Education in the digital age

The results of the 2022 Programme for International Student Assessment (PISA), published in December by the OECD, show an unprecedented decline in educational attainment worldwide, raising legitimate questions about education systems.

Can EdTech (as in Educational Technology), which is transforming teaching methods through technological innovation, promising to democratize education, contribute to greater success at school and improve lifelong learning?

In her latest report, Micaella Feldstein, Tech & Data specialist, provides an overview of the various EdTech segments and looks at how the sector is set to evolve, with generative AI expected to play a decisive role.

Technological innovation has led to the emergence of numerous distance learning solutions: online courses, including massive open online courses (MOOC), learning management system (LMS) platforms, educational content and tools, online coaching, educational support and tutoring, foreign language learning, edutainment, etc.… Virtual and augmented reality technologies also enable experiential learning. The metaverse, a parallel, persistent and immersive virtual world in 2D or 3D, holds great promise for the world of education and training. Finally, AI is playing an increasingly important role in the creation of synthetic, evolving and personalized content, or even in replacing 'human' tutors with chatbots.

Even if the education sector is highly regulated, conservative and often hostile to reform, the use of distance education and training continues to grow, particularly in the professional sphere. The health crisis has accelerated a so-called hybrid model to take hold in the working world, leading to an increasing recourse to distance learning and training, particularly in the professional sphere.

New generation technologies have indeed proven their advantages in terms of flexibility, cost reduction and accessibility. They meet the demand for individualized services, a trait that has become increasingly prevalent in modern society, particularly among the younger generations. The sector therefore seems destined for a bright future, and shows strong growth prospects between now and 2030, estimated at 13.6% per year (source: Grand View Research). It is the subject of support policies such as France 2030 plan. 

However, EdTech firms are struggling to make a profit, and this is reflected in their stock market performance. The revenues they derive from subscriptions, sales of packages and courses, sales of software and hardware, are not enough to offset the very high cost of investing in new technologies needed to remain competitive.

In particular, the democratisation of generative AI, illustrated by the dazzling success of the famous ChatGPT developed by OpenAI, is changing the game for many EdTech companies, who need to integrate this very powerful technology to maintain their competitive edge. They also compete with the GAFAMs, notably Google and Microsoft, which are developing their own EdTech solutions, such as Google Classroom and Office 365 Education.

In this context, access to finance is all the more complicated because investors are much more cautious and are less interested in a company's growth than in its profitability, the soundness of its business model and the suitability of its management team. The worsening macroeconomic situation and rising interest rates have made it very difficult to finance start-ups in the ecosystem. 

In view of these difficulties, the success of EdTech will depend on a solid business model capable of reassuring wary investors. A wave of consolidation in the sector can also be expected, with further mergers and acquisitions enabling firms to join forces to keep abreast with the latest technologies, while broadening their customer base and expertise.