Summarize this content to 2000 words in 6 paragraphs in Arabic Global investment in online education companies has fallen to its lowest level in a decade as the industry comes under pressure from the rapid rise of free generative artificial intelligence tools that are undercutting their products.Edtech businesses, which offer services such as online tutoring and exam practice, received just $3bn of investment in 2024, compared with $17.3bn at the peak of the pandemic in 2021, according to data from PitchBook. This is the smallest amount since 2014, when edtech companies attracted $2.3bn.The huge decline comes as edtech companies, which soared in popularity during the pandemic amid mass school closures, have struggled to maintain subscriber growth after the end of the Covid-19 emergency.It has been exacerbated by the fast development of generative AI over the past two years, which has further upended demand for edtech companies’ paid-for online learning tools and caused their valuations to plummet.“While edtech offers the potential to bridge the skills gap, many investors and learners feel that the platforms have failed to truly deliver on this promise,” said Sabah Baxamoosa, director of business development at entrepreneurship platform OneValley.However, investment in generative AI is booming. Investors have poured $51.4bn this year into the developing technology, up from $16.5bn in 2021, according to PitchBook.Chegg, a California-based edtech group, was one of the first companies to report a hit to its business from the launch of OpenAI’s ChatGPT, bringing the stock abruptly down from its pandemic high.Since then, the company has continued to struggle. In November, it announced it was cutting a further 21 per cent of its workforce, just six months after its last lay-offs. It reported a 13 per cent decline in subscribers to 3.8mn during the third quarter compared with a year ago. Chegg’s shares are down about 84 per cent this year.“Recent advancements in the AI search experience and the adoption of free generative AI services by students have resulted in challenges for Chegg and other direct-to-student learning services,” said Nathan Schultz, chief executive and president. “Instead of building critical thinking skills, students often lean on AI for quick answers, which hurts their long-term understanding.”He added that Chegg had a “deep legacy” and “resilient brand” and that next year, it “will continue to strengthen the learning experience for students who seek to learn, not just get a grab-and-go answer”.Coursera, which offers online courses, certifications and degrees, has also seen its stock fall more than 56 per cent this year. Shares in Udemy, a similar online learning platform, are down more than 43 per cent this year.However, language learning app Duolingo is one of the few to buck the trend, with its stock gaining nearly 60 per cent this year, following a rise in users and paying subscribers off the back of new features. Some features are powered by OpenAI’s GPT-4 for personalised feedback.Competition from AI companies has increased this year, with OpenAI and Google bolstering their education offerings. OpenAI launched ChatGPT Edu in May, a version of its popular chatbot, which London Business School and Arizona State University are using. Google this year developed LearnLM, a family of models fine-tuned for use in educational settings.Edtech companies are now rushing to integrate AI into their products, arguing that the technology has the potential to enhance their services. Platforms Khan Academy and Coursera have integrated generative AI assistants to interact with users. Speak, a language learning platform, uses OpenAI’s voice model Whisper to teach through conversation.“AI will impact the way people learn more than almost any other area of human activity, especially when you consider that education is a rare area where software hasn’t meaningfully shifted things yet,” said Connor Zwick, chief executive of Speak.The San Francisco-based start-up recently raised $78mn at a $1bn valuation, led by Accel and with participation from OpenAI’s start-up fund, Khosla Ventures, and Y Combinator.Zwick said individuals were willing to pay for a more specialised experience but added that Speak did not define itself as edtech. “I just don’t think investors are excited about the edtech industry, and you can’t blame them after the last cycle’s performance. Today, edtech is almost a loaded word.”Some edtech companies are looking at driving new revenues by helping teachers detect when students have used generative AI to cheat on tests.Last year, Turnitin launched AI-generated text detection as part of its offering, and it has since reviewed more than 200mn papers. Annie Chechitelli, chief product officer of Turnitin, said the tool had an 86 per cent accuracy rate while keeping the number of false positives — where the tool mistakes human-generated content for AI — under 1 per cent. “We were able to respond quickly because we’ve been working on it since 2020 [but] since the beginning of school, students have been inventive and creative around ways to subvert systems [and] there are always new threats coming up,” she said.Many within the education sector are sceptical over whether these changes will help improve the outlook for edtech companies.OneValley’s Baxamoosa said deploying quality AI models in edtech products was expensive and had bias, privacy and security concerns. These obstacles, as well as the speed of change in the industry, have damped investor appetite, she added.Jared Cooney Horvath, a neuroscientist and education specialist, said “the modern hype” of generative AI had led edtech to “plug that word into every aspect of their products — even when, or especially when, it doesn’t belong”.“Edtech companies are largely composed of engineers, businesspeople and economists,” he said. “Very rarely will you see a practising teacher or educator anywhere in the mix. Their failure to meaningfully impact education is [because] they do not understand the field they are trying to evolve.”
