Employers as the Next Test for Consumer Edtech

The Rising Challenge of Burnout in the Remote Work Era

The shift towards remote work, while offering flexibility, has introduced a significant challenge: employee burnout. Prolonged uncertainty and a potentially stagnant work environment are leading many individuals to reassess their career paths and overall purpose.

This isn't affecting a minor portion of the workforce. According to Microsoft, a substantial 41% of employees are contemplating a change in employers within the coming year.

Increased Pressure on Employers to Retain Talent

Furthermore, nearly half – 46% – are actively planning a significant career shift or transition. Consequently, companies are facing mounting pressure to improve talent retention.

This pressure is driving some organizations to adopt more extensive and innovative employee benefits. These include support for pre- and post-natal care, accessible mental health resources via text messaging, and readily available meditation services.

Edtech Platforms Targeting the Corporate Market

As the focus on employee well-being intensifies, consumer-oriented edtech startups are recognizing a new opportunity.

In recent months, direct-to-consumer companies like Outschool and MasterClass have begun developing products specifically designed for employers.

An Unconventional Value Proposition

These platforms, blending education with entertainment, offer a unique approach. Outschool, traditionally focused on supplemental education for children, proposes that supporting working parents with engaging activities for their kids can boost employee satisfaction.

MasterClass, known for its classes taught by renowned experts, suggests that access to inspirational figures could encourage employees to remain committed to their current companies.

A Shift in Edtech's Approach to the Corporate Sector

This strategy represents a departure from the conventional edtech pitch to businesses.

Companies such as Udemy and Guild Education typically emphasize reskilling and upskilling initiatives, aiming to equip employees with the skills needed for in-demand positions.

The Key to Success: Demonstrating Long-Term Impact

The success of these newer efforts, as they attract investment, will depend on their ability to consistently demonstrate tangible benefits to employers. Entrepreneurs must effectively convince businesses that edtech can address a challenge even more complex than education itself: employee motivation.

Addressing the Intensified Challenges Faced by Working Parents

Amy Yamner Jenkins initially joined Outschool as a contractor last autumn, tasked with expanding the after-school learning platform’s reach. She observed a significant shift when schools remained closed in August 2021, noting that both educational institutions and employers began utilizing Outschool to alleviate the pressures associated with continued remote learning.

These initial indicators from customers prompted a fundamental realignment of Outschool’s strategic objectives. Subsequently, Jenkins was appointed as the head of schools and distribution, leading a team of ten individuals dedicated to integrating Outschool into school systems and employee benefit programs.

Currently, more than 100 organizations, including Alto Pharmacy, Mursion, and Twitter, are leveraging Outschool’s services.

Jenkins acknowledges that the challenges of balancing work and family life existed even before the pandemic. However, she believes the pandemic served to highlight these difficulties for companies in a more pronounced manner.

Outschool presents itself to employers as a solution that empowers working parents to achieve a more harmonious work-life balance by providing stimulating educational opportunities for their children. While not adhering to conventional pedagogical methods, Jenkins positions Outschool as a preferable alternative to passive screen time, fostering children’s exploration of new interests and passions.

Transforming a direct-to-consumer platform into a business-to-business-to-consumer (B2B2C) model necessitates careful planning. Outschool has developed customized landing pages for each company, showcasing classes aligned with the interests of their employees’ children.

Furthermore, a concierge service is offered, allowing parents to share their children’s preferences and schedules, with an Outschool representative then arranging classes utilizing employer-provided credits.

The company is actively refining its methods for demonstrating its value proposition to employers. A new dashboard has been created, enabling HR departments to monitor employee engagement with classes and topics, and subsequently assess the benefit’s impact on employee retention rates.

Over the past year, employees have collectively spent over $75,000 in employer-funded credits on Outschool, according to Jenkins. The expectation is that offering a $100 monthly Outschool stipend will positively influence employee retention.

“We anticipate demonstrating this impact,” Jenkins stated, emphasizing that the partnerships are relatively new and conclusive data is still emerging. However, the available data provides employers with the tools to conduct their own analysis.

While Outschool focuses on supporting working parents with childcare solutions, MasterClass is pursuing a different strategy with its new product, emphasizing the importance of developing employees’ soft skills.

How Expertise in Hostage Negotiation Can Inform Workforce Reskilling

MasterClass is widely recognized for its instructional content featuring prominent figures. These courses span diverse fields, from culinary arts with Gordon Ramsay to creative writing with Issa Rae, and even tennis instruction from Serena Williams.

Typically, these lessons are valued less for quantifiable educational results and more for providing insight into the thinking processes of accomplished professionals.

However, MasterClass’s new offering for businesses represents a shift in focus. The platform now presents curated bundles designed to enhance employee soft skills.

These include negotiation techniques taught by Chris Voss, a former FBI hostage negotiator, and effective communication strategies from Robin Roberts, a host on “Good Morning America.”

The core benefit lies in providing supplementary training that can either develop existing employee capabilities or facilitate upskilling initiatives within a company.

The MasterClass website details two distinct products tailored for employers, differing in delivery method, administrative controls, and intended applications.

One option, a license-based product, grants companies and teams a year-long access to MasterClass content, managed through a centralized administration panel.

This panel functions as a dashboard, allowing employers to track content usage and identify the most popular courses among their workforce.

The second product operates as a gifting mechanism, where employers provide employees with unique codes for individual MasterClass accounts as a benefit.

Analyzing the uptake of each product will reveal whether employees perceive the platform primarily as a perk or as a genuine tool for professional development and soft skills improvement.

Attempts by consumer-focused edtech companies to penetrate the B2B market are not unprecedented. Previously, Duolingo partnered with Uber to offer English language training to drivers in Brazil.

While strategically conceived, this monetization effort ultimately proved unsuccessful. Duolingo is now revisiting B2B strategies, with motivation emerging as a key outcome, mirroring MasterClass’s approach.

MasterClass declined to provide commentary on this topic. The impetus behind this new employer-focused direction remains unclear.

However, a recent $225 million funding round offers some clues. The company stated that an enterprise offering, responding to significant demand from both small and large businesses, would be officially launched later this year.

Furthermore, MasterClass recently appointed Nitin Gupta, an experienced entrepreneur with leadership roles at Uber and Postmates, as its VP of Enterprise.

Addressing the Total Addressable Market

The strategic shifts of companies like MasterClass and Outschool towards business-focused expansion following substantial fundraising rounds are not accidental. These startups, now well-funded, are actively seeking avenues for growth that justify their increased valuations.

Outschool, catering specifically to parents, experienced a significant surge in bookings, exceeding $100 million in 2020. This represents a dramatic increase from the $6 million recorded in 2019 and a modest $500,000 in 2017.

Previously, CEO Amir Nathoo indicated to TechCrunch that Outschool achieved profitability in 2020, driven by this exceptional growth in bookings. However, this profitability proved to be temporary.

Nathoo stated his intention to maintain proximity to profitability, but emphasized the necessity of aggressive investment in long-term opportunities given the dynamic market conditions.

MasterClass also has compelling financial motivations for diversifying into non-consumer revenue streams. Data from Sensor Tower reveals that consumer spending within the MasterClass app reached approximately $3.6 million in Q2 2021.

This figure, while representing a 350% increase from Q2 2019, was 28% lower than the spending observed in Q2 2020.

The attractiveness of the enterprise market is evident. The success of companies such as Guild Education demonstrates the potential for building a substantial business by providing educational services to large organizations, serving numerous learners through a single client.

Greg Siegel, chief business officer at Guild Education, doesn't immediately perceive new entrants as direct competitors. He instead encourages employers to prioritize the genuine impact of benefits.

He questions whether incorporating tools like MasterClass or Outschool demonstrably influences an employee’s decision to join a company or enhances their performance in their role.

Siegel highlights the key questions employers are asking: “What incremental impact does this tool have on employee retention, and how effectively does it attract talent?”