Beijing. Following regulatory requirements, however, most of these instructors rushed to obtain the necessary certification.
Lu Peng said that while some teachers do come from universities, many of them have switched from engineering to the humanities—or even from one discipline to another—so it's true that the teaching quality of quite a few of them is only average.
In fact, some so-called top-tier institutions' star instructors aren't much different from teachers at smaller institutions," Lu Peng said. "In fact, these instructors can be even more results-oriented, because they're driven by performance metrics and renewal rates." To boost renewal rates, some teachers will go to great lengths to produce rapid score improvements in a short period of time.
Lu Peng told Pai Finance that this shortcut amounts to simply handing students the answers and having them rely on homework-help apps. "This is clearly forcing growth before its time—students only know the answers but fail to truly grasp the underlying concepts.
To ensure a steady stream of customers, online education providers have invested heavily in advertising, which has indirectly exacerbated anxiety among parents and children," said Lu Peng.
Lei Yanhao told Pai Finance, "The entire logic behind K12 after-school tutoring is built on anxiety—tutors create anxiety to compel parents and students to enroll." For example, the message goes: "If your child doesn't take after-school classes, they'll fall behind." There's no denying that this revenue model of capitalizing on anxiety has indirectly accelerated educational involution.
Lei Yanhao believes that the distorted development of K-12 online education has disrupted the overarching logic of education as a whole. In his view, in the past, the focus of education was firmly within the school setting, and high-quality teachers were still primarily found in schools. Today, however, a large number of students devote their time to after-school tutoring. "Is this meant to suggest that the quality of teaching in schools is inferior to that offered by online education providers?"
Wu Jianning, founder of Houren Technology, told Pai Finance: "Out-of-school education should be designed with students' cognitive development patterns and learning cycles in mind; it must not be driven solely by capital and the market."
The current state of K-12 online education is largely the result of failing to strike the right balance between business imperatives and educational goals—namely, reckless spending and indiscriminate expansion. According to Lei Yanhao, online education should be a sector that benefits both the nation and the people, one that emphasizes long-term accumulation and sustainable operations. "As educators," he adds, "we have an even greater responsibility to parents and children, to the industry itself, and to the broader trajectory of social development."
Wu Jianning believes that excessive capitalization risks undermining the fundamental purpose of education, which should prioritize its public-service mission above all else.
However, despite the most stringent regulatory crackdown to date, many industry professionals believe the sector will not simply wither away: "K-12 after-school tutoring is here to stay."
"As long as competition in the gaokao and zhongkao persists, all primary and junior high school students will face pressure to advance to the next level," Lu Peng believes. He further argues that K12 after-school tutoring has, in effect, helped to balance educational resources across different regions—particularly through online delivery models.
As one observer candidly noted, while people lament the relentless academic competition in big cities, they often overlook the severe lack of access to after-school tutoring for exam candidates in smaller cities—particularly in rural junior high schools, where teacher resources are woefully inadequate. "It takes extraordinary effort for a student to get into the county-level top high school, and then to rank among the very best in that school, just to have any chance of being admitted to a first-tier university."
It is precisely against this backdrop that online after-school tutoring institutions have emerged, helping to bridge regional disparities in teacher quality. He stated bluntly, "If we eliminate these tutoring institutions, are parents expected to teach themselves advanced math and then tutor their own children?"
Education is warm and human; only by returning to its original intent and fundamental purpose can online education have a future.(The end)
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