by Jamie Penkethman, and friends
Just posted a video pitch for the SmartPitch Challenge, an entrepreneurship competition sponsored by the Baruch Field Center, Sunshine Suites, and IBM.
Check it out at the link below.
While the market for English as a foreign language is huge, there are some big disadvantages. For one, setting up a new business and trying to find customers globally presents a whole set of challenges. You would have to do a large number of marketing campaigns, each one optimized for the local language—that sounds like a Google AdWords nightmare. (As if setting up an optimized campaign in a language you speak natively wasn’t brain damage enough). Secondly, the EFL model doesn’t present the best opportunity for labor arbitrage. In general (and I am just assuming here), English-speaking countries tend to have higher costs of living than non-English speaking ones. A teacher living in California would have to charge more than one living in Argentina, and a student living in Argentina might not be willing to spend as much on language classes by webcam as one in California.
So let’s reverse the model.
How does this sound? A website for language classes by videoconference, offering private classes in Spanish, French, German, Italian, Arabic, Japanese, Korean, and Chinese / Mandarin.
The market for students is the United States, the UK, and Canada, and the market for teachers is wherever these languages are spoken locally.
I figure North America and the UK would be the easiest places to get students, and while customer attainment internationally is challenging, recruiting teachers will be easier than recruiting students.
This was close to my original concept anyway, but I was so taken with the idea of focusing on English as a Foreign Language, because of how huge the global market was, that I overlooked the challenges. (Yes Ted, you were right, you were right).
Anyway, what to do about this blog now??? Is my title all messed up now, I mean EFLstartup (English as a Foreign Language is no longer accurate is it?). Nope not really, how about this linguistic pivot. eFLstartup.com with eFL standing for eForeignLanguages. Yep, I’m jumping on the eInsertProductNameHere bandwagon. But at least it saves me the pain of having to set up a new blog, buy a URL and point my nameservers somewhere…Read More
Englishcafe.com had approximately 111,800 students from all over the world. Great number right? But only 456 of them, or .04% had taken more than one class. So the vast majority of users were not generating revenue. Englishcafe.com did a good job at getting people to register and use free content, but not such a good job at converting that large user base into frequent paying customers. The lack of students taking private English classes online explains why the website had so few teachers.
Does this mean that EFL students are not an ideal market, that they are not willing to spend money on classes? I don’t know, but the case of englishcafe.com is not encouraging. I have to wonder if the website got distracted from their core service and tried to do too much.
The social network aspect, blogs and free teacher created content would seem to be great ways to hook people into the site. But they didn’t facilitate paid classes. Maybe the blogs and free lessons were a distraction from the website’s main business, which was live teacher to student classes.
All that content takes time for students to use and absorb. That scarce free time could very well have been spent in class, but was instead used on non-revenue generating activity. Maybe a more streamlined website would have been more effective…Read More
Problems with The Englishcafe.com Model
To me, englishcafe.com was the best of the websites that provide English language classes via videochat. I especially like the way the site fostered a sense of community, containing many features in common with a social networks. It also provided ample opportunities for users to add content, in the form of blogs and lessons. Using today’s conventional wisdom, social networking and user created content are considered fundamental keys for website success. It appears that users embraced these features too. There are many conversations between all website members, whether student or teacher; a large number of blogs; and a wide selection of teacher-created lessons.
On the down side, income-generating activity, paid classes between students and teachers, seemed to be surprisingly low.
Overview of Teaching Activity
It’s easy to see how many paid classes, which englishcafe.com called ‘teacher time,’ individual teachers have given. Not only were there a surprisingly small number of teachers. Only 60 were officially ‘approved’ by the website. Teaching rates plummeted once you got outside of the top five.
The most active teacher taught 674 classes. A hefty amount for sure! The website had a 10% fee off what the teacher charged. That just seems too low. This teacher charged $35 and hour. So if we assume that all these classes were an hour long, Teacher #1, earned the website $2,359 over the course of her career with the website.
Not bad, customer lifetime value, but because of the very low 10% fee, englishcafe.com needed some serious user activity to get just over two thousand bucks. If this was done over a year, Teacher #1 would be teaching on the site for 13.5 hours a week (they get two weeks vacation of course). Now if you had a lot of teachers who were this active, you could have a business. But you’d need one thousand to get you $2.3 million in revenue. (I don’t even want to guess how many students that would be).
Unfortunately, teacher usage rates on the website declined precipitously after the leading two teachers. The chart below summarizes activity by the leading 15.
The numbers are enough to make a Venture Capitalist investor cry. And VCs have hearts of stone, it takes A LOT to make ‘em cry. Maybe the movie Beaches starring Bette Midler will do (VCs are generally Big Bette Midler fans) along with the chart below. The chart below really chokes me up too.
So you see, the number of classes taught just plummets. By the time you get to Teacher #15 we are looking at only 7 classes and $35 bucks for englishcafe.com. For the top 15, the website’s total earnings amount to an estimated $7,466. That ‘s a lot of labor and investment for $7,466.
I think the business idea had potential, but man, those numbers have me curled up on the floor, bawling my eyes out. That’s in part because I have Beaches playing on the TV—mainly for the music, I just love that soundtrack.
Please note: that these numbers are just guesses I’ve made from reviewing the englishcafe.com website. The columns number of classes and hourly rate come from the ‘find teachers’ part of the englishcafe.com website. I assume that each class is an hour (I’m sure many were for less) and that rate for all classes was for the teachers current rate). The 10% fee I got from reading the FAQS on how to teach. I apologize in advance for any possible mistakes.
–Jamie PenkethmanRead More
I was shocked to see englishcafe.com announce that they were closing. Of all competitors, they seemed to have the best concept and strongest management team. There were a lot of things that I liked about the website: emphasis on community building, intuitive interface, good teacher pages, group classes and user generated content. The website focused on people, both teachers and students, and it seemed like it could really build a loyal user base.
I was also extremely impressed by the management team, which was composed of a group of uber-experienced Harvard and Stanford MBAs and tech industry veterans, including Douglas Carlston, who founded Broderbund. When I was a kid in the 80s, pretty much every piece of software I used on my Commodore 64 was written by Broderbund: Where in the World is Carmen Sandiego, Print Shop, Prince of Persia and many others (all of which contributed to making me a solid B-/C+ student).
When I was initially researching the space for live video English teaching and came across englishcafe.com, I was at first dismayed to find such a well implemented and well run website.
How the heck, could I develop something that could compete with these guys?
However, englishcafe.com ended up encouraging me to push forward. For one, the website validated the viability of this business. While many people I talked to liked the idea of language classes via live video, a lot had reservations about focusing on English as a Foreign Language. Englishcafe.com, with their highly experienced and connected team, demonstrated that real money believed that the idea could work.
So my strategy was to try to develop a differentiated service, a different language teaching focus, revenue model, design/ interface etc… It’s an excellent website, but we could study its flaws and try to build something that users might enjoy more.
So, now that the website is folding, I have to ask out loud.
There were some things about the site that raised question marks. The biggest was that they did not seem to have anywhere enough teachers to build a significant revenue stream. I estimate that you’d need least 1,000 teachers with moderate useage to get revenue into seven digits—and that’s revenue, no consideration of expenses.
I also wonder if there were problems with the user experience, either for teacher and students. In some respect, I saw areas where design could be improved.
Anyway, I’d love to hear from users of the site. If have any experience with englishcafe.com, please comment. Why do you think it closed?Read More
A lot people here in the U.S. have wondered why I’m choosing to focus on English, rather than teaching other languages. Well, I think this platform is great for learning any language, but I think that when you are starting a new business, it’s important to have the most narrow focus possible. So below, are my reasons for (initially) focusing on English.
1. Market Size: According to the British Council, the global market for English Language learning is approximately 1 billion, 750 million of which learn EFL. Globally, the language learning market is $80 billion. As approximately $6 billion of that happens in the US, we can assume the vast majority of that $80 billon is for English.
2. Marketing Efficiency: Recruitment of teachers and attainment of students will be more efficient if this project focuses on one language.
3. English is necessary: English is the world’s lingua franca and it is a necessary tool if one wants to remain competitive in the global economy. This means that English language learning is not a discretionary activity, but a required one. Because of this, we assume that there will be less student turnover with English students than with other languages.
4. The CELTA certificate helps ensure teacher quality. The CELTA (Certificate of teaching English to speakers of other languages) is the primary certification in the EFL industry. It is used globally, and the process of obtaining one is rigorous. All our teachers must have a CELTA, and this will help ensure their quality.
–Jamie PenkethmanRead More
Well once again, I am immersed in the world of language teaching, after a several year absence. For those who don’t know me personally, I taught English in both New York and Barcelona. Living in Barcelona was amazing–jamon, cava, pa tomaquet, FC Barcelona (who didn’t win a thing while I was there!), beach, playa, platja, etc…
No wonder I stayed there seven years.
However the experiences of being a local teacher in New York and an expat in Barcelona were very different.
When teaching in NYC, I often found myself asking my students, who came from all over the world, about their customs, food, culture, and way of life. It was endlessly fascinating. I learned as much as my students did.
When I moved to Barcelona, teaching English gave me instant access to the local way of life. But after a while I got used to it and really missed the diversity of teaching in NYC.
One reason that I’m excited about this project, is that it gives expat English teachers the chance to interact with students from other cultures. My hope is that students and teachers from all over the world can find each other, and learn something while building connections and even friendships.
I think it’s a cool idea.
–Jamie PenkethmanRead More