Edtech Failed the Pandemic Test
Startups and investors have pumped billions into the promise of remote learning. Why are we still so far behind?
Welcome to Buy/Sell/Hold, Marker’s weekly newsletter that’s 100% business intelligence and 0% investment advice. Each week, our writers Steve LeVine and Rob Walker make sense of the most important developments in business right now — and give them a Buy for clever moves or positive trends, a Sell for mistakes or missed opportunities, or a Hold if they’re noteworthy but too early to call.
🏫 Edtech Could’ve Saved School. How Did It Fail So Badly?🏫
The Buy/Sell/Hold Analysis
For more than a decade, edtech startups and their backers have touted a digital future in which children, regardless of their background, will be able to soak up the best that education has to offer, remotely. It won’t matter your family’s income, the neighborhood, nor even the country where you live. But the coronavirus pandemic — which should have been the moment for these companies to shine — has instead been a surprising failure for virtual education. Distance learning has, at least so far, squandered its big test.
As edtech evangelists like Bill Gates have talked up the more equitable education future, U.S. and global venture firms have bought into their vision, pumping billions into these companies over the past six years. Crunchbase compared VC funding for edtech in the first half of every year since 2015, and found that venture investment has remained steady at an average of about $723 million. Unfortunately, the bulk of U.S. venture funding has gone to companies aimed at adults, and not children — Coursera, for instance, got $130 million in funding in July, with MasterClass raising $100 million in May. Meanwhile, edtech firms marketing to kindergarteners through 12th graders have received significantly less investment (Enuma raised $9 million in May).
According to a tracker funded by the Gates Foundation, Brown University, and Harvard, if you single out the children of high-income parents, their virtual learning progress soared by 45%. But if you were the ordinary middle-income or poor family, edtech failed you. In a June study, McKinsey reckoned that a fully digital scenario for the entirety of the current academic year would result in a loss of the equivalent of three to four months of math learning for kindergarten through 12th grade students.
For most school districts and parents, edtech is the only lifeline right now. But after all that investment, the message from the market should be, “Is this the best you can do?” As of now, remote learning looks like another of those glitzy, wouldn’t-it-be-great stabs at the future — like the smart city and the fully driverless, no-steering-wheel automobile — that at the very least look very, very distant.
— Steve LeVine
⚡ Lightning Round ⚡
⚡ Best Buy Transforms Its Stores Into E-Commerce Hubs: Starting next month, the electronics big box chain will effectively start treating 250 of its some 1,000 U.S. stores as dual retail locations and distribution centers. With its online sales up a whopping 242% in the second quarter compared to the same period last year, pivoting to more efficient, Amazon-esque shipping strategies ahead of what’s certain to be an e-commerce-heavy holiday season puts the retailer in a position to pounce. Buy.
⚡ NYSE and Nasdaq Embrace IPO Alternatives: On Wednesday, the SEC greenlit the New York Stock Exchange’s proposal to let companies raise capital through direct listings. Ever since Spotify used a direct listing to go public in 2018, it has gained popularity among founders and investors as an alternative route to the public markets that lets them keep more of the funds that would traditionally go to the investment banks. The NYSE’s newly approved rules would allow companies to use a direct listing to issue new shares in addition to selling existing shares. Next: The Nasdaq is awaiting approval from the SEC on a similar proposal. Buy.
⚡ Warby Parker Hits a $3 Billion Valuation: The eyeglass startup, which just raised $245 million in new funding valuing it at $3 billion, is the veritable OG of the direct-to-consumer revolution. They pioneered the model of using the internet and a millennial aesthetic to cut out the middlemen, simplify inventory, and pass savings on to consumers. Still, as dozens of startups attempting to replicate their model for everything from toothbrushes to athleisure have struggled with outrageous customer acquisition costs, it’s worth asking whether Warby is just hoarding cash to buy themselves more time to ride out a recession. Hold.
⚡ KFC Drops Its ‘Finger Lickin’ Good’ Slogan: The global fast food giant decided to suspend use of its longtime slogan after people complained that an encouragement to lick one’s fingers didn’t jibe with public health guidelines against face-touching during the pandemic. As one of the few corporate slogans to have withstood the test of time—it’s been in use since the ’50s—and evoke a tangible, corporeal sensation associated with its product (what do “I’m lovin’ it” or “Taste the feeling” mean, anyway?), the slogan will be dearly missed. Until it’s back, we’ll be eating our fried chicken with a fork. Sell.
📈 The Number: $4 million
The approximate opening box-office revenue for the Russell Crowe thriller Unhinged.
This time last year, the top-grossing film was the R-rated coming-of-age comedy Good Boys, taking in more than $30 million. Fast-forward to our current pandemic entertainment season, and Unhinged’s meager seven figures is now considered “a win for the revival of moviegoing in the U.S.,” according to The Hollywood Reporter. (Unhinged’s haul would have put it in 13th place, had it been released this week in 2019, trailing the Richard Linklater film Where’d You Go Bernadette, which had a $5.1 million opening.) It’s all relative: What would have been a humiliating flop for a mass-oriented star vehicle back then is now a success because Unhinged played in 1,823 theaters, per THR, “the first new wide release to hit the big screen since cinemas went dark in March amid the novel coronavirus pandemic.” That’s far from business as usual — Good Boys played on more than 3,200 screens — but it’s seen as a hopeful sign for the movie theater business, which has been hit particularly hard by the pandemic. The massive AMC Theatres chain, for instance, reported a second-quarter loss of $2.2 billion. The next big test: Christopher Nolan’s $200 million spy extravaganza Tenet, delayed several times since a planned July release, is rolling out in international markets — including China, where limited-capacity theaters have helped bring back moviegoers — early next month. Hollywood wants to know: What will it take for you to give us a thumbs up again?
— Rob Walker
📖 Marker’s Read of the Week: After nearly two decades of unprofitability, the pandemic-induced nesting surge finally made Wayfair profitable — but can a company that had a singular breakthrough in a freakishly anomalous quarter keep it up?
🔎 Marker’s New Fixation 🔎
Spruce up your resume and dust off your aloof, ironic sense of humor, because Bud Light is hiring a Chief Meme Officer to help peddle its hard seltzer online. The chosen “CMO” will receive $5,000 a month for three months, complimentary Bud Light Seltzer, and the chance to participate in a glorified PR stunt in exchange for making “at least 10 fire Bud Light Seltzer memes per week.” Bud’s definition of a meme, in this context, is comically dissonant with its original meaning: a piece of content organically shared between individuals that eventually results in widespread imitation, iteration, and visibility. Instead, these C-suite worthy memes will be the result of top-down promotion between a company and a gigantic ad-targeted audience that is unlikely to respond with its own variations on the original. Like Michael Bloomberg’s 2020 presidential campaign — one which infamously dumped money in the laps of meme-generators to manufacture faux social media buzz — Bud Light Seltzer is unlikely to see any traction beyond the initial novelty of its acknowledging that memes exist without knowing what distinguishes them from ads.
— Jean-Luc Bouchard, Senior Platform Editor, Marker
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