Can Edmodo Turn Virality into Profitability?


Can Edmodo Turn Virality into Profitability?

By Tony Wan     Jun 21, 2016

Can Edmodo Turn Virality into Profitability?

With more than 65 million users in 370,000 schools around the world, Edmodo boasts the sort of “viral” adoption that makes entrepreneurs and investors salivate. Yet finding a stable revenue source has proven elusive. “If I can only [make] 30 cents or 40 cents per user per year, [we] would be profitable,” Vibhu Mittal, the company’s CEO, mused on a panel at the ASU+GSV Summit conference earlier this year. He acknowledged that “we haven’t quite solved it yet.”

Virality pays off when businesses can advertise to or sell data about their users. But that doesn’t work in education. Mittal’s candid remark raises an important question facing Edmodo and the “freemium” strategy: How can an edtech company convert virality into financial sustainability when neither its direct users (teachers and students) nor the organization (schools and districts) are willing to pay?

That’s the $87.5 million puzzle for roughly 80 employees at Edmodo and the 11 venture firms that have backed the San Mateo, CA-based startup, which last raised $30 million in Aug. 2014. Making the question more urgent is the fact that its user growth in the U.S. has “flattened” due to market saturation, Mittal told EdSurge in a follow-up interview.

The App Store Experiment

Founded in 2008 as a school-safe social learning network for K-12 teachers and students, Edmodo enjoyed the early “hockey stick growth” that illustrates viral adoption. The platform is often described as “Facebook for schools,” and that familiar feel and design attracted many teachers to Edmodo’s offerings. By 2012, the company claimed 10 million users.

But unlike Facebook, which can generate billions in revenue through ads, the vast majority of Edmodo’s users—roughly 90 percent—are students. And kids don’t pay. Many freemium edtech companies offer a basic version of their offerings for free, and try to upsell “premium” services such as data analytics and additional features to school administrators. Some companies opt to monetize from parents.

Edmodo has long tried to figure out how to deliver value that teachers or schools would pay for. In 2012, the company built an app store where teachers could buy tools directly from entrepreneurs and companies; Edmodo would take a cut of sales. “Our thesis was that teachers would have money that they could use to purchase apps,” Manish Kothari, the company’s General Manager of Platform, tells EdSurge. “We thought districts would disburse money and give [teachers] the freedom to choose and buy what they want.”

This hypothesis—that teachers would have the budget or authority to purchase apps—“was a pipe dream,” Kothari now believes. Only 10 percent of Edmodo’s teachers visited the app store, which at its peak offered 700 apps from 100 developers. At one point, the company even offered teachers app store credit, but that failed to build sustainable momentum.

Going Upstream

Edmodo also offers data management services that allow schools to create a private subdomain, sync user accounts with student information systems and monitor usage data. In addition, company offers professional development in the form of in-person trainings on how to use Edmodo, and helping set up professional learning communities using its platform.

In 2014, the company launched Snapshot, a free tool that allows teachers to generate standards-aligned quizzes. The product was paired with a premium “Snapshot for Schools” version, which offered more robust data analytics to schools and districts. But demand was lukewarm in the U.S. and the business struggled, according to Kothari.

These services are still available, despite lower than expected traction. Just a couple hundred of U.S. schools and districts pay for these services, each of which the company charges $500 to $2,500 per year.

International Expansion

Now the focus for Edmodo is on international expansion, where the company sees fewer competitors. “Outside the U.S., the market is very different as there are entire countries that suddenly decide to bring all schools online at once and need tools,” Mittal observes. “When this happens, we’ll try to be one of the first products they consider.”

It’s a strategy that a similar company, Schoology, followed in 2014, when it won a contract from the Uruguayan government to deploy its learning management system (LMS) in all of that country’s schools. Schoology now claims users in more than 130 countries, with a major presence in Malaysia, Singapore and Korea.

Roughly half of Edmodo’s overall revenues come from international partnerships secured over the past two years. In Mexico, the company notched a deal to provide its platform to the country’s biggest teacher’s union, with more than 1.4 million members. Across the Atlantic, the company is working with Cambridge University Press to pilot its Snapshot assessment tool, in 30 U.K. primary schools. And in Japan, Edmodo has also partnered with educational publisher and “cram school” operator, Zoshinkai, to pair its platform with Japanese content to deploy to schools.

Next Experiments

The company has hardly given up on the U.S. market, even though Mittal acknowledges that “there are now many competing products in the marketplace, the biggest of whom is now Google Classroom.” The internet search giant’s free LMS, which claims more than 10 million users, has captured some of Edmodo’s user base.

At the national ISTE conference later this June, Edmodo plans to share several new features that it hopes will revive its traction. Among them is Edmodo Play, a feature that allows students to take multiple-choice quizzes in their Edmodo class stream. Students can earn badges and chat with others from around the world on a discussion board. (All comments are moderated.) Within four weeks after its soft launch in Nov. 2015, Kothari claims, almost half a million students answered questions.

Another update will allow teachers to make discussion threads in private groups and classrooms publicly accessible to the broader Edmodo community. “Great conversations were happening, but they were not discoverable,” says Kothari, who describes these interactions as “richer Twitter chats.”

June will also mark the last month for the Edmodo app store. Earlier this year, developers were notified that the store will be sunsetted on June 30. The company is not abandoning the idea entirely, however; in its place is Spotlight, a marketplace similar to Teachers Pay Teachers where anyone can upload, share and sell materials. The majority of the 100,000 resources available are free and created by teachers; of the paid offerings, most cost under $5. These materials can also be displayed directly into a student’s class stream.

Kothari says that wooing developers to Spotlight is not a major focus for now; there are fewer than 50 of them selling on the platform. Edmodo takes a 40 percent cut of all sales, but so far this makes up only “a tiny fraction” of the company’s revenue.

There is a possibility that data from the Play quizzes and discussion topics can surface content recommendations from the Spotlight marketplace. “It’s definitely something we will look at,” Mittal hints, “but we are not doing it right now.” He adds: “Whenever we make a recommendation, we want to offer content that might be most effective for specific users.”

For Edmodo, leveraging student data to make content recommendations is a risky prospect. It is a signatory to the Student Privacy Pledge, a legally binding commitment stipulating that companies cannot use student data for commercial purposes.

Steve Blank, a revered entrepreneur, investor and advisor in startup circles, has said that a startup is “an organization built to search for a repeatable and scalable business model.” In that sense, Edmodo is very much a startup—even though it may be old by Silicon Valley’s standards. “We can only charge for our business if we can provide real value to our users,” Mittal says. In the U.S. and abroad, the company has managed to get people on its free platform. Keeping them—and finding revenue—however, remains a challenge.

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