Prospects for Russian EdTech

Contents:

• There is still room to grow. But there are nuances.
• Who will lead in Russian EdTech?
• What will become a problem?

According to the latest rating of the largest EdTech companies in Russia from Smart Ranking, the sector continued to show active growth in 2021. This growth was initiated by the pandemic, as a result of which the EdTech market doubled in the first year. In the third quarter of this year, revenue for the 100 largest companies grew by 90% compared to the same period in 2020. However, the rating's compilers note that the growth rate has begun to slow. This may indicate possible saturation of the EdTech market in the near future.

The discussion about the growth prospects in the EdTech sector in Russia began with the question of whether the leading market players expect a slowdown in the pace of development. The discussion was moderated by venture investor and founder of several technology companies Maxim Spiridonov, who raised the topic of "The Inexhaustible Market of Russian EdTech". As part of the discussion, participants will consider the current trends, opportunities and challenges facing the educational technology industry in Russia.

The EdCrunch Glocal conference dedicated to new technologies in education was held in Almaty, Kazakhstan. This year, the main focus was on designing a new educational experience. Participants discussed current trends and innovations that contribute to the improvement of the educational process.

There is still room for growth. But there are nuances

Most discussion participants are confident that the total revenue of EdTech companies in Russia will continue to grow in the next few years. However, forecasts regarding the rate of growth and its sources vary significantly. Experts note that the development of digital education, the introduction of new technologies, and the increased demand for online courses may be the main factors contributing to this growth.

Vasily Alekseev, CEO of the Like Center, is confident that the Russian EdTech market continues to have significant potential for expansion. He notes that the online education sector can be supplemented by new online schools and digital products, which will create additional opportunities for users. Given current trends and growing interest in digital learning, the development of EdTech in Russia can lead to the creation of innovative educational solutions that contribute to improving the quality and accessibility of education.

At the moment, the boundaries of the EdTech market are not clear. It can be compared to the business of the 1990s, when many sellers operated on the market. There is a significant increase in demand for educational technologies, as well as an increase in the number of educational institutions. This indicates that the market continues to develop and expand.

According to Alekseev, Like Center forecasts significant growth through 2023. The company plans to increase its revenue tenfold by the end of this period.

Mikhail Myagkov, founder and CEO of Maximum Education, agreed with Alekseev, noting that the growth potential of Russian companies has not yet been exhausted. He identified two key sources for further development:

• On the one hand, traditional educational formats are being digitized, opening up new market niches. Similar processes, as Maria Spis, co-founder and managing director of HolonIQ, noted at another EdCrunch expert session, "What's Happening in EdTech: Global and Local Trends," are occurring in many countries around the world. During the pandemic, educational institutions mastered basic solutions for distance and e-learning, and now they are talking about integrating technology into all stages of the educational process.
• On the other hand, the online format provides access to education to those who previously never considered studying. The number of potential clients for EdTech companies is gradually growing.

Myagkov noted that the Russian market remains relatively small.

Companies' growth rates are often assessed by various ratings and positions in lists of top enterprises. We analyze indicators that demonstrate how much these companies' revenue has increased. However, when considering the overall revenue of the entire market, it becomes clear that even notable achievements of individual companies represent only a small share of the total. This emphasizes the need for a deeper analysis and understanding of the real dynamics of the market as a whole.

Dmitry Krutov, founder and CEO of Skillbox, is confident that further growth of the Russian EdTech sector is possible. To achieve this, particularly in the area of ​​adult continuing education, it is necessary to rethink customer service approaches. It is essential to adapt engagement strategies and improve the quality of educational services to meet changing user needs and ensure their satisfaction.

According to economic and demographic data, the audience for educational projects in Russia is approximately 40 million people. Of these, as Krutov notes, only about 4 million have made at least one purchase in the EdTech market. There is also the problem of one-time purchases: many customers do not return after completing a course or a month of subscription. However, the remaining 36 million who have not yet shown interest in learning in modern formats could be a new source of growth for EdTech. Working with this audience requires developing new approaches and strategies to attract their attention to educational opportunities.

It is important to begin engaging with the client not at the moment of their immediate inquiry, but much earlier—six months or even a year before they make a decision. This requires a comprehensive approach and significant effort. In the near future, the focus will shift to customer education, helping them recognize the value of learning and view it as an essential part of their life journey. This strategy will help build deeper, longer-lasting relationships with customers, ultimately leading to increased loyalty and willingness to engage with them.

The movement to a new audience has already begun, including with government support. Dmitry Krutov emphasizes that the approach to training in digital professions chosen within the Digital Economy project is the right one. Half the cost of the educational program is reimbursed from budgetary funds, which, in his opinion, significantly stimulated the market in 2021. This form of government support contributes to the increased accessibility of digital learning and the development of qualified personnel in the field of digital technologies. Similar ideas were also voiced during a discussion on online education trends held at the eSTARS conference, organized by HSE University in collaboration with the international educational platform Coursera. At the EdCrunch event, opinions differed from the optimistic expectations. In particular, Marianna Snigireva, CEO of Netology, noted at the session "What's Happening in EdTech: Global and Local Trends" that the Russian education market has already lost its status as a "blue ocean" and has become a red one. According to her, the growth rate in this sector has slowed significantly.

During a discussion on "The Unruly Market of Russian EdTech," Mikhail Sverdlov, Development Director at Skypro, emphasized that the growth rates of EdTech companies vary significantly. While the average growth rate is 20-25%, industry leaders demonstrate impressive revenue increases of up to 400% per year. This creates a situation in which part of the market grows rapidly, while less successful companies drag the average down, reducing the overall growth rate to 20%. This uneven development highlights the need for deeper analysis and the adaptation of strategies to achieve sustainable growth in Russian EdTech.

Andrey Lobanov, Founder and CEO of Algorithmika, is confident that the Russian EdTech sector will grow more slowly in the future than it has in the past eighteen months. He attributes this to the fact that the intensive growth observed during the pandemic was supported by so-called "semi-natural" factors. As external conditions weaken, a natural pullback is expected, which will impact the industry's future growth rates.

According to Lobanov, there is a risk of reduced activity and the possible loss of profits for EdTech companies. This trend could negatively impact the education sector, as many startups rely on investment and constant growth. In a context of economic instability, it is important to consider how changes in funding could impact innovation and the quality of educational services. A decline in interest in EdTech could lead to a reduction in the number of resources available to students and teachers, which will ultimately impact the quality of education overall.

EdTech in its early years can be compared to the Wild West. In Russia, the situation is exacerbated by the fact that it is not always possible to require polite communication from teachers in the school system, and many university professors do not pay due attention to pedagogical quality. However, EdTech stands out in this context. As user awareness of technological products and their capabilities increases, so do the demands on the quality of educational solutions. If EdTech fails to adapt and improve the quality of its offerings, this could lead to slower or even contraction of the market.

According to experts, EdTech companies should focus on improving the quality of their educational products. This will not only attract more customers but also improve the user experience, which in turn will contribute to increased trust in educational technology brands. Improving the quality of content, interface, and platform functionality is a key factor for successful business development in this competitive industry.

Who will lead in Russian EdTech?

In his speech, Vasily Alekseev noted that the EdTech market is expecting a transformation aimed at improving the quality of products. Other participants also agreed with this position, emphasizing the need to work on improving quality in this area.

Moderator Maxim Spiridonov raised the important question of who will become the leader in the EdTech market if the main competitive advantage is product quality. Perhaps these will be young startups offering breakthrough solutions. According to the Pareto principle, 80% of innovations originate in companies that have only 20% of the global R&D budgets, which often applies to startups. These companies are capable of introducing new approaches and technologies that can significantly change the dynamics of the educational technology market. Therefore, a focus on quality and innovation will be a determining factor for success in this field.

Mikhail Myagkov disagrees with the widespread opinion about startups. He is convinced that the keys to success lie in the hands of the largest market players. In a highly competitive environment, established companies are able to influence trends and set the direction of development. They have the resources, experience, and networks that allow them not only to survive but also to thrive. Startups striving for success must take this dynamic into account and seek opportunities to collaborate with industry leaders, which can significantly increase their chances of development and scaling.

Education is a process that gradually develops technology. Large companies have the resources to implement such changes. I'm not sure that you can create a revolutionary idea in EdTech while sitting in a lab among highly qualified specialists. In my opinion, real progress in technology is achieved through constant practice, interaction with students, and gradual improvement of the quality of the educational process.

Large digital companies have significant resources for accessing customers and investing in innovative products. This creates the conditions for them to become leaders in their industry, according to Myagkov. However, he emphasizes that current market leaders will not necessarily maintain their positions in the future. Changes in consumer preferences and technological trends can lead to the emergence of new players and change existing rankings.

Vasily Alekseev emphasizes the importance of "young and daring" companies in the EdTech sector. He believes that in this market, it's not so much products that compete, but the management systems behind them. Alekseev predicts that future leaders will be companies with unconventional business models that differ from traditional approaches in the education sector.

Many people in the infobusiness sector have every chance of making it into the top 10, 20, or 30 rankings with impressive results. While we can't reveal their names until the rankings are published, we're already familiar with some of them. Therefore, I urge our viewers to keep an open mind and consider those who have achieved significantly greater success than we might have imagined. This is an important moment for understanding the realities of the infobusiness and the opportunities it presents.

This call to action is no accident: several months ago, Like Center took first place in the ranking of the largest EdTech companies by revenue for the first time. This event provoked a variety of reactions, as evidenced by the comments under the post by Smart Rankings founder Daria Ryzhkova – from caution to outright aggression. Some users questioned the company's business model, which offers not only long-term entrepreneurship programs but also short-term two- and three-day intensives, calling its activities "infogypsyism." At the end of the discussion about "unrelenting EdTech," Andrey Lobanov recommended that creators of educational startups focus on developing products that are in demand in foreign markets. Relying on the capabilities of the Russian economy when planning their business is inappropriate, in his opinion. Lobanov is also convinced that Russian EdTech is capable of creating educational solutions that meet global standards. This is due not only to the rich methodological legacy of the Soviet school of mathematics but also to the high level of qualifications of specialists in this field. Creating competitive products in the international arena requires an innovative approach and adaptation to the demands of the global market. In Russia, there is a high thirst for knowledge and a fairly high level of education. This creates the conditions for both the development of innovative products and the formation of an interested audience ready to consume them. Unlike Russia, people in Europe are more relaxed about education and self-development. In Asia, the number of qualified specialists capable of creating competitive products is limited. Thus, Russia has unique resources for developing educational and entrepreneurial activity, which opens up new market opportunities.

Lobanov believes that in the next few years, Russian companies will actively export models and projects that have proven successful in Russia beyond the country's borders, primarily to less developed regions. Of course, most solutions will require significant adaptation to meet the needs of new audiences. While success cannot be guaranteed, this development path will help EdTech companies maintain high growth rates. Adapting products to international markets and taking into account local specifics will be key factors for success in this field.

In his recommendations for newcomers to the EdTech market, Dmitry Krutov emphasizes the importance of niche training. He predicts that this trend will be one of the key trends of next year. Niche training allows for a more precise response to the needs of target groups, offering specialized programs that align with current market demands. This opens up new opportunities for educational platforms and facilitates more effective skill development for students. In the increasingly competitive EdTech market, focusing on niche areas can be a key step to success.

Narrow niches offer so-called blue oceans where success is possible. Numerous examples confirm this. New companies are also emerging in the IT sector, which could soon take leading positions in rankings. These niches offer unique opportunities for growth and development, allowing startups to stand out from the competition and find their audience.

Participants in the session dedicated to global and local trends in EdTech emphasized the opportunities for implementing new solutions. In a rapidly changing educational landscape, innovations in educational technology are becoming especially relevant. Participants discussed how modern technologies can improve the quality of education and make it more accessible. The use of new approaches and tools will enable the creation of effective educational processes that meet the demands of the times.

• According to Maria Spies, there are currently not many technologies available in the world to support students and their socialization. New companies could develop solutions to support the educational process beyond the classroom.
• And Puzzle English CEO Ivan Shtanko is confident that the next big trend will be developing students' thinking rather than transmitting information.

Marianna Snigireva focused on key technological trends, such as personalization through digital footprint analysis, as well as the development of virtual and augmented reality technologies. An important goal she highlighted is reducing digital inequality. This area requires attention, as access to modern technologies and information is becoming critical to ensuring equal opportunities in society.

In recent years, there has been a growing interest in online education among people from various social groups. This is wonderful, as more and more educational programs are appearing on the market that provide people of any age with the opportunity to change professions and start a new life. Online education opens up new horizons, allowing you to gain the necessary knowledge and skills without having to attend traditional educational institutions.

What will become a problem

The Russian EdTech market faces a number of obstacles that could slow its development. Participants of the EdCrunch conference identified several key issues affecting progress in this area. These include a lack of funding, a lack of clear government policy in education and technology, and intense competition from international players. Furthermore, low levels of digital literacy among teachers and students also negatively impact the implementation of innovative solutions. These factors require attention and solutions to ensure sustainable growth of EdTech in Russia.

In his address to Dmitry Krutov, Maxim Spiridonov noted that in his own projects, the emphasis on the external design and marketing of the product sometimes became excessive. This underscores the importance of balancing the visual appeal and functionality of the product. Excessive attention to external aspects can distract from the essence, which ultimately negatively impacts the perception and effectiveness of the product.

We have created an environment in the EdTech market where everyone strives to stand out by promising maximum benefits, which drives sales. However, product quality often fails to meet user expectations, leading to one-time purchases. This can become an obstacle to further development. Time has passed, and the mass audience no longer perceives online education as something exotic. Users can quickly assess the true value of offers and say, "You promise impressive results, but in reality, you don't." As a result, after their first purchase, they may be dissatisfied, which negatively impacts the company's reputation. Therefore, it's important not only to attract new customers but also to ensure high-quality educational products to keep them coming back.

Dmitry Krutov characterized this statement as speculation and expressed disagreement. In his opinion, the problem has deeper roots, and the presentation of EdTech products has lost its aggressive vibrancy. Companies in this field are becoming larger and prefer a more restrained style in communicating with the audience. This change reflects a new strategy aimed at creating trusting relationships with clients and emphasizing the quality of the product, rather than its visual appeal.

According to Dmitry Krutov, the roots of the single-purchase problem must be sought precisely in this aspect.

I have repeatedly noted that the term "lifelong learning" is of interest to specialists, marketers, and education experts, but remains unclear to most people. I always emphasize: "Let's pay attention to the number of repeat sales at Moscow State University." The problem is that many people are not ready to continue their education, and currently we are faced with a limited number of those who are considering further education. This highlights the importance of raising awareness of the benefits of lifelong learning and the need to adapt educational programs to the real needs and interests of the audience.

Mikhail Sverdlov shares this opinion. He noted that EdTech companies are currently reaching the very top of the audience—those who have already decided on their educational and career choices. However, making such a decision requires free time and resources. EdTech representatives believe the key to solving this problem lies in education, as previously mentioned by Krutov. They strive to help people choose educational programs that will make their lives more satisfying and happier.

At the end of the EdCrunch conference, it was announced that the State Duma had adopted amendments to the Law "On Education." These changes require the use of only online platforms and electronic resources verified by the Ministry of Education in public schools and colleges. Maxim Spiridonov noted at the conference that Russian regulators are actively signaling their intentions to control the content and formats of digital education. The question of whether government restrictions could slow the development of EdTech, particularly in the field of education for children and adolescents, remains relevant. It's important to understand that such measures can both support the quality of education and create barriers to innovation in educational technology.

Mikhail Myagkov believes that the government's introduction of content standards and platforms for school education is a logical step. He notes that this could negatively impact the size of the EdTech market, but does not consider it catastrophic. He believes that oversight is necessary to improve the quality of education and ensure equal access to modern educational resources.

When the situation stabilizes, companies will begin to develop strategies for engaging with the market. However, this won't be like the US school market a friend tells me about. In such cases, you leave a meeting with the principal selling him a messenger app for parents, and your competitor walks into the next meeting. This underscores the highly competitive and dynamic nature of the educational technology market. It's important to remember that success in such conditions depends on the ability to adapt and find unique offerings that meet client needs.

Mikhail Sverdlov emphasized that government involvement in adult retraining programs sometimes results in funding for educational initiatives ending up in the hands of unreliable providers. This raises concerns about the quality of services provided and the efficient use of budget funds. The need to ensure transparency and select qualified organizations to implement such programs is particularly relevant in the context of improving the level of education and professional training for adults.

Public investments in higher education are often not accompanied by clear guarantees of results. As a result, 16 billion rubles from the budget annually create a stream of specialists whose average salary is approximately 30,000 rubles. This situation suits many, but the question arises: is this truly an acceptable outcome for society and the country's economy? We must consider how to optimize investments in education so that they are more effective and meet the expectations of both students and the state.

In the area of ​​continuing education for adults, the state does not prevent EdTech companies from achieving high results in retraining. Therefore, federal retraining programs, according to Sverdlov, have at least an indirect benefit. They promote IT professions, inform citizens about upcoming changes in the labor market, and help them adapt to new conditions, thereby facilitating the acquisition of relevant skills. This creates opportunities for professional growth and improves the competitiveness of workers in a changing world.

Finding and engaging new audiences both in international markets and within the country, as well as improving the quality of educational services, will be key areas of development for Russian EdTech in the near future. Focusing on expanding audiences and improving content quality will allow companies to remain competitive and meet the growing needs of users in educational technologies.

Read also:

• How EdTech is looking for approaches to assessing the quality of education
• What to watch and listen to: the prospects of EdTech
• What is EdTech? Opinions of its representatives
• Why EdTech in Russia is impossible without the state