Future reimagined: The US$5trn education market coming of age

Education  is  likely  the  most  important  investment  in  an  increasingly  intellectual  economy,   in   our   view   (see   our   related   global   Q-Series   report).   According   to   Euromonitor,  global  spending  on  education  amounted  to  U$5trn  in  2019  (6%  global  GDP),  yet  education  is  significantly  under-represented  in  the  capital  market.  As  advances  in  governmental  policy,  technology,  and  business  models  are  redefining  the  education  value  chain,  and  COVID-19  is  spurring  1.5bn  children to adapt to  online  learning,  we  believe  a  new  education  era  is  coming  of  age.  How  will  online  education create multi-decade investment opportunities?

Why learn online? How will online education play out?

We  think  online  education  is  well-positioned  to  address  the  scalability/affordability  limitations of offline education and the rising demand for lifelong learning in the fast-evolving world economy. In this report, we analyse the China and US online education markets as case studies on how online education could play out globally. The full suite of  UBS  Evidence  Lab global  consumer  surveys  and  mobile  trackers  show  pickups  in  online  consumer  preference  and  usage,  likely  spurred  by  COVD-19. We expect this to be only the beginning of a seismic structural shift.

How big is the online education opportunity?

Despite being a fraction (about 9% in 2019) of global education spending, we expect non-formal  education  to  build  up  critical  mass  online,  with  more  to-customers  (2C)  models, and reach US$213bn in 2025E. For formal education –   the lion’s share of total education  spending  –    we  expect  offline  public/not-for-profit  (NFP)  formal  education  institutions  to  adapt  to  learners’  changing  preferences  by  providing  partial/fully  online  programmes.   We   find   meaningful   upside   (2025E   revenue:   US$217bn)   for   to-business/to-government  (2B/2G)  companies  that  facilitate  this  online  transition.  We  expect online education to add a US$94bn new revenue opportunity to the value chain, most notably in advertising, cloud services, data centres, hardware, and software.

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