Indonesian edtech’s biggest challenges

This article is part of our deep dive into Indonesian edtech.

In a previous article, we highlighted the unexploited opportunities in Indonesian edtech.

In this installment, we look at some of the challenges that startups in this sector will need to overcome, as well as the solutions that some companies are employing.

Broadly speaking, Indonesia’s edtech industry faces three issues: customers’ limited willingness or ability to pay, inadequate digital infrastructure in some parts of the country, and a shortage of qualified talent with relevant skills.

On the first point, a World Bank report on Indonesian edtech notes that less than 5% of users of freemium products convert to paid users once the free trial period expires.

While Indonesia has a large addressable market, it “lags behind a lot” compared to India and China in terms of the willingness to pay standard prices on a recurring basis, a venture capital investor tells Tech in Asia on the condition of anonymity.

However, not all startups will face this problem. Paradoxically, focusing on a smaller part of the market can reap bigger monetary returns. For example, Chinese language learning platform LingoAce focuses on families in the middle class and above, who are more willing and able to pay for classes. This market segment also has a better understanding of the benefits of learning a second or third language.

That said, things could improve with time. LingoAce founder and CEO Hugh Yao agrees that the mass market is not willing to spend too much money on education. However, he expects that this will change in three to five years as the economy continues to grow and members of the younger generation become parents. “This happened in Japan. It happened in Korea, China, Singapore, and Hong Kong as well,” Yao says.

To increase customers’ willingness to pay, edtech companies will have to do a better job of demonstrating tangible benefits. For K12 students, this may mean that companies need to show parents measurable improvement in learning outcomes. Indonesian edtech company Zenius, for example, touts the enthusiasm of its large base of alumni who have used its products to pass the Ujian Tulis Berbasis Komputer, a computer-based exam that is part of the annual entrance test for state universities.

For the vocational segment, edtech will only prove its worth when students who complete a course are able to receive certifications that are widely accepted, according to the anonymous investor we spoke with. This might require a combination of corporate, government, and international partnerships.

When it comes to digital infrastructure, Indonesia’s is still relatively limited, especially outside of Java and the major urban areas.

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