In late 2005, I happily connected with Hank and Steve, two of the three co-founders behind Shanghai based education service Chinesepod. I’ll be honest, Chinesepod was such a fresh service there weren’t many comps to look at, thus it was truly difficult to determine whether or not user acceptance and demand would hold-up long enough for the company to reach critical mass and turn a profit. Basically, we had to wait and see what happened as the business matured a bit more.

In the meantime, I tucked in, did some crawling around the Web, held a dozen or so focus groups (online and offline), and became a user of the service.

As part of my research I placed adverts on Craigslist (and a couple local Chinese bulletin boards) looking for Chinese Mandarin tutors – I wanted to see if there were alternatives to the traditional offline courses or CD/web enhanced lessons. What I started noticing was a significant number of duck taped Web2.0 Chinese and English tutoring services – these tutors had cobbled together real-time virtual classroom on the back of Skype. The only problem was I had no way of determining if any of these tutors were good value or a waste of space.

This got me thinking – why not create a web based on-demand professional tutoring service for Chinese mainland students of all ages, across all subject – some possible service features could have been: (1) no required minimum session time; (2) tutors selected based on student/parent ranking, relevance, or dialect; (3) sessions held in a browser based 3D virtual meeting room; and (4) various social networking tools.

Sure, there were some challenges in hiring and qualifying tutors, monitoring the quality of sessions, and 3D environments were bulky but the platform was scalable and required few full time employees – definitely an execution play rather than a capital intensive venture. However, I got busy and this concept melted like the polar caps.

Fast forward to February 2008 – so, I’m surfing around New York Times’ website and I came across an article by journalist Michelle Slatalla titled “On Demand, on Time and for a Fee, an Army of Tutors Appears”. The article is a narrative of what happened after Slatalla unleashed her kids on a couple US online tutoring services – indeed, it is worth a read – more importantly, it jarred my memory…

Granted, it has been a couple years since (and, sure there are some people playing around in this space in China) but I still think this is a very interesting business – especially, given recent advancements in 3D environments, increased popularity of computers in the home, and the fact that Chinese students (and uniquely so) have completely blurred the line separating the real world (offline) and the virtual (online) space.

To wit, American students are drawn to a service, such as Tutor.com it’s heard to imagine a similar service not succeeding in China.

UPDATE (13/2/08): This morning, we got an email from Steve Williams (Chinesepod) that provides some additional insight into China’s tutoring industry – we don’t normally post comments/emails on our site but this one is particularly interesting. Many thanks.

I’ve seen a fair bit of interest in the space from Indian call center firms, looking to extend into English tutoring in the China market. I think they’ll have a hard time building brand awareness, given the spend of big chains like English First and Wall Street, but if they partnered with off-line schools they could have a good opportunity.

Scale is another problem, as is stopping freelance tutors poaching customers and servicing them off-platform. Another huge gap is the lack of online support materials. A key piece of offline school ‘technology’ is the textbook, but what do online tutors use? A lot of them send the student a link to an Amazon page, where the student buys a book and waits a week for delivery. Insane! I think there is an opportunity for Praxis here, with on demand syllabi.

China use to cycle 5 to 7 years behind the West, in terms of technology/Internet business models, however with the introduction of business models leveraging “Web2.0” (this words is so overused and generic) technologies this cycle lag has dramatically narrowed; we’d argue China is only 2 to 3 years behind the West (while Japan and Korea might actually be trailblazing thanks to the proliferation of broadband).

As a result, local entrepreneurs looking to break into this Web2.0 space don’t necessarily have the cushion they once had – “hey, the train is leaving the station and you’re still trying to figure out how to buy your ticket…” – with Web1.0 business models. Furthermore, the very nature of Web2.0 ventures, being all user generated content and stuff, are significantly more global friendly (i.e. localization is bottom up, not top down) – for example, Flickr is as relevant to Xiao Wang in Xi’an,PRC as it is to Redneck Bob in New Hampshire, USA.

Not solely for this reason, but perhaps the above comment is a main driver of our belief that China based blogging communities are not financially viable over the long term (ex-advertising revenue model), for example, a recent survey revealed that over 40% of China professionals use MS Spaces, which is free and not a Chinese homegrown product. We think this certainly holds true for video storage/sharing sites as well.

Heather Green from Business Week fundamentally shares our view on blogs/podcasts/vblogs but “we thinks” Heather is overlooking one specific opportunity – Web2.0’s “killer app” – here is what Heather has to say:

But I believe the general notion here is that there isn’t a huge amount of money to be made just on podcasts and that the disruptive nature of podcasts lie in the fact that most people will be doing them for themselves and their friends and families.

So, what is the killer app (or business model) in the Web2.0 space? To Heather’s point, how are we as investors (and you as entrepreneurs) going to profit from this disruptive force – free content and storage? Well, after months (not years, mind you) of hard core research and analysis we’ve identified the perfect killer Web2.0 app/business model: Education.

We liken the Web2.0 education model (language/test prep) to online dating, but not match.com, more like Jdate.com – a dating site targeting the global Jewish community. Jdate can charge up to US$34 per month for their service because they have a captivated audience (Jews) looking for a specific payoff (a date/marriage) and are willing to pay for this (users trust the content/service).

To preempt any inflow of dating b-plans, for the record, we don’t see dating as a very good Web2.0 business.

Education is perhaps one of the only services/categories that not only leverages the benefits of community, RSS, podcasting, etc to vastly improve the user’s experience (“making learning fun”), but also does so inexpensively and, if you get the content and usability right, profitably. Furthermore, the market remains wide open (perfect environment for China based entrepreneurs) with only a handful of start-ups attacking this space (and no clear leader).

And, within the education space, we believe language and test preparation are the most exciting segments – largely because it combines both the foundation of a captivated audience (“I need to pass my GMAT to get into b-school or it’s back to the countryside for me”) and specific content (language is, well, language) with established/popular/free distribution channels (podcast, RSS) and the support of community/network (user generated content). In other words, consumers will pay for your content, while your costs associated with distribution are relatively low.

We especially like what the boys over at Shanghai-based OnDemand Training are doing with Chinesepod.com and Englishpod.com

Yahoo brings podcasting mainstream…and to be honest, it looks quite functional

If you want to listen to podtech’s interview with Yahoo Podcast product director, Geoff Ralston click here…it is worth a quick listen…

Interestingly enough…one of the top three most popular postcasts is ChinesePod.com, which provides free daily podcasts teaching people to speak Chinese…