Education is roughly a $6.5 trillion market, but less than 4% of it is digitized, meaning there’s untapped potential for EdTech companies to expand their presence.
The growth momentum is strong. By 2026 the global education technology market size is expected to reach $410, 2 billion, up from 183.4 billion in 2021. Educational institutions, governments, and B2B and B2C customers alike are also eager to spend more on quality education and training, with over $404 billion in global expenditure going towards EdTech.
Emerging technology, new customer segments, growing demand for workforce upskilling, and changing regulations — a lot of forces are shaping the industry. In this post, we spotlight the five main emerging technology trends for the EdTech sector for 2023 and onward.
What Was Happening in the EdTech Market in 2022?
The EdTech industry saw its ups and downs through 2022.
Inflation, economic volatility, and geopolitical concerns negatively affected EdTech funding rounds in Europe. Globally, VC funding rates for EdTech went down for the first time since 2014. In 2022, total funding stood at $10 billion vs. $20.8 billion in 2021.
The US dominated EdTech VC investment rounds, though the total funding decreased by 2X to $3.9 billion, according to Holon IQ. European VCs maintained steadier financing patterns, with deals standing at $2 billion. The steepest drop was tracked in China with funding levels dropping to $0.4 billion in response to new regulations, banning commercial tutoring companies from making profits, raising capital, or listing on stock exchanges worldwide.
Despite the complex market conditions, EdTech still remains a highly lucrative sector.
Some 20 VC firms have allocated funding for EdTech projects including Sequoia Capital, Owl Ventures, and Agility Ventures among them.
Mature EdTech startups increased their valuations, with ByJu’s, Yuanfudao, and Zuoyebang now topping the list of the most valuable EdTech unicorns. Their total valuation stood at
$46 billion, while the other 7 unicorns held a value of $26.85 billion. In other words: current leaders strengthened their grip over the market, making it harder for new companies to enter the market in China and the US.
Top ten EdTech unicorns by valuation. ByJu’s, Yuanfudao, and Zuoyebang hold the highest value in 2022.
Other important EdTech trends in 2022 included:
- Publicly traded and private EdTech companies were valued at $375 billion.
- Six new EdTech unicorns emerged on the market including Paper ($1.8 billion), Multiverse ($1.7 billion), Domestika ($1.3 billion), and ClassDojo ($1.25 billion).
- The most competitive EdTech market players were the following: 2U Inc, BoxLight, Byju’s, Blackboard, Udemy, Coursera, Chegg, Duolingo, Udacity, and Unacademy.
- Udacity, Coursera, and edX decided to withdraw from China’s market due to new regulations and shifted focus to India instead.
- Career progression is a new niche. According to a McKinsey survey, EdTech users increasingly seek value-added services (personalized mentoring, assistance during the job search process) and a sense of community. Mature startups are now looking to expand into the employment territory. For instance, upGrad hired recruiting and staffing agents to help their learners advance in their careers.
How Fast Is EdTech Growing?
Despite the recent setbacks and slowdowns, the EdTech industry continues to grow fast.
According to the Reporter Link, the global education technology market size will increase from $254.80 billion (in 2021) to $605.40 billion by 2027. This is an absolute growth of more than 130%.
The number of EdTech unicorns also keeps multiplying. In July 2020, there were 19 total unicorn companies. At the beginning of 2023, the “herd” has almost doubled. We now have over 28 EdTech unicorn companies worldwide.
The customer demand remains strong, but the market is also maturing fast. This means new entrants must come up with strong value propositions and attractive positioning to attract new customer segments.
What Are the Education Technology Trends for 2023?
Tech know-how has become the main differentiator in the EdTech market. In 2023, the following five technologies will be shaping the EdTech market.
Big Data
Data analytics already enables EdTech companies to personalize the learning experiences, provide better reporting to educators, and quantify the impacts of implemented training programs. Big data analytics can take these use cases a not further.
Udemy relies on big data analytics to measure student engagement rates. Instructors can immediately see the number of students who have opened the lecture, how many minutes they spent watching the lecture, and how many dropped watching the lecture within 15 seconds. Based on this data, course developers can adjust their content for better engagement.
Civitas Learning, in turn, uses big data analytics to provide educators with comprehensive analytics on student performance, using aggregated data from course history, LMS engagement, and advising notes. The educational technology platform offers predictive insights on course completion rates and helps identify struggling students, who need extra support.
To create competitive analytics features, however, EdTech product owners will need to first focus on implementing the optimal data management strategy to ensure rapid, secure, and scalable data processing for data-driven products like adaptive learning platforms, intelligent tutoring systems, and automated test scoring solutions.
Virtual and Augmented Reality
The adoption of virtual and augmented reality in EdTech hasn’t been fast in the K12 sector. However, AR/VR has gained traction in corporate learning. VR products can help upskill employees faster since experiential learning improves long-term knowledge retention by as much as 75%-90%.
In many cases, VR is also a more cost-effective solution, allowing employees to avoid classroom trips and complete training remotely during off-work hours. Peugeot, for example, uses Uptale’s immersive learning platform to deliver VR safety training for its staff. New plant operators can engage with 360° training clips to master the basics of operating their workstations and learn essential safety and quality best practices. The New Jersey Police Academy, in turn, uses VR to better train new members of law enforcement.
In the classrooms, educators are increasingly using AR instead of physical props to introduce new subjects to students. Unlike VR, AR does not require expensive hardware and can be used from a regular smartphone. For example, Assemblr provides an intuitive AR experience creation tool for educators. The app can automatically convert provided files and notes into classroom-friendly AR and 3D creations. CoSpaces EDU is a similar tool but for students. It lets anyone create 3D objects for metaverse environments and bring them to life in AR or VR.
By the end of 2023, the global market of AR in education is expected to hit $5.3 billion as more educators bring new technology into the classroom.
Gamification
Gamification is a great way to increase product engagement rates. Just look at Duolingo’s latest numbers: 62% increase in daily active users (DAU), 44% increase in total subscription bookings, and 67% in the number of paid subscribers. As the company’s former Head of Product recounts, leaderboards, “streak” features, and sassy push notifications drove much of Duolingo’s early-day success.
In 2023, gamification in EdTech has taken a more advanced shape thanks to new technologies like big data analytics, machine learning, and the metaverse. For example, Minecraft launched an Education Edition, which allows students to explore real-world issues in a digital world. In cooperation with Polygon, Edverse created an educational metaverse for institutions and individuals. The implementation of the learn-to-earn model, combining metaverse and crypto, may be the next big move in gamification.
Artificial Intelligence
Artificial intelligence (AI) is gaining wider acceptance from educators. According to a Microsoft report, 99.4% of educators said AI would give their institution a competitive advantage within the next years, while 15% think of the new education technology as a game changer.
Some 25% of educational companies already have AI models in production and many more a testing promising AI use cases in EdTech:
- Adaptive classroom applications
- Predictive student performance analytics
- Intelligent tutoring systems
- AI-driven test scoring
- Conversational assistants for student management
- Generative eLearning materials creation
- Conversational AI for language tutoring
Analytical AI-powered applications and AI solutions for language learning are expected to have the highest potential impact on the sector. For instance, AI-powered online tutor Elsa helps English learners hone their speaking skills by providing instant feedback on the student’s pronunciation. Century-Tech, learners experience a high level of personalization as AI algorithms present the right level of learning material at the right time and fill knowledge gaps.
Mobile Learning
The mobile learning market size is going to reach $155 billion by 2026. Interactive technologies such as augmented reality, virtual reality, and artificial intelligence are going to play a crucial role in shaping the mobile learning market in 2023. To illustrate how advanced technologies work for mobile learning, let’s look at Hatch Kids, a platform for teaching coding. It offers students to build AR and 3D games, and interactive VR environments from a smartphone.
Chatbots are also shaping the mobile learning market. Nitin Ramrakhyani, Product Vice President at Novakid, says the platform’s development is currently centered around AI and chatbots as a response to the increasing demand for individual learning.
Final Thoughts: What Is the Future of Education Technology?
By 2025, EdTech spending will shift towards new categories. In particular, the spending on augmented and virtual reality products will reach $12.6 billion (up from $1.8 billion in 2018). Spending on AI solutions will increase to $6.1 billion. Robotics and blockchain are also going to be in-demand technologies in the EdTech sector. Overall, the EdTech sector will continue to grow fast, with the use of technology, and double in the near future.
If you want to put emerging technologies at the best service of your business, 8allocate would be happy to advise on the optimal tech stack and architecture for your EdTech product. Get in touch with us.
