BEIJING, December 31  (TMTPOST) — Chinese Internet giant NetEase’s education arm NetEase Youdao will end its service on China’s compulsory curriculum and transition to teaching science, technology, engineering, arts and mathematics (STEAM) programs, the business unit’s CEO Zhou Feng said in an internal letter to employees.

Some of NetEase Youdao’s employees will be leaving for a non-profit education institution, according to the internal letter. Zhou said that NetEase Youdao has maintained its core competence – making use of technologies in developing quality products – in the past two years when the competition was strong in the market.

NetEase Youdao will go back to its roots and innovation, Zhou said in the letter, stating that the company will shift its focus from competing with service and operation to competing with good products and technological innovations. Product competence is more important than brand influence and channels, according to the internal letter.         

Image Source: Visual China

In Q1 this year, NetEase Youdao’s revenue reached 1.34 billion yuan (US$211 million), registering year-on-year growth of 147.5%. The company later made revenue of 1.293 billion yuan in Q2, up 107.5% year-on-year. In Q3, NetEase Youdao’s revenue grew only 54.8% year-on-year to 1.4 billion yuan. The company lost 130 million in Q3 as revenue from learning services dropped 34% year-on-year. Sales volume and paid users of K9 education services went down by nearly 70% year-on-year in Q3. It is apparent that China’s double reduction policy, announced in July this year, started to have its toll on NetEase Youdao’s business.

China announced its "double reduction" policy earlier this year, restricting private education service providers’ business operations and forcing private tutoring companies to go non-profit as a way to improve education equality and reduce pressure on students. The "double reduction" policy imposes heavy restrictions on the provision of tutoring services on school subjects and online education, which has had a devastating impact on tutoring centers that focus on the school curriculum.

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