This week, China Voices brings TechNode Squared members a timely report VIPKID’s early promise and current troubles, translated by courtesy of LatePost. TechNode has not independently verified the claims made below. Additional reporting by Emma Lee.

VIPKID, an online English language teaching platform, occupies a unique place in US-China tech relations. Since its founding in 2013, CEO Wendy Mi has grown the company to the point where tens of thousands of Americans daily teach hundreds of thousands of Chinese. LatePost charts the growth of the firm, outlining how strategic decisions to focus on upmarket customers, create a strong sales culture, and prioritize growth over all else gave VIPKID an early advantage as the market for online education mushroomed. Yet of late, the technology backend and managerial shortcomings have hampered VIPKID’s progress. The firm has also struggled to create a product as appealing as its core offering of one on one online classes.   

This core offering, however, struggles to make money. This past June, founder Wendy Mi set the goal of making RMB 1 (about 14 cents) per class. In this week’s translation, LatePost reports that the company has bought size at a high price, reporting operational numbers based on an anonymous “former mid-level manager.” In a statement to TechNode, factoring in VIPKID’s extensive marketing, LatePost reports, customer acquisition costs are as high as RMB 6,000. Since profit per unit is about RMB 42, and the average customer takes seven classes per month, a customer has to spend two years on the VIPKIDS platform just for the company to break even on sales and marketing costs. Recent layoffs, moving employees to tier-two cities, and the disappearance of afternoon snacks speak to the firm’s efforts to aggressively cut costs as investors lose patience with companies that sacrifice profits for size. 

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