What does a dictionary pen mean to NetEase Youdao？

Educational hardware is now at the forefront of the industry. In this market, children's watches have become a category with an annual sales volume of tens of millions, and the annual sales volume of learning tablets is also several million units.


In October this year, ByteDance released a smart work light, opening up a new form of educational hardware. Since then, there have been reports that Bytedance "wants to do all the mature educational hardware."


Recently, NetEase Youdao released a new generation of learning intelligent hardware-NetEase Youdao Dictionary Pen 3. In Youdao Mall, there are also a variety of educational hardware products on display, including Youdao Cloud Pen, Youdao Translation Egg, Youdao Super Dictionary, etc., but the sales star is a dictionary scanner pen.


Not long ago, NetEase Youdao’s third-quarter financial report showed that smart learning hardware contributed 163 million yuan in revenue, a year-on-year increase of 289.3%, becoming NetEase Youdao’s second-largest source of revenue. Among them, nearly 250,000 units of Youdao Dictionary Pen 2 were shipped.

NetEase Youdao is positioned as an intelligent education company. It has an earlier history of developing education hardware, and the relationship between education hardware and curriculum products is also different from other online education companies. Generally, online education companies will connect hardware and software to collect students' academic data and cultivate user traffic pools for course products.


After NetEase Youdao CEO Zhou Feng joined NetEase, he presided over the development of the Youdao Dictionary. He introduced at the launch conference of NetEase Youdao Dictionary Pen 3 on December 1, "The relationship between hardware and courses is a parallel relationship, which is two forms to meet the learning needs of users. We don’t think that hardware is for courses. In this case, The value is relatively low".


New features challenge the AI ​​model


NetEase Youdao Dictionary Pen 3 adds two new kinetic energy: "Quick Check" and "Interactive Reading".


When using the previous generation dictionary pen to look up a word, you need to scan it from front to back, and the new generation dictionary pen can read it with just one click on the word.


Duan Ke, the chief scientist of NetEase Youdao, said: "This function is very practical and attractive, but it also poses a great challenge to the algorithm. First of all, the super-sensing optical system is required to have a very large wide angle in order to see a larger range. This is the basis of the inquiry. Otherwise, the content cannot be collected, and subsequent recognition processing is impossible. However, for the algorithm, the wide-angle lens will distort the read graphics, and there will be problems such as uneven lighting. It is difficult to make an AI model under these conditions. There was no successful solution in the industry before."


For this reason, the development cycle of NetEase Youdao Dictionary Pen 3 is as long as one year, starting from the release of the previous generation of Dictionary Pen.


In fact, algorithms have become the core element of smart hardware products. The dictionary pen is not the first of NetEase Youdao, but from Japan, "but Japan's previous dictionary pen products are not equipped with AI algorithms," said Zhou Feng, CEO of Netease Youdao.


"I think learning hardware products is the most important in three aspects: the first is the hardware itself, the second is the content that it carries, and the third is the algorithm. The previous electronic dictionary is almost out of the market. Why is the current dictionary pen becoming popular? , There are millions of sales a year? The main reason is that there are new algorithms." Zhou Feng said.


Expand user base and usage scenarios


Another new feature of Youdao Dictionary Pen 3 is "Interactive Point-Reading", which is a visualized interactive function of point-and-reading picture books for users of low-age children.


According to Wu Yinghui, Senior Vice President and Head of Product of NetEase Youdao, NetEase Youdao has cooperated with book publishing organizations such as Xuele, Children's Fun, Little Elephant Chinese Characters, etc. ·Shannon" and other series of picture books have produced the Youdao dictionary pen version of point reading. Users can click on the picture of the picture book to generate animation videos on the point reading pen display and can realize the interaction of voice follow-up reading and picture book answering through the point reading pen.


The user group of Youdao Dictionary Pen is continuously expanding to younger ages, from the earliest college students and adult groups, to now K12 users account for 70% of the total. However, Zhou Feng told the 21st Century Business Herald that Youdao Dictionary Pen added the picture book point reading function, not to expand the user group but to enhance the usage scenarios.


"The scene is stronger than everything." Zhou Feng told the 21st Century Business Herald.


"One of the basic ideas for hardware products is the scene. We think that reading is a scene. In fact, the basic logic of intelligent products is to continuously cover business scenes to realize the value of the product to users. For example, the mobile phone scene covers from making phone calls to Taking pictures. Our way of thinking is very simple-how to create value for users so that they want to buy this product. For users, they used to buy dictionaries and some reading products for their children, which is much more expensive than buying dictionaries. It’s not convenient to use. And after the point-reading pen is added to the point-reading scene, it creates a new way to make it more convenient for users. He doesn’t need two devices anymore." Zhou Feng said.


But NetEase Youdao needs to cooperate with publishers to produce point-to-read content. On the day when the new generation of reading pens was released, NetEase Youdao released a content cooperation plan called "Malang Project of Magic Pen" to encourage high-quality original authors to introduce their content into dictionary pens.


The production cost of point reading products is extremely high. Wu Yinghui said, "After making a set of about 10 thin picture books into point reading, the cost is 300,000 to 400,000 yuan."


Hardware & course traffic pool


For online education companies, how do the two products of educational hardware and online courses work together in the business model?


In the third quarter of 2020, NetEase Youdao’s smart hardware product net income was 163 million yuan, a year-on-year increase of 289.28%, and the growth rate exceeded the year-on-year growth rate of online courses. But the gross profit margin of smart hardware is only 29.8%, which is much lower than the 53.9% of online courses.


One question is, can smart hardware products divert their users to Youdao's excellent courses?


In this regard, Zhou Feng said frankly that the current exploration of diversion methods is still relatively early, "mainly to provide course discounts to users who purchase the reading pen, and to distribute the course manual in the package of the reading pen."


"Users have different learning needs, some through courses, some through hardware, and some through free content and tool products. In fact, the user level of hardware is relatively large, while the user level of courses is not large, even in the industry The first and second companies in China have millions of course users," said Zhou Feng.

Zhou Feng believes that when the number of users of different products such as courses, hardware, tools, etc. grows large enough, users will find demand for other products when using a certain product, and imaginable operating space will appear.

In the third quarter of 2020, NetEase Youdao's online course paid users totaled 624,000, and dictionary pens sold 250,000 units. 22% of the sales of online courses come from their own traffic. In fact, a considerable part of the purchasers of dictionary pens are also users of the online course product Youdao Premium Class.


After adding the point-and-reading function to the dictionary pen, the usage scenarios are expanded, and the independence of the product has also been strengthened.

Point-reading pens have been used in China for more than ten years, mainly for the enlightenment education of children aged 2-6. According to reports, the market size of the point-reading pen industry is expected to exceed 4 billion yuan by 2024. According to the forecast of the Multi-Whale Capital Education Research Institute, it is estimated that by 2022, the K12 education smart hardware market alone will reach 57 billion yuan.

"If one day the external customer traffic of online education is unacceptably expensive, we can also be faster in the hardware business, or we can rely on our own traffic, etc. so that the flexibility will be greater. I think this is the current situation. An advantage of business architecture." Zhou Feng said.


(Source: 21st Century Business Herald)