China's online education market is projected to be worth 453.8 billion yuan (US$64 billion) by 2020, according to a report by iiMedia Research, which also estimated that the number of K-12, or from kindergarten to high school, online education users will reach about 37.7 million by this year.

In an open letter to mark ByteDance’s eighth anniversary in March, company founder Zhang Yiming singled out education as a strategic new business direction for the company, without mentioning gaming and sectors that it has also been exploring.

“[The online education] market is huge,” said Xu Fanlei, vice general manager of Shanghai-based consultancy iResearch. “Even if late comers end up only taking a small part of the market, it is still relatively big”.

The market is also “fragmented”, with the three or four largest players, including New Oriental Education and TAL Education Group, taking up less than 5 per cent of the market share in online education for K-12 students, Xu said.

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This fragmentation could allow late comers such as ByteDance to consolidate the industry and become top players, according to Xu. “The industry is far from its final game,” he said, adding that there remains a large untapped market especially in smaller third and fourth tier cities.

US-listed New Oriental reported a profit of US$137.7 million in the third fiscal quarter ended February 29, up by 41.4 per cent. The company’s decision to move all of its offline classes in China to live-streamed online classes from end-January “has played a fundamental role in cushioning the impact [of the pandemic] on our service and operation,” said Michael Yu, New Oriental's executive chairman.

Both New Oriental and TAL, its largest competitor, did not respond to questions about the impact of tech giants like ByteDance entering the online education industry.

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Both apps target kids aged two to eight, feature animated characters that serve as AI teaching assistants, and have similar pricing plans – monthly plans at 289 yuan and annual plans at about 2,600 yuan, according to Chinese tech news platform 36kr.

Yuanfudao and Baidu-backed Zuoyebang, which also has a similar AI education product, declined to comment on rivals.

Analyst Xu said ByteDance could gain an edge in the industry through its expertise in live-streaming, a major feature of its mainland Chinese version of TikTok, Douyin.

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“ByteDance can quickly leverage its existing live-streaming functions to enter this market and compete,” he said, adding that a sense of immersion is important for learning, and “so far the best online solution to that is through live-streaming”.

However he said that even with live-streaming, students are still facing a screen: “Given the same conditions, live-streamed courses won’t be as good as the offline ones.”

ByteDance’s existing online education offerings, aside from GuaGuaLong, include English-learning apps Gogokid and Open Language as well as Qingbei, an online classroom for K-12 students covering a range of subjects.

Despite its multiple attempts, however, none of ByteDance’s online education apps have become market leaders. Its best-performing app, Open Language, ranked around 70th among the education category on China’s App Store, while Qingbei came in at 450th place as of Monday, according to App Annie.

Yu Bin, an independent internet analyst and blogger, said ByteDance’s mistake was that it put too much emphasis on promoting the apps and gaining traffic in their early stages, rather than focusing on the quality of the courses and services. In this, the company “won in superficial aspects but lost in the essential aspects,” Yu said.

For example, ByteDance aggressively promoted Gogokid on Douyin, hired Chinese A-lister Zhang Ziyi as brand ambassador and sponsored two famous television shows to promote the platform in its early stages.

Gogokid laid off employees in April last year according to domestic media outlet China Entrepreneur, although a ByteDance representative said this was to optimise staff within a “normal range” during the performance appraisal period. Another similar ByteDance platform, aiKid, also failed to gain ground in the industry and has not been updated since December 2018.

The new users attracted from apps catering to the masses like Douyin may not be targeted customers, Yu said, adding that the largest companies in the online education sector each specialise in certain subjects and teaching methods.

But Zhang, ByteDance’s founder, said he is in no hurry for the company to achieve success in the online education space.

“Of course [before we achieve success] we should have a deeper understanding first,” Zhang wrote in his open letter marking the start-up’s eighth anniversary. “Starting a new business is no easy job.”