Whether it’s schools or universities, digital education is still in its infancy. With Corona, this is changing worldwide. There is also a potential multi-billion market for investors. By Oliver Ristau, Euro on Sunday
Beducation is not a given. Not in Germany either: Many girls and boys learn almost nothing at school because of the Corona chaos. In addition to socio-psychological reasons, this is due to the lack of digitizationto compensate for the loss of face-to-face teaching. When it comes to access to digital learning formats and modern technology, some German schools are still teaching from the Stone Age.
Corona shows the deficits. Not only at school, but also in universities and vocational training. “From a global perspective, hardly any area of life is less digitized than education,” says Stuart Forbes, co-founder of ETF provider Rize, which specializes in thematic funds. He expects that to change drastically. Corona acts as a dam break. In the United States, for example, the demand for qualifications that can be completed at home on a computer is growing rapidly. More and more providers are emerging, including for distance education. This way, students can earn college degrees without even having to go to college in person. In addition to the Internet and computers, prerequisites for e-learning are the programs of e-learning providers that cooperate with universities. E-learning is also a convenient way for companies to further qualify their employees.
Strong growth expected
The market is huge. According to calculations by market research institute HolonIQ, global spending on education was $5.4 trillion in 2020, largely funded by the state, but also by private households and businesses. By 2030, the education sector could reach $8 trillion. So far, only 4% of global education spending is on digital technologies. By 2025, analysts see the share rising to 5.5%. This represents an increase of approximately $180 billion and corresponds to an annual increase of 16%.
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Digital learning games for preschoolers, such as those offered by the Norwegian company Kahoot, can be expected to be very dynamic. Additionally, the variety of e-learning programs for schools and training centers will continue to grow. Teachers go home via a screen and individually transmit the learning content. It also means a boost for technologies such as augmented and virtual reality (AR/VR). Medical students could use VR goggles to perform operations, and future pilots could simulate a landing maneuver. This requires developments in artificial intelligence and robotics. Providers of video platforms such as Zoom and Teamviewer or developers of blockchain technologies that make certificates for university exams tamper-proof also benefit. Online courses and new technologies cost money. At the same time, however, costs are falling elsewhere.
Travel for continuing education is not necessary for companies. Distance learning reduces the burden on students as they no longer have to pay high rents in college towns. They can also save on tuition fees; so far, many young people in the United States are still burdened with high debts.
Digital formats could bring more fun in knowledge transfer and therefore better learning success. Greater individualization through online learning can specifically promote strengths and address weaknesses – unlike sometimes ineffective classroom communities.
emerging market boom
Digital technologies are not only progressing in industrialized countries, they are booming in China and in emerging countries in particular. “We project that by 2050, about two billion more people will be active learners than today,” Forbes says. This applies especially to secondary schools and adult education. In the prognosis, the number of completely illiterate decreases at the same time.
In highly populated countries like Brazil, India, Indonesia, Mexico and Nigeria, more than half the population is under 30, many of whom are potentially valuable workers. Especially when they are educated. It’s good for people and for society: the creation of value and income increase significantly with the level of education, as shown by an OECD study. Since central schools in large territorial and island states are only partially accessible, decentralized digital solutions are needed. Full Internet access is available in many locations. In some African slums, the connection is better than in the German provinces.
No wonder the capital market discovered the subject. According to HolonIQ, nearly $48 billion in venture capital has been invested in the digital education industry over the past ten years, mostly in China and the United States. The subject is also gaining importance in the stock market. In 2020, 16 education service providers from around the world took the stage. More recently, the American company Coursera made a brilliant debut in March. It is now one of some 300 companies in the sector listed on the stock exchange. The sector is still small. Only 45 companies reach a market capitalization of more than a billion dollars.
A comparison with the health sector shows the potential that lies dormant there. Healthcare companies have a market value of five trillion dollars, which is more than 60% of the volume of the eight trillion global healthcare market. The market value of companies in the education sector is only $300 billion, or only 5% of the volume of the global education market.
HolonIQ estimates global education spending at $5.4 trillion in 2020, with digital education accounting for 4.2% at $227 billion. Education spending will rise to a total of $7.3 trillion by 2025, of which $404 billion will then go to digital education, a 5 percent share, according to the market research institute. .5%.
Rize Ed. Technology and digital learning
The exchange-traded index fund (ETF) Rize aggregates the shares of 35 companies in the digital education sector. It tracks an index set up by HolonIQ. Most companies come from the United States and China. The fund has come back significantly after launching in August 2020 and peaking in February. A good entry point for investors who want to benefit from the sector’s long-term outlook and want to invest more broadly here.
Teamviewer seems to be on course for growth even after the boom of the onset of the Corona crisis. In the first quarter of 2021, invoiced sales increased by 26% to reach 147 million euros compared to the same quarter of the previous year. Shares of the Swabian software company have been under pressure since it became clear that MDAX will be Manchester United’s sponsor. To some, this sounds a bit like megalomania. Nevertheless, there could be a good buying opportunity right now.
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