91 started with, also best-known for, 91 Assistant, software for users to organize apps in smart phones. Later on it became an app platform. As more and more educational apps emerged, 91 came up with several services for online education, such as a collection of apps for kids. The educational content 91 has can be a plus for it to sell a hardware device. Also, it is expected long-tail revenues will be generated from the in-built content ecosystem.
There are several players in the kids’ tablet market, including some well-known brands that have been in consumer electronics business for a long time, such as Newsmy, best-known as an MP3 player brand, and Subor, a long-time brand for educational electronics. The Newsmy one claims that it has licensed exclusive right from BBC to use the Teletubbies to make courses attractive to children.
Similar to manufacturing mobile phones, it’s not difficult to reach out to manufacturers to design and produce certain hardware in China. That’s also one of the reasons that margins for smart phones declined for a crowded market fuels competition and drive down prices – previously the margin could be as high as 40% while now it’s 10% for the Xiaomi phone(disclosed by an investor of Xiaomi’s); more than a few manufacturers can hardly make a profit.
It’s unknown what a margin it is for such a kids’ tablet, but it is well-recognized that content is the selling point to Chinese parents who may not care much about the functions of a device. Once I saw a mom buying such a device at a book store, only asking whether the in-built text books were the latest version and how much more educational content could be downloaded from the its official website. Price is normally not a concern to parents.
For 91, its app platform and educational service under development could drive the sales of the tablet and the sold devices could bring in more revenues by selling more content or services, only if parents considered 91’s content is good for their kids.
Subor has been in the educational device business for such a long time. When I was a kid, I had a Subor Learning Machine home. But, I cannot recall even once I used it for studying or learning anything. Instead, I was playing Super Mario. We gathered at different friends’ homes, playing games by connecting a Subor Learning Machine to a TV set.
Today, you can see kids holding iPads everywhere in first-tier cities like Beijing. They are, like we were, playing games. Would you wonder why their parents don’t give their educational apps to play with since there are a plenty in iTunes stores? Do you think parents would like to buy 91 kids’ tablets so that their kids have no access to games? But I guess 91 hopes to earn some money from gaming app downloads or in-game items.