Nearly two decades ago, brothers Yariv and Boaz Binnun hatched the idea of a school for private tutoring online. It was the height of the dot-com bubble; ideas for the internet received generous funding even if they lacked a clear business model. In their home in Tel Aviv they did Google searches for “private lessons” and believed they were the first in the world in their field. They resigned from their jobs at the Israel Broadcasting Authority and IBM, and celebrated their new independence by vacationing abroad together.
“When we returned, our brother Oded sent us a list of seven websites that do the same thing. It turns out we simply did the wrong search. We should have searched for ‘tutor,’” Yariv said, laughing.
“We worked on the idea at a time when there were loads of internet-based companies, and we wanted to be part of this great thing. But it turned out that we used the wrong search word, and there was a financial crisis that affected the industry and wiped out the small remaining possibility of raising money in an unpopular industry such as ed-tech.”
Today, eTeacher has 600 employees, including 350 teachers (most are employed directly) in 25 countries. Last year the firm sold 33,000 courses to about 30,000 students from 200 countries, and offered 12,000 teaching hours a month.
The courses it offers – biblical languages, modern Hebrew, English for adults and programming for children – generated $22 million in revenues in 2018, and the project has been profitable for a decade.
The company started out as a portal for tutoring. The Binnuns handed out leaflets at the entrance to schools inviting people to log on to their website, which they described as “your private teacher.” The site let students order a private teacher for a lesson online or a face-to-face lesson at home. They sold online packages of hours to schools and local authorities, and lessons for preparing for the bagrut matriculation exams. It was a business worth half a million dollars a year, and it was backbreaking work, they say.
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The turning point came in 2002 when the company won the bid for an Israeli Foreign Ministry project to start a virtual school for the children of Israeli diplomats abroad. But even this opportunity was the fruit of a big mistake.
“We were sitting here in the office and we said we had to win this tender,” Yariv says. “We decided to offer it at a minuscule price, 120 shekels [$33.50] per lesson including a teacher, technology and content, and after a year we would raise prices and build the business on that.
“We were 20-somethings, we didn’t understand how tenders work. The tender arrived by fax and we didn’t notice that a page was missing. And I remember the phone call from the Foreign Ministry when they told us we won. ‘Mazal tov, we’re happy to start working with you over the next four years.’ I broke out in a cold sweat; we had committed ourselves for four years! We were sure we had gone bankrupt at that moment.”
They thus had to act quickly. “We had to lay off all the teachers and bring in cheaper ones,” Yariv says. “We realized we weren’t capable of developing the content by ourselves, so we asked Israel’s Center for Educational Technology for permission to use their content. At the time it was an innovative idea: You can operate a school without being the publisher of the content. You don’t have to do everything yourself.”
They then sat down to develop the program that would eventually become their main asset. “Until then we had developed tools for one-on-one learning, and suddenly we were in a world of groups,” Boaz says.
“The conditions in group learning are entirely different: Suddenly you have to assign teachers, and substitutions have to be managed, and students in different time zones who are in the same class.”
Within three months they started a virtual school with 12 subjects and 20 teachers who taught Hebrew to children ages 5 to 7 scattered around the world. The two received permission from the Foreign Ministry to sell the courses to other Israeli children whose parents had emigrated, and in 2004 they taught 400 children for $1,000 per course.
The sale to private individuals, who are not captive audiences like foreign diplomats, taught the brothers an important lesson. “Until then we didn’t understand that teaching is a profession. We came from the world of private lessons, where the students who moonlight in the afternoon as tutors are the kings,” Yariv says.
“When we started we said to ourselves ‘Anyone can teach Hebrew.’ There was a guy here who came from high-tech and we said he would teach the children because high-tech people are smarter, aren’t they? It was an utter failure. We learned the hard way, but fortunately very early, that a good teacher is a great asset. Despite all the technology, the involvement of the students depends on a teacher sitting in the classroom.”
Aramaic for the masses
In 2004, a man named Dani Gvirtz knocked on the door of the company’s offices in Ramat Gan. He was a media buyer in the worldwide Jewish market, and suggested that the Binnuns sell a course offering Hebrew studies for adults. He told them he had a list of email addresses of people who might be interested in studying at such a virtual ulpan.
“We signed a deal with him without having a course to offer,” Yariv says. “At the time every email came in accompanied by a sound. I remember that Dani sent the email and we were sitting in the office and we heard ping, ping, ping, and suddenly a rapid sequence that sounded like a slot machine when you win the jackpot. We never imagined that you could send an email and get 1,000 requests.”
Today this ulpan, the Rosen School of Hebrew, is the largest school for learning Hebrew on the internet, with about 7,000 students.
But that’s nothing compared to the market for biblical languages that the two brothers later discovered. They started to get phone calls from people interested in learning biblical Hebrew; there are evangelical Christians who want to be able to read the original text.
“We had tough negotiations with a scholar at one of the universities, offering him 1% of the revenues. And from that 1%, over the years he earned sums that nobody imagined that a linguist who was an expert in biblical languages would earn from lectures.”
Over the years, eTeacher established the world’s largest study network for biblical languages such as Aramaic and Greek. The courses are given to 17,000 students a year from 200 countries in six languages, with 95 percent of the students studying for religious reasons.
They have also had failures; for a while they tried to enter the market for English and Chinese lessons but discovered there was too much competition.
Learning from the swindlers
In 2008 they met with the founder of the company ChinesePod, which had developed a product for learning Chinese via podcasts. They learned from him that there are two types of companies: those that have a product but no marketing, and those that are experts at marketing but lack a product.
“In China, a company with a quality product can sell in the local market, but in Israel there’s no such market. Israeli startups have to be exporters too – so they need both a good product and sophisticated marketing,” Yariv says.
“There was a company in Israel that sold tickets for a U.S. Green Card lottery. They fill out registration forms for you and take a lot of money for that, while you can do it yourself free. The entire industries of gambling, forex and Green Card lotteries are industries without a product, but they were so profitable that they improved their customer acquisition on the internet to insane levels,” he adds.
“They had concepts such as ‘lifetime value’ and ROI [return on investment] that we weren’t familiar with and didn’t use, and learning about them was a real revolution for us. If there’s one positive thing that these industries did for the Israeli ecosystem it’s that they were an excellent school for marketing. So that in effect, from all the forex and gambling swindlers we learned methods of marketing and measurement that we applied to quality learning products.”
Today eTeacher receives about half a million leads – details about potential customers – a year. The phone hotline speaks to two-thirds of them, about 300,000 people, and about 5% become customers and buy a product. The company makes almost no profit on the first course, so for it to succeed the student has to persevere and be satisfied.
In the worlds of education there is one index of success – engagement, Yariv says. “We label each customer based on the number of lessons he attends – 54% of those who try a product stay with us until the end. For years we were embarrassed by those numbers, until we discovered that they’re actually very high,” he says.
“We’re operating in a world of edutainment – after all, we don’t award an academic degree here, and when you compare it to a university course, many people don’t even come to learn but to buy a degree. Here you pay $1,000 per course, and it’s a demanding schedule of nine months, once a week. For years we didn’t have a benchmark because the industry was young, and we used to say: Wow, half the people didn’t stay with us!
“But when you look today at [online learning platform] Coursera, for example, which started out in 2012, you see that sometimes only small percentages of people reach the finish line of the course, and those who do are strong students with bachelor’s and master’s degrees. Our involvement is 10 times as great, and we manage to earn $1,300 from every customer.”
How do you explain that?
Boaz: “I think that there’s something strong about traditional learning, and that the innovation lies in the marketing, in the learning experience, and in our ability to expand geographically and numerically. We believe that learning is also a social process, and that an inspiring teacher and a group of colleagues have power that provides incentive, because you want to be the best. We go for programming and languages because those are things that are hard to study by yourself.”
Didn’t apps like Busuu prove that you can learn languages independently? Isn’t there room for a paradigm change in the world of education?
Yariv: “These apps are money-making machines, but in the end when you talk to people who come from there you discover that nobody really learns there. ... Anyone who has followed the conversation in the past two decades sees that if in the past everyone said that schools would disappear, today everyone knows that they’re not going anywhere.
“We aren’t philosophers of education, we didn’t come with a vision into which money was poured. To a great extent we went for what works, and we discovered that the classical model has tremendous power, that the customers want it, that they remain engaged, and that over time we manage to produce income from a customer on a level that many industries don’t manage to do.”
In 2016, when one of their children had difficulty learning programming independently, they discovered a new opportunity and made their first acquisition – a modest one of a few hundred thousand dollars – of the programming school Tekkie. Within three years they turned it from an enrichment program taking in around $100,000 a year into a business expected to generate revenues of around $4 million this year.
Tekkie’s success helped them understand that they had a platform capable of making additional acquisitions and entering new fields.
“We know how to expand geographically, recruit and train teachers abroad, and support the business with technology such as a system for managing the teacher’s learning in which he receives the content, sees the students, the schedule and his salary management. And there’s a system for managing substitutions, which can automatically carry out hundreds of substitutions weekly,” Yariv says.
“Finally, we have a business information system that looks at the data and creates insights, as in a gaming company.”
Now they’re looking for small activities with proven pedagogy that they believe have international potential on their platform. They’re particularly interested in entering the field of music lessons, believing that along the way there will also be the possibility of exporting their technology.
“Today most of the world teaches in a synchronized manner in physical schools,” Yariv says. “These businesses will at some point want a system, a kind of Wix, which will let them work on the internet.”