Text/Forbes China

The Internet wave has been unstoppable for 20 years, and the education track is almost the most difficult fortress to conquer.

For Internet technology, the education scene is an extremely personalized and highly specialized field. There are very few Chinese online education companies listed on the New York Stock Exchange capital market in the United States. As the first independently listed subsidiary of NetEase, NetEase Youdao (NYSE: DAO) achieved rapid performance in 2020, with net income in the first half of the year reaching 1.165 billion yuan, a year-on-year increase of 112.3%.

NetEase Youdao is named after "A gentleman loves money and gets it in a proper way." What is the so-called "Tao"? Finding such a path in a red sea filled with giants is not easy.

NetEase CEO Ding Lei said: "I feel that I am a victim of education and also a beneficiary of education." When I was listening to a math class, why did the math teacher speak so vividly and the other math teacher let me People find it boring? Because each teacher expresses and guides the same educational content differently, different learning effects will be produced.

Ding Lei told Forbes China: "Youdao's most important investment is in content. NetEase is not in a particular hurry. I believe that monetization will happen sooner or later, and we will not simply and crudely think about monetization in the short term. ”

“I have been preparing for education for ten years”

In October 2019, NetEase Youdao rang the bell of the New York Stock Exchange. Ding Lei said: "NetEase has been looking for a manifestation of corporate social value, in addition to making money. We have made many attempts and worked hard to create some value for society that companies can do. The Internet is originally a knowledge sharing platform, and I am open I am a beneficiary of traditional education. Therefore, I am very interested in education. I have been preparing for it for ten years."

Since 2020, the sudden outbreak of the new coronavirus has made the advantages of online education more prominent. . Affected by the epidemic, the penetration rate of the K12 online education industry reached its peak in March 2020. In the second quarter, NetEase Youdao's net revenue from learning services and products was 520 million yuan, a year-on-year increase of 190%. The revenue growth of this segment was mainly attributable to the revenue growth of Youdao Premium Courses. During the reporting period, Youdao Premium Courses achieved sales of 460 million yuan, a year-on-year increase of 214.5%, accounting for 74% of the company's net income. Among them, K12 is the main growth engine.

Ding Lei said that in the past, many educational resources were invested in the school hardware environment, but now, Internet companies are investing in course content. Through market competition, he believes that this is the most remarkable thing that the Internet has done in China to improve the quality of course content and reduce the costs for families, businesses and online courses. "The best investment in the world is investing in education." Ding Lei said.

The great power of technology is to make people become better people and make the world a better world, rather than just pursuing faster speed and higher efficiency at the same latitude.

Ding Lei recalled that NetEase started offering open courses as early as 2010. At that time, this move had a great impact on the education industry. In the past ten years, NetEase Open Courses has translated 13,000 hours of courses into Chinese at its own expense. These courses are from top universities in Europe, the United States, Japan and South Korea. Ding Lei’s purpose of doing NetEase’s open courses is to create a 24-hour university course without walls. "Because I had such a regrettable experience when I was in college. There was a teacher next door who taught a very good signal system class, but I didn't have the opportunity to listen to it. Foreign open courses provide such an opportunity. You can Watch videos, videos, and translations 24 hours a day.”

At that time, there were no products in the form of open courses in universities in mainland China. With the advent of NetEase’s open courses, China’s online open courses and Chinese MOOCs gradually emerged.

Since 2010, NetEase has invested millions of yuan in purchasing course copyrights every year. NetEase’s open courses allow everyone to watch course video content for free, even without ads. Ding Lei admitted that as a company, it is not profitable to do these things. For him, it is not his main job. But he believes that an entrepreneur should change and improve people's lives and learning through technology and innovation.

But one problem they gradually discovered is that NetEase’s open courses provide university courses, which are more aimed at adults over the age of 18. Ding Lei said: "I have never been able to solve the problem of K12 education. How can these children before the age of 18 receive a good education?"

In fact, in the K12 track, there are already giants Lin Li, offline education and training institutions mainly New Oriental and TAL have been deeply involved in the industry for many years, and the competition for new online unicorns has also entered a fierce stage. Why does NetEase Youdao carve out its own path in the Red Sea?

In 2014, NetEase Youdao began to try to explore the field of online education. Today, Youdao is positioned as China's leading intelligent learning company, committed to providing 100% user-oriented learning products and services.

One of the most exciting things in business is creating something new out of something old. Not only is this enjoyable, it's also the most effective way to grow your business.

In 2018, Youdao’s self-operated course model has achieved revenue of 284 million yuan. In the first half of 2019, the number of monthly active users of Youdao Dictionary reached 51.2 million, making it the number one language app in China. The early success of Youdao Dictionary allowed NetEase to continue to expand into the field of educational products and services.

NetEase Youdao, NetEase Cloud Music and other businesses have pressed the growth accelerator button for NetEase. In the second quarter of 2020, NetEase Youdao's net income was 620 million yuan, a year-on-year increase of 93.1%; the innovation and other business segment's net income was 3.73 billion yuan, a year-on-year increase of 38.7%. It is worth mentioning that NetEase Youdao's operating net cash flow continues to be positive, its gross profit margin continues to optimize, and it shows a positive development trend.

Ding Lei believes: "Traffic is king does not seem to be fully applicable in the current education context. The real threshold of Internet education is 'content'." Once the content barrier is overcome, it will become its own moat. .

In September 2019, NetEase Group’s public welfare project “One Screen” was implemented on a large scale for the first time, entering more than 300 schools in more than ten counties in China, benefiting tens of thousands of students. With the live broadcast system of Youdao Premium Courses, students can receive high-quality teaching content online. At the same time, NetEase will also provide "online classes" to teachers in poor areas and set up teacher training courses, allowing famous teachers from Qingbei to prepare lessons and improve the quality of teaching from the source.

Ding Lei hopes to bring together the best educational resources in the country and bring the top "school district housing" online to realize his dream: to allow knowledge to flow without class and to make school district housing available everywhere in China. .

He hopes that the change of technology in education will not only change from offline to online, but also promote the overall change of the industry.

Polishing the texture, as always

In the fast-moving Internet, polishing the texture is a luxury, but Ding Lei said that it will be a matter of time. Creating high-quality products has been NetEase's firm line 20 years ago. At that time, NetEase was just three years old. The young Ding Lei believed that this was the right choice to overcome the fog and win the competition in the Internet world.

For more than 20 years, Ding Lei has maintained his original attitude as an entrepreneur. Making a debut with a soulful product is considered by the outside world to be a "very NetEase" thing. Through long-term research and insight into people's hearts, NetEase can spend nearly 20 years polishing a game, and it can also spend several years making a music app.

Take educational products as an example. Unlike many education brands that sell knowledge, NetEase Youdao does not build a platform, but seeks to cooperate with famous teachers to create high-quality, high-quality content together in a "studio model" . While various schools are on the road to “de-famous teachers”, Youdao has always been committed to cultivating famous teachers.

Ding Lei said that products should have texture. Behind the texture visible to users is the core of NetEase technology. He believes that many people use technology only to improve efficiency and reduce costs, which is not particularly meaningful. Any technology must have an application scenario, and you must understand what kind of scenario it is. Technology is not the absolute threshold for the Internet. The most important thing is to apply it in scenarios and generate value in the scenarios. When it comes to AI in the spotlight, Ding Lei believes that it should either be labeled as AI or artificial intelligence, and that technology must be truly used in valuable areas. Starting from pain points and being driven by demand is one of the reasons why NetEase Youdao's AI education tools can succeed. It is precisely this method of exploration that allows NetEase's AI achievements and technologies to have practical and in-depth uses from the very beginning, and a large amount of feedback is quickly presented to feed back technological improvements.

Picking up the Youdao Dictionary Pen, Ding Lei’s pride in his product appeared on his face, like a passionate entrepreneurial young man.

Two years ago, Youdao began to lay out intelligent hardware. In October 2017, Youdao launched its first smart hardware "Youdao Translation Egg". Since then, hardware products such as Youdao Translator and Youdao Dictionary Pen have been launched one after another. As of August this year, Youdao Yifang has launched 9 educational smart hardware products and will launch more in the future. These products are determined to improve the learning efficiency of Chinese people through the implementation of AI technology.

For online education, what kind of product is considered a good product?

Ding Lei analyzed that learning is very different from games. Games are like eating delicious food, falling in love, and singing karaoke alone. This is human nature. Only learning is counter-human to some extent and makes you uncomfortable. Therefore, the Chinese have a saying: "Study in the sea and work hard on the boat". But if learning products can be integrated into the game spirit of “killing monsters and upgrading”, users will gradually have the motivation to continue learning.

He believes that the best educational tool in the future is the combination of artificial intelligence, AR and VR. For example, the arrangement of carbon atoms in diamond is different from that in ordinary graphite. How can this abstract three-dimensional structure be turned into a learning product that users prefer? A blackboard can only draw a plan view, but with the help of AR technology, a person will never forget it after seeing a vivid and three-dimensional structure.

When Ding Lei was young, he had a diligent pursuit of knowledge and personally felt the constraints of lack of educational resources. This was his original intention to make educational products; since he founded NetEase Cloud Music in 2013, Ding Lei has also been on the platform for a long time. Recommend your favorite songs and playlists on the Internet; even a pair of jeans carefully selected by NetEase has traces of Ding Lei’s pursuit of quality. If you pursue all this, it can only come from "love".

Ding Lei said: "Actually, I have been thinking about Apple products during the Steve Jobs era. They incorporate a lot of industrial design sentiments. You can feel that this product resonates with your heart."

From the road to the simplicity. The grand proposition of changing the world, for Ding Lei, is to create products that can touch people's hearts and reach their souls.

He has told the outside world many times that he founded NetEase 23 years ago and was inspired by the autobiographical book "The First Half of My Life" by TSMC founder Zhang Zhongmou. Ding Lei said: "When I see a 56-year-old senior doing something enthusiastically, why can't I do it as a 26-year-old young man?" The power of idols is infinite and will influence many people to want to do it. Change the world.

If I started a business at the age of 26, it was because of my passion for personal heroism. Today, 49-year-old Ding Lei has greater responsibilities to shareholders, employees and society. As Jim Collins wrote early in his book, "Shareholders, partners, employees and consumers, you cannot harm the interests of any of them."

It can take ten years to polish a product Sharpen your sword, but to monetize your product, you need to find a new business model.

First expand users through free products, and then do commercial monetization. This is typical Internet thinking, but it is not Ding Lei’s path. What Ding Lei believes in is: Make the product perfect first, and then consider the market and users to pay for it. The road to simplicity.

On the day Youdao went public, Ding Lei once said that the methods and forms of online education in the future will be more diversified, and will not only be based on the use of a computer or mobile phone screen, but will also be based on AR and VR in the future. Such education It will be more immersive, more efficient, and more interesting.

He believes that the core of the competitive advantage of education is to use technological tools and means to help users complete educational courses, master the knowledge chain of education, and target certain knowledge points. Weaknesses are repeatedly improved and strengthened. Especially when a new thing appears, as an entrepreneur, you must be able to seize the new business model that can be generated by this new device application.

Ding Lei said, "We are actually looking forward to AR glasses. AR glasses are more comfortable than VR glasses. I think AR glasses will have a huge impact on the world. Because NetEase has been working in the content and technology fields for a long time, we After AR glasses come out, what kind of product innovations can we make together? If you pick up a magazine today and you can’t understand the text, but your glasses have a radar, and when you scan the magazine, everything in English will be translated into Chinese. . This may be something that will happen soon.”

“For entrepreneurs, you must have the ability to track the development of technology, and you must be prepared for this. This process cannot be done by other companies, only we can do it, because Youdao has been doing the core technology in the whole process for almost 20 years, and the engine is in our hands. The glasses are just a way to help me obtain information and complete information input or output. Equipment. In order to wait for the advent of such a product, NetEase has made technical preparations for a long time. "Ding Lei believes that only by doing a good job in R&D and preparation of basic technologies can the product further explode and expand its application scope when opportunities and trends come.

Today, games, music and education are NetEase’s three major development areas, and the main thing they have in common is content. But in an era where traffic is king, how can content build a moat of its own value?

Ding Lei believes that the core is the creativity of creation, the means and process of creation, and the application of technology. Technology can solve problems of efficiency and cost, which can help some companies generate value in PGC content.

NetEase Cloud Music has always been Ding Lei’s favorite.

Why are songs such as "Qian Qian Que Song" and "Human World" composed by popular Japanese composers in the 1990s so enduring?

China’s music industry needs an industrial system and a business system that can allow these musicians to continue to grow. This is true for music, and so is education.

In 2003, 32-year-old Ding Lei topped the Forbes China Rich List with a net worth of US$1.076 billion, becoming the first Internet-born richest man in mainland China. But for Ding Lei at that time, how to build a great and long-lasting company was a long-term road to explore.

Ding Lei said: "I read "Built to Last" in 2003 and "Win" in 2005. I met these two books late. "Built to Last" answered my most important question An important question is what is the value of a company's existence.

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