Alibaba-backed online education giant Zuoyebang downsizes amid tightening policy control

Online education company Zuoyebang reportedly laid off employees and went so far as to cut entire departments due to China’s pressuring policy on the sector. The industry might face the biggest wave of layoffs during this business recession.

Tough regulation has been haunting the online education industry since the beginning of this year. Charged with false advertising and unclear pricing, Zuoyebang and Yuanfudao, China’s two largest online education companies were fined 2.5 million yuan in early May. Regulators fined other 15 companies for the same reason this month.

Zuoyebang replied that the layoff is a normal operating decision and the company is still looking for lecturers and other positions. In December last year, the company raised over 1.6 billion dollars from investors including Alibaba, Tiger Global, and Sequoia Capital.

The online education industry embraced an unprecedented opportunity when schools were suspended during the Covid. The China Internet Network Information Center (CINIC) estimated that by June 2020, the number of online education users in the country had reached 380 million, accounting for 40.5% of total Internet users. The report shows there were 111 fundraising events with a total amount of over 50 billion yuan in 2020 alone — higher than the sum of the past four years.

However, Chinese state media have expressed criticism that the companies may not follow the principles of education, and that advertising creates anxiety for the parents who feel every child needs to participate in these activities.

SEE ALSO: Market Regulators Fine Online Tutoring Giants Zuoyebang and Yuanfudao for Misleading Consumers

The Ministry of Education said in March that the after-school tutoring is adding pressure on kindergarten to Grade 12 (K12) students while hampering public education, and ordered businesses to reduce the excessive tutoring service.

Faced with tightening regulations, TikTok’s online education business is turning the steering wheel of its online education business, aiming to develop the use of big data and AI in education and sell its service to public schools.

Liu Lin, the president of the China Private Education Association, pointed out that the development of K12 educational institutions will feel the pain of policy control. A large amount of investment focused on K12 will flow to other sectors of online education, changing the landscape of the entire industry.