Chinese online tutoring platform Vipkid said that it expects to reach profitability this year after making a number of internal changes, following a flood of investment in the market in 2020 which skipped over one of its largest players.
Why it matters: The news could boost investor confidence in the company’s outlook. Observers and shareholders have criticized Vipkid for prioritizing growth over sustainability and pushing sales rather than addressing core needs such as technology.
- Investors turned cold on the company in 2019 as its customer acquisition and other costs rocketed, and after what many viewed as overextension into different class models.
- The company received its last round of funding in 2019, missing out on a surge in edtech investments in 2020.
- Vipkid now faces intensified competition from a host of deep-pocketed rivals like Yuanfudao and Zuoyebang.
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Details: Zhang Yuejia, co-founder of Vipshop, said to Chinese media outlet Late Post that the company expects to achieve corporate profitability in the second half of this year at the latest.
- The company has undergone a raft of internal adjustments beginning in 2019, the report said. It reduced employee headcount to 7,000 from 12,000 last year and lowered its rent by RMB 30 million ($4.7 million), moving its office out of pricy downtown real estate.
- The company will lay off an additional 10% to 30% of its employees before the end of this year, according to the report.
- Company CEO Mi Wenjuan said in a letter that the company will streamline its offerings to one-on-one online classes, courses combining live English tutors with artificial intelligence-powered online assistants, as well as AI English and math classes for kids.
- Vipkid will reduce its K-12 “dual-teacher big class” offerings, in which a foreign teacher instructs large classes and a Chinese teacher coaches smaller groups, an area dominated by rivals Yuanfudao and Zuoyebang.
- After a year of adjustment, the company said in August that it had reached per customer profitability for two consecutive quarters.
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Context: Vipkid received its Series E led by Tencent in 2019 without specifying the size of the round.