Here is a piece by Yariv Binnun, the creator of the Israel Instititute of Biblical Studies, on the evolution that led to its creation. Very interesting stuff!
The Story behind eTeacher’s Foundation
The use of the cellular phone in Israel began in the 90s and by the mid 90s cellular phones had become widespread. I understood then that this cellular revolution would provide a plethora of business opportunities for students like me who wanted to study and yet at the same time make a living and be independent.
At the beginning of my studies, I established a company called “Suddenly Everything is Clear” which mediated between teachers and students. The business model was straightforward. Students would call my cellular phone and I would be the contact between them and the teacher. The students were obligated to purchase at least four lessons, where the teacher had to deposit the first two lessons in my bank account.
Future communications between the teacher and the student was not of my concern. This work provided me with an income as a student, as well as the required flexibility in order to study and achieve an academic degree. It also exposed me to the size of the market and to the demand for private lessons.
The following was my daily routine:
1) On the way to campus in the morning, I stopped by the entrance to one of the high schools in Tel Aviv and handed out flyers to each student who entered. I took advantage of the fact that all the students entered in the space of an hour through one gate and this bottleneck enabled me to give each student a flyer within a short time.
2) When I arrived at the university campus, I put up notices in the hallway for the recruitment of teachers. Students from the campus called and once a week I conducted interviews in the campus library. Those accepted were put on my database.
Overall the model proved itself and in two to three hours of work a day, I made $1500 a month, which was sufficient for me then as a student.
When I graduated, I looked for work in the field of communications and journalism. I was integrated as a researcher and deputy editor into one of the most popular political television programs broadcasted in Israel at the time.
Work in the television industry required that I be constantly up to date with the news and I read all the important newspapers on a daily basis prior to the program. The year 1999 was a very successful financial year with daily reports of exits or substantial funds raised by Israeli startups. I felt that I was not in the right place. That same year I was exposed for the first time to the Internet site EBAY. The model amazed me and I immediately began to think what a site like this could do for the tutoring market which shares similar characteristics. The “second hand” market and the private tutoring market are both characterized by many individuals who perform small business transactions all over the world. This is where the idea for eTeacher was born.
The idea was such: an internet site that would enable teachers to advertise themselves and students to order instruction services. The tutoring could take place face to face or on-line on the internet.
In order to advance this idea, the first thing I looked for was someone with the capability of building such an internet site. My brother, Boaz, a software engineer worked for IBM ‘s (Israel) research department at the time. Previously, he owned a company for building web sites that was actually one of the first in Israel to build web sites in the ’90s. Boaz liked the idea and decided to leave IBM and join me. We worked from his house for the first few months.
In 2001 the site was launched. It was targeted at the Israeli market and enabled teachers to sign up, build a profile on the site and advertise themselves. In addition, we developed an application on Microsoft’s “Net Meeting” platform that enabled teachers to hold lessons on-line as well as bill students.
Despite the amount of work that was invested on the site, immediately with its launch, we understood that the site was advanced beyond its time and that there was no chance to profit from it. In 2001, the broadband connection is Israel was in its “diaper stage” and the market was not ripe to accept our concept.
The alternative was to raise money and wait for the “market to come to us”. The problem was that the fundraising market was completely shut down after the “internet bubble burst” and the stock market crash.
One alternative was left: to change the model and produce income.
We came back to the models of conventional tutoring. Orders were placed on the site and we sent the teachers to the students’ homes. We simultaneously developed a system that would give on-line, real-time support for homework on the internet. This model was already being used in the U.S. by a company called www.tutor.com and the concept there was called live-homework-help. The system was developed and schools purchased the service. The service enabled schools or local authorities to offer on-line, real-time assistance for students who need or want help with their homework every evening without having to leave the house.
These two products developed but were not enough, especially because of low profit margins. Despite this, the activity grew from year to year and more of the tutoring was conducted on-line and less face to face. In 2007, 22 local municipalities registered for the live-homework-help service and purchased subscriptions for tens of thousands of potential students.
The Turning Point – Winning the Ministry of Foreign Affairs’ Tender
In 2002, the Israeli Ministry of Foreign Affairs held a tender for the establishment of a virtual school on the internet for the purpose of teaching Hebrew to children of Foreign Service employees in 50 countries. The goal of the school was to provide training to children of Foreign Service employees in retaining their Hebrew language skills (reading and writing) whilst they are abroad.
We understood then (and today we know we were right) that as a company that wants to specialize in elearning, we had to win this tender. A strategic decision to win this tender at all costs was made and indeed we won. We were required to begin the virtual schooling within two months of the tender (with a high penalty for every day of delay) for between 250 to 300 students of various ages, in many different countries. It was a complex project.
Despite the tight schedule and the complexities of the project, the virtual school began on schedule. The success of the project surprised even us; we believed in learning through the internet, but until this time had not seen tangible proof for the ability to study and progress using our system. There was high attendance by the students in the class, teachers reported that the students were making progress and learning to read and write and the feedback from the Ministry of Foreign Affairs and from the parents of the students was impressive. Today we are still the licensees of the Ministry of Foreign Affairs. A year ago, Intel and El Al Israeli airlines also informed us that they would finance this service for their employees’ children abroad.
Additional companies also committed to partially subsidize the service for their employees.
In 2003, at the end of the first year of the Ministry of Foreign Affair’s virtual school, we thought that the next stage was to sell the courses to Israelis abroad, a community of approximately half a million Israeli families living outside of Israel. However, our marketing budget was inadequate. We therefore tried to market through human resources departments of companies that send employees abroad, forums of Israelis abroad and cooperation with small internet sites intended for Israeli communities abroad. The response was limited but still tens of students registered at high prices.
At this point, another turnabout began which influenced the development of the company. In the winter of 2003, I traveled to Boston with my wife and newly born son for three weeks. My wife was required to take a course at Harvard University as part of her doctorate. I meanwhile took care of my son, Uri, and decided to take advantage of the trip and set up some meetings. I met with Dror Havusha, an Israeli entrepreneur in the field of internet who resides in Boston, and I told him of our plan to sell courses on the internet for Israeli children living abroad. He was particularly interested as his children are at the age where such a solution could be of assistance. I asked him whether he would like to invest tens of thousands of dollars (which was a large amount for us at that time) in our project in order to enable us to market the products.Dror suggested that the amount was too small to justify the process, but requested the possibility of entering the lessons and observing them, and so he did.
I returned to Israel and spoke to Dror on the telephone who was very impressed by the product. A few years later, he told me that what truly impressed him was the fact he saw the students coming into the class 15 minutes prior to the beginning of the lesson and waiting patiently, as if it were a TV program and not a lesson. Dror proposed an original idea during the meeting. He said he would take the marketing of the courses abroad upon himself and would finance it from his own pocket. In return, he asked for percentage of the income. In addition, he proposed that after a year we would set up a joint subsidiary that would operate and market the courses outside of Israel. We agreed upon the model and set out on our path.
During the first year of our cooperation, 2003-2004, we recruited 250 students who paid an average of $900 in tuition fees. This was a great success for us. It was in fact the first time we were able to enjoy a model that had a significant percentage of profit as the studies were held in groups and the income was in dollars at a very high price (dollar shekel ratio). The success was due in particular to Dror’s ability to spend a sum of money in marketing that we did no have beforehand. Dror advertised in all the large portals and the Israeli news sites where Israelis living abroad keep up to date daily.
Looking back, this is where the model of eTeacher was born, and this is where the business’s turning point began. What was revealed in the Ministry of Foreign Affairs’ project as an efficient way to learn turned out to be something that can be sold and where a profit can be made. In coordination with Dror, we decided to issue him new shares and added another partner to our company who contributed greatly.
The Next Stage: Establishing www.hebrewonline.com
The activity with Israelis abroad brought about requests from the Jewish American market from Jews who wanted to learn Hebrew as a second language. As we were not prepared for this, we did not initially respond to these requests. One morning a media buyer for Jewish communities abroad came to our offices.
We told him of the recent requests we had received from Jewish communities and he asked if we were interested in running a marketing pilot to determine the market’s readiness for on-line Hebrew courses for mature Jewish clientele. We approved of his proposal and agreed to his sending e-mails to a distribution list of 100,000 subscribers of one of the leading sites that focuses on this audience.
The results of this pilot amazed us. From the moment the e-mail was sent, the leads flowed continuously.
Within 48 hours, we had received hundreds of requests from people who wanted to learn Hebrew on-line on the internet. We began a race for the development of a Hebrew learning program on five levels. Every level takes eight to nine months where the student receives a weekly lesson in a group of five to six students. We recruited writers and a pedagogical manager and the development process began. We simultaneously progressed with the sales and marketing.
Hebrewonline was a great success and a natural continuation of the successful project we developed with the Ministry of Foreign Affairs for Israeli children living abroad. Over the course of three years, thousands of students registered. The growth rate was astonishing – the number of students doubled itself year after year. In 2007, approximately 2500 students purchased the Hebrew courses. On top of that, an additional 2500 students joined the tutoring activities here in Israel. We experienced the operation of a school with 5000 paying students.
The next stage: The Establishment of www.classicalhebrew.com
As a natural continuation of our activity in Hebrew, we established www.classicalhebrew.com. Here too, the decision stemmed from clients’ requests. We began to get requests from the Christian world that was interested in reading the bible in its original language. When we established eTeacher, we could not imagine that we would one day teach courses on how to read the bible in its original language to a Christian public in the US and in Europe. In business, as in life, not everything is planned.
In order to build the site, we took the model that was developed on hebrewonline and duplicated it. The first stage was to find a professional manager to recruit a team of writers, followed by sales and marketing.
In mid 2007, marketing of the product began and hundreds of students have already been recruited this year.
The combined success of the three Hebrew segments: children of Israelis abroad, the Jewish market and the Christian market strengthened our sense that we have a unique model with potential for additional languages.
We decided that it was time to venture into the big world and searched for the next phase.
The next stage: The Chinese Market – Establishment of www.chinesevoice.com (end 2007)
In 2006 and 2007, the company turned profitable as a result of the Hebrew group models, the export activities outside of Israel and the revenues from abroad. The model was profitable due to both the transition to groups as well as the nature of the activity which is one of export. It was also profitable as operational and salary costs were in shekels and these services are less expensive in Israel than the US and Europe. At the same time the revenues were in strong currencies such as Dollar, Euro and Pound.
This status enabled us to begin investing in and developing new initiatives. In 2007 the division of work between Boaz and myself enabled me to leave the day to day management of the business and dedicate all my time to development of our new products, leaving Boaz to actively managing the company.
This is what we looked for:
- “Big” languages, which apply to larger audiences than Hebrew, such as Chinese and Spanish.
- Languages that will sell in an English speaking market where our marketing and sales infrastructure are.
- Languages from countries where teachers can be recruited easily and where the teachers’ wages will not be high.
- Developing languages, languages that interest in them will grow in the coming years.
We carried out the following tests:
- Testing of search volume in Google Trends, of the interest in languages according to different areas in the world, using the expression learn (the language name).
- Screening of learning programs offered in 20 language schools in the US.
The tests lead us to the Chinese language. We saw that the market for study of Chinese in the US is smaller than the market for study of Spanish, but larger than the market for Hebrew instruction. We also noticed that the average price for an hour of Chinese language instruction is higher than for an hour of Spanish. In addition, the majority of schools do not offer Chinese language instruction in groups, but rather one on one (there is no critical mass). This data was especially important as this is where the internet is most effective (long tail). On top of this, we should add the current global interest in the Chinese market as a whole and the anticipation that this market will keep growing.
For these reasons, we decided at the beginning of 2007 to establish an on-line Chinese language school.
We set about our work using the same methodology that we had developed in the Hebrew market. In this case, there were additional challenges and logistical complexities related to the employment of instructors in China without a presence in China.
Within 12 months of our decision, a team of instructors was recruited from the Beijing area and a team of writers was established. At the beginning of 2008, we began to market and sell the courses. The first classes are already on their way.
Simultaneous Establishment of www.englishonline.co.il (end 2007)
At the same time as we developed the Chinese site, we decide to strengthen our activity in the local market by developing an on-line English language school. In 2005 and 2006 we identified requests through our tutoring activities for adults wishing to improve their English. At the beginning of 2008 www.englishonline.co.il went on-line and started selling group courses alongside our private tutoring in the local market.