edtech companies

How Are Edtech Companies Making A Billion Dollar Revenue? Secrets To Edtech Business Success!

Business 23 November 2023 5 Mins Read

COVID-19 created many problems, and the solutions to those are here to stay. Yes, you are seeing an opportunity. If you are willing to take it, you must know how most edtech companies are making money. This article has the top 6 edtech revenue models you can consider. 

Remote work and remote learning are pretty common after the 2020 Covid breakout. These models are increasing. Interaction of technology in education has been prominent in the last few years. As a result, Edtech companies are rising. 

The edtech market will expectedly grow up to a valuation of US$288.4 Billion by 2031 from US$74.2 Bn in 2021. It represents a CAGR (compound annual growth rate) of 14.5%.

Freemium

Not just edtech, many entertainment and service platforms are also following the freemium revenue. It creates an opening for edtech startups to analyze what type of revenue model works for them. So, what does freemium mean for edtech? 

How It Works?

Edtech startups attract users by providing free access to their products. Later on, they put a price cap on the service and anticipate the users to purchase and upgrade to a newer version of the same. 

Challenges

Whether they want to upgrade or not, it lies completely in the users’ hands. A negative side of the freemium revenue model for edtech companies is cases where the users do not upgrade. Although the students are excited about the services, they may not always convince their parents and teachers to fund these services.

Solutions

However, companies use smart methods like features and time limitations to make the users upgrade to a paid version. For example, many edtech companies limit their users after a month or two weeks. Also, a very personalized marketing can help spread the words. 

Some platforms limit users from accessing certain features. It takes these companies a lot of hard work and time to put together these services. 

It would take efficient marketing targeting the teachers and the parents to avail services from the edtech companies for profitability. 

Top Down Approach

Edtech companies are also seeing some level of success by following one more conventional approach for revenue generation – the top-down approach. Basically, edtech companies sell their products to schools through district officials. 

How It works?

First, a company has to determine the market size of that industry. Next, they identify the size of the market using the projected percentage of penetration. Once they have planned the market size, they figure out how to boost their revenue. 

Next, the district buys every school that it manages. Since the district officials have many schools under their management, they are prospects for a larger-scale contract.

Challenges

The main downside of edtech companies following the top-down approach is the level of rising market competition. Also, the contracts almost take forever to complete. The district also has different demands, mostly regarding customer service. 

Solutions

Startups can learn from successful companies like Schoolzilla to unify more schools under their umbrella. They can also work on their customer care services and provide the schools with the aid they need. 

Schoolzilla has successfully unified 140 schools under their services. They also provide the schools with data-driven metrics to showcase the growth due to changes implemented. 

Bottom-Up Approach

The Bottom-Up approach is another way of revenue generation for edtech companies. 

How It Works?

This model works by first identifying the market size and anticipating growth. Next, according to growth anticipation, these companies can determine the revenue part. Usually, they determine the revenue by approaching schools and users. Schools are always eager to use free products. 

But, edtech companies give families to use the product for a price. However, it is the schools that facilitate consumer adoption. 

Challenges

The main challenge here is the cash outflow. On top of the cost of developing the products, edtech companies have to make significant investments to attract customers. This usually plays out positively. But, if the customers do not want to upgrade to a paid version, then burning all that money can lead to potential loss. 

Solutions

The schools and the teachers can encourage students to keep using the products. This way, the parents can also get convinced to purchase them for the users. Also, a product loop between the school and the family users can also help edtech companies boost revenue. 

Sponsored

Another way edtech companies generate revenue from their products is through sponsors. 

How It Works?

The companies do not involve the schools and parents in purchasing their products. Instead, they bring in a corporation that purchases the products as a sponsor and provides the products to the schools and families for free. 

The corporation also helps with the funding for product placement. It is a part of CSR initiatives for corporations. Besides, by sponsoring edtech products, the corporation can build brand awareness and get better exposure. 

Challenges

Again, the competition part still remains. Other companies can also opt to provide similar services to their users. Edtech products and their cost should be reasonable to get the sponsors onboard. 

Edtech Startups

There is no need to create your own courses for a specific niche market. In fact, some edtech startups do not have to create their own courses as well. Instead, they can develop platforms where teachers from different backgrounds and with different sets of skills can teach. 

For example, Udemy and Skillshare are some examples of edtech companies of this type.

Ad Sponsored Edtech Companies

Some edtech companies are ad-sponsored platforms, meaning users will see advertisements throughout the course. It is difficult to create courses and distribute those courses onto online platforms. So, edtech companies can provide courses for free while earning revenue from third-party advertisers. However, advertisements are irritating to the users. So, as an entrepreneur, you must be mindful about the length of advertisement you will show. 

Final Words

Despite potential market growth, competition in the edtech sector keeps on rising as we speak. There are big market players as well as efficient newcomers. So, take your steps mindfully. Plan out your business, marketing, and revenue model reasonably before you enter the market. 

Hopefully, this article provides the valuable insights you need. If yes, let us know what you liked about this particular post. Also, we are open to your feedback and input. Thank you.

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ed tech innovation ed tech startup edtech future of education technology

Shahnawaz is a passionate and professional Content writer. He loves to read, write, draw and share his knowledge in different niches like Technology, Cryptocurrency, Travel,Social Media, Social Media Marketing, and Healthcare.

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