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I was a particularly active child in school, and I actively participated in extra-curricular activities, moving from art to music to other things that caught 12 year-old self fancy in a matter of months. Having covered various aspects of the K12 market in the previous blogs, I was therefore curious to explore the extra-curricular education space.
Meishubao has built an online art platform and has established scale in a specific vertical, instead of going horizontal across different hobby subject like dance, music, etc. In India, most startups I have come across are building horizontal platforms across different hobbies and are still in early stages. Meishubao is a great case study of narrowing down on one hobby (art) and going deep into it.

Leading Live Art Education Platform in China

Meishubao is one of the leading art learning platforms in China which started as a community of art enthusiasts and now focuses on live learning. It has several products for online learning with the core product being live learning with 1 on 1 format and small class format (with 4-8 students).
Meishu (美术) refers to art and bao (宝) refers to treasure, hence together it means ‘Art Treasure’.

Students receive a stand and camera reflector from Meishubao which is used for conducting the live class. Here’s a video illustration:

Art classes for kids is a $12B+ Market in 2019!

According to market estimates, the art education for young children in China is around $12B- $15B. Source

Here’s another analogy: China is home to over 235M kids under the age of 14 who are used to spending (per capita) $46 on toys, hence the toy market is ~$11B. Source

Some drivers for such a deep market:

Competitive art entrance exams at higher levels, for which students need strong foundations since childhood
Parents want to introduce sense of aesthetics to their children
The status of fine arts has improved, in the overall education system with some regions requiring a compulsory art evaluation for senior high school exam (中考)
Growth of online market is led by convenience offered to parents to save on travel time (dropping and picking up children from offline centres)
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Meishubao evolved from an art community to a live tutoring platform

Meishubao, in 2014, started as an art community platform which was popular in students who wanted to pursue art for their undergraduate/ graduate studies. In 2017, it started a SAAS service for Art Training Institutes with info. management service for art college entrance exams, etc. In 2018, it struck jackpot with introducing live classesin individual and small class formats. Very recently, it also introduced an AI based self-led class- Bear Art (小能美术) which has better unit economics, since it does not need a live teacher but is empowered with recorded content.

Live art tutoring is convenient, both economically and logistically

Value for art for children is established in China and Meishubao highlights it as a combination of ‘aesthetics, sensitivity, imagination and cognitive ability’. Being a live online platform, it offers much needed convenience to parents and children to attend classes anywhere at the time of their convenience, from teachers from top art universities in China. With help of reflector camera, it’s able to mimic close to offline experience. For group interaction, it also offers smaller classes (with 4-8 students) to add social element at a discounted fee.

Meishubao has diversified offerings to increase potential TAM & realization

Meishubao has an extensive portfolio covering students in age group of 3- 18 years. The live 1:1 product is a relatively premium product with live classes costing around ~$15 class, whereas the small class product costs around ~$10 per class. Xiao Xiong Meishu (Bear Art) is a recent AI product which has self-led content classes which are hosted in a timely fashion and are enabled with help of recorded content and an art box (art and craft accessories) which is couriered by the company on purchase of a course.

Such a wide portfolio of product covers different segments within the same market and ensures that the business is very defensible, enjoying synergies all across.

The company follows the classic free trial class conversion model

After the parents come across the advertisement for Meishubao, they could either download the app or sign up through WeChat Mini App. After registering with phone number, sales consultant contacts parents to arrange a free live class, subsequent to which parents can buy a course. Some courses offered are- Creative Painting, Chinese Painting, Anime and Sketching.

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Meishubao 1:1 app can be used by both parents and older kids to conduct live classes with gamification and social elements built in

Company hires Art Teachers from top art universities in China

Meishubao works with young art teachers from top art universities in China. Teachers get paid around $6 per class (~40% of class fees). The teacher’s fee is slightly lower for the trial class, but they are incentivized with a payout incase the student converts to paid user. Currently Meishubao boasts of a network of 20K art teachers on its platform.

Meishubao has raised over $125M with latest valuation being ~$600M

Company has been growing fast and has consistent support from investors like Tencent, Shunwei Capital, etc.$170M is annualised revenue for 2020 based on June numbers. The number could be much higher now!

The live art tutoring has been getting intense over past few years, since barrier to entry is low

Most players build differentiation on the basis of teacher supply, pricing and size of the classes. Meishubao has been able to diversify its portfolio as discussed above, and is one of the most defensible businesses in this space.

Increase in CAC due to competition led to the launch of AI Class (Bear Art)

Since the contribution margin is shrinking over time due to increase in CAC, Meishubao launched the Bear Art- AI class which has no further teacher cost and lower CAC since the AOV is smaller (~$400). It not only improves the unit economics but also increases the future potential.

India is seeing surge of extra-curricular EdTech platforms

Some companies in the extra-curricular edtech space in India

Most of the companies mentioned above are covid-born and have landed upon a great opportunity given that the children are at home and are looking for replacement of the offline hobby classes. These players offer classes in creative writing, reading, dancing, yoga, music, etc. It’s a very different approach compared to companies in China like Meishubao, VIP Peilian (live online piano learning platform).

Major concerns I’ve with horizontal platforms:

Marketing Hassle: ‘Recall for Consumer’; for example, coding has proved to be an interesting category in extracurricular learning with platforms being able to build a strong recall (with vertical approach), whereas horizontal platforms haven’t really broken out.
Operational Hassle: For edtech start-ups, it’s important to crack one or two segments really well and then establish deep supply with razor sharp focus, otherwise it will be a bottle beck at the time of scale up.

That being said, horizontal play could be an interesting opportunity for increasing the TAM and LTV of customers.

Conclusion:

Building into usual behaviour of parents and students is very crucial for success of any EdTech platform.
Going deep in one category can provide for promising results, if coupled with right technology and product portfolio.
Being agile and coming up with innovative products can help improve the economics and fight with the competition.
It’s very important to question the strategy in extracurricular: whether to go vertical first or horizontal first?!
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Live Art Tutoring EdTech Unicorn in making…