U.S. share market participants are looking for NetEase's third quarter financial report out Thursday.

The company offers users in China free access to some of Google's technologies and online tools - despite Google-run websites and its internet search being blocked in mainland China.

Students from more than 700 universities and colleges across the nation are gaining free access to three of its technologies and online tools. 

NetEase Youdao, the online education subsidiary of China's tech company NetEase, in partnership with Google China, recently launched the learning program "Grow with Google" on its Chinese Universities MOOC platform, an online education product owned by NetEase Youdao.

Providing World-Class Knowledge

The program consists of three courses. TensorFlow is an end-to-end open-source software for machine learning and ARCore represents augmented reality technologies. Both were developed by Google.

The platform shows so far more than 20,000 users have signed up. The overseas digital marketing course is the most popular and provides potential opportunities of being employed by 100 overseas firms in association with Google.

The platform indicates the three courses will be available through the end of next year. Anyone in China can gain access to the education content through the China Universities MOOC app.

MOOC is "massively open online course." This platform claims to be in collaboration with 724 higher-education institutions across China, with top universities such as Peking University, Zhejiang University and Nanjing University involved. It covers a wide range of online courses from artificial intelligence and computing to economic management and foreign language learning. 

Bright Prospects

NetEase Youdao reported 520 million yuan ($78.93 million) in net income in education services and products during the second quarter of this year, representing a rise of 190% year on year and accounting for nearly 84% of its 620 million yuan in net income, according to the company's financial report.

High profits in education service come from online courses which raked in 542 million yuan in revenues with 45.2% of gross margin. Paid student enrollment of K-12 students on its premium courses earned 329 million yuan during that time.

One of its offline educational products, Youdao Dictionary Pen Scanner for word and sentence translation between Chinese and English, remains popular with students.

The company was listed on the New York Stock Exchange in October last year - the first division of NetEase to go public. It sought $220 million in the initial public offering. 

"The capital market has always supported online education companies," Zhou Feng, NetEase Youdao's chief executive officer told China Daily, "as they are optimistic about the development prospects of the sector."

China's online education sector is expected to achieve revenue of 485.8 billion yuan ($71.8 billion) this year, compared with 387 billion yuan in 2019, according to consultancy iiMedia Research.

Underlying Concerns

As of the first half of 2020, over 15 online education startups in China have conducted more than 49 fundraising rounds, a rise of nearly 48% year on year. Online education firms currently account for almost 50% of the nation's education market share, according to public information.

Education experts warn that, as some online education startups spend excessively on marketing to win over users, the sector may face another "Ofo event." Ofo was one of several bike-sharing companies that faced bankruptcy from overspending on marketing and high competition, leading to cash flow issues. Facing high customer acquisition costs, the online education companies are still left seeking a sustainable business model. 

In NetEase Youdao's battle with competitive rivals including Yuanfudao, VIPKid and VIPThink, the company has drastically increased its marketing expenses in the second quarter to as much as 450 million yuan and even signing Lang Ping, China's legendary volleyball coach, for its premium line of courses. Marketing expenses were 122 million during the same time last year.

During the second quarter, NetEase Youdao's multiple learning apps had average monthly active users of more than 120 million compared with 100 million when it filed its prospectus for Nasdaq listing.

China's total online education user numbers will hit 351 million by the end of the year, said iiMedia Research.