Three lessons learned from Udacity’s initial China failures

Cracking into the alluring but formidable Chinese market has never been easy. Despite great successes elsewhere, a number of the world’s most powerful tech giants including Google and Uber have fallen out of favor in China. Various reasons contribute to their fiascos, but there’s one common factor behind them: the failure to realize how different China can be.

Udacity, the US online education company that provides nanodegree courses including topics such as tech entrepreneurship, full stack development, and data analysis, is among the foreign tech firms that are geared up for China expansion.

After more than a year of effort, the Udacity team has gone through the initial doubts and pains in penetrating China and started to record an uptick in performance. It’s still too early to say that they are proving successful here, but what they have experienced could provide some useful lessons for those aiming for the same thing.

Foreign tech giants failed to realize how different China can be, or rather, they are unwilling or reluctant to do so, especially at the initial stage of tapping into China when still pre-occupied with the glories of their overseas success.

In 2015, Udacity raised a $105 million D Round at a valuation $1 billion as the first online education unicorn in the US. With abundant capital, they naturally spread out to the global market with new teams in China, India, London, and Brazil.

“We had high hopes when we launched our Chinese site in April last year because we have this Silicon Valley content. Content from Google, Amazon, Facebook, from the inventors a lot of technologies that we use today, even from the inventors of the database, the programing language that programmers are using. But in the first six months of our operations in China, we had no business,” Udacity China head Robert Hsiung said at NewCo Shanghai, a company tour event held by Chinaccelerator.

Around October last year, the team decided that it’s time to break things. “Everything that we do in the US, we just threw it out of the window and started from zero,” said Hsiung.

Payment habits are different here, adapt accordingly

First and foremost, it is important that you don’t overlook the different payment options and habits of Chinese customers, whether you are a startup trying to explore Chinese market or simply doing business with Chinese companies. It would be a shame if users are attracted by the service but didn’t make a purchase due to terrible purchase experiences.

“The most important change we made is the way we price the products,” Hsiung introduced. The way Udacity used to price the product in China or the way it priced in the US is based on subscriptions, which is very common in the West.

“But in China, no one pays for a subscription, everything is pre-paid here, your phone bill, electricity bill, because the system is not designed to deduct automatically from your credit card or your bank account,” he said. “The culture here is about pre-paying for everything, so we switched to a prepaid model. That was a big plus, enabling us to drive a lot of conversions.”

People consume content differently

“We got a lot of feedback that our courses are a bit too long,” said Hsiung. The complaints are not that surprising since Udacity’s courses originally take six to eight months, 10 hours a week of self-propelled learning to complete.

This is really tough to get through, even for US students who have grown in an education system that advocates self-learning and self-improvement. To some extent, their Chinese counterparts are less tenacious in self-motivated study: teachers and parents have played too important a role in monitoring the progress of their studies since early on.

“We cut the courses into two, enabling us to actually lower the price point and shorten the time to completion. Since October of last year, our revenue has grown by 8X,” he said.

Start from the basics

Localization is a big, big term, but comes down to the basics of execution.

In the case of Udacity, language localization is both basic and critical since there’s lot of translation to be done for their video courses. “When we launched in April last year, we made a huge mistake by giving all our content to one translation agency. We found that what they do is basically to put it into Google Translate and send it back to us. We received lots of complaints from the students,” said Hsiung.

Now, the team has set up a full-time localization division that manages volunteers and translation agencies to ensure the highest-quality translations. The team now only has to do text translation of video subtitles and written content. “As of July this year, we have seven locally-translated courses and this number is going to reach seventeen by the end of December.”

Now operating in China for more than one year, the Udacity China team is proud to see that a lot of innovations thriving here in China are actually impacting the rest of the world.

“Our US platform is shifting to the same way we are structuring our packages, they also offer pay by installments, where students can buy our courses in more affordable ways. They are also adopting the way we use WeChat to bring students together to learn together and help each other.

“The biggest thing we have learned about being in China is that things that work in the US don’t necessarily work here. For any startup, you really have to continually innovate and really empower your team to innovate,” he added.