The Changing Role (and Threat) of Technology for Children

Australia | Focus on

The impact of the Covid-19 pandemic saw a proliferation of teaching through ‘edtech’ and related services. We are now beginning to see early consolidation and directional guidance on the future of the industry.

John Toll
Partner
Azure Capital

A recent study by the University of New South Wales Gonski Institute for Education has revealed that the average Australian child owns three digital devices and fewer than half go an entire day without using them. These devices include smartphones, laptops and tablets, which all now occupy common place in households around Australia.  

Over two thirds of parents surveyed in the study confirmed that “negotiating digital technologies causes conflicts in our home.”

Whilst parents see clear educational benefits of access to digital devices, the supply of which is often required by schools, 80% of those surveyed are convinced their kids are negatively distracted by their screens.

 

Benefits of Technology in the Household

Whilst the role of technology at home to assist in a child’s educational experience had been increasing prior to COVID, there is no doubt that one of the few positive outcomes of the pandemic was the opportunity to rethink how digital technologies can be used to support teaching and learning in schools - something that was effectively forced given approximately half of the world’s students were unable to physically attend school in late 2020. 

All over the world, school shutdowns have seen teachers, students and families get together to achieve great things with relatively simple technologies. Whilst some market commentators believe COVID will be the tipping point after which schools will be pushed fully into digital education, perhaps the most compelling technology-related lessons to take from the pandemic appear to be the informal and improvised digital practises that have helped teachers, students and parents get through school at home. Examples include the surprising rise of TikTok as a source of informal learning content where remote schooling saw teachers of all ages turn to the platform to produce short (~1 minute) slices of content to give inspirational feedback, set learning challenges or simply check-in on students and parents to see how they were coping.

 

Threats of Technology for Children

But there is a darker side to the rise of technology in households and the digital home-schooling revolution.  Numerous serious threats that a child’s access to technology in the household can present are well documented with cyberbullying, child predators, online porn, privacy concerns and distraction from study, among those commonly identified. It also should be noted that these threats don’t only exist in the household, but rather any time a child accesses technology in an unregulated manner.

"Covid-19 gave rise to informal and improvised digital practises that have helped teachers, students and parents get through school at home... but there is a darker side to the rise of technology in households and the digital home -schooling revolution"

Of these threats, recent surveys have found that cyberbullying is one of the leading concerns of parents. This isn’t surprising given an estimated one in five children has been the victim of cyberbullying, and three-quarters of Australian schools reported at least one incident of cyberbullying in the past year.

 

Other common reported threats which are the subject to various on-going studies and investigations include to the potential negative impact digital technology can have on the mental health of children and the link between screen use and sleep quality.

 

The Cyber-Safety Industry

These threats are concerning to parents and caregivers.  Coupled with the fact that more screen-time appears inevitable as the digital transition continues across all aspects of our lives, it paints as worrying a picture as it does create an opportunity.  The proliferation of internet use by children has given rise to a range of cyber-safety tools and platforms provided by experts.

 

One of those experts is ASX listed technology company, Family Zone Cyber Safety Ltd (Family Zone). Family Zone is an emerging leader in the fast-growing cyber safety industry whose unique innovation is its patented cyber safety ecosystem, a platform enabling a world first collaboration between schools, parents and cyber safety educators.

 

Family Zone has a range of products, some of which are for use in Schools to both help manage students but also importantly assist these educational institutions discharge their duty of care while students are online at school. Other products are tailored for use at home to allow parents to monitor and keep their children safe online.

The market opportunity for Family Zone is vast with an estimated total addressable market in the key jurisdictions in which Family Zone operate of 57 million students in America, 10 million in the United Kingdom and 5 million across Australia and New Zealand. 

 

The regulatory backdrop for schools across each of these regions is evolving. Industry players such as Family Zone are likely to play a key role in assisting these regulatory bodies in setting future guidelines and requirements, by virtue of the level of data they have access to through their existing products and customer base.

"The regulatory backdrop for schools across each of these regions is evolving. Industry players such as Family Zone are likely to play a key role in assisting these regulatory bodies in setting future guidelines and requirements, by virtue of the level of data they have access to through their existing products and customer base."

Family Zone recent acquisition of Smoothwall Limited

Azure Capital recently advised Family Zone on it’s A$142 million acquisition of Smoothwall, the UK’s leading provider of K-12 digital safety solutions. Smoothwall is an industry pioneer, with a mature filtering product and a leading position in UK education, providing services to more than 12,400 schools and 6 million students representing approximately 38% of the market. Smoothwall generates circa A$30 million of annual recurring revenue and delivered a pro forma unaudited EBIDTA of ~A$7.0 million for the financial year ended March 2021.

 

The transaction was funded via a fully underwritten A$146 million equity raising which was very strongly supported by institutional investors with the share price now trading well above the equity raising price. The Company currently has a market capitalisation approaching A$0.5 billion.

 

The acquisition of Smoothwall by Family Zone creates the world’s most compelling K-12 digital safety solution incorporating Family Zone’s fast growing Linewize K-12 solutions, Family Zone’s parental controls and Smoothwall’s scale and world-leading solutions.  The combined entity has pro-forma ARR of ~A$44 million, employees over 300 staff with its products used by ~9 million students across over 18,000 school globally.