Q2 2024 Review: Developments in UK Online Education
We’re now entering the summer months here in the UK, and for the moment the sun is shining and it’s nice and warm, at least where I am. This is particularly encouraging given that in recent weeks the internet has been serving up articles entitled “Can you imagine a year without a summer?” and ”Why is June so cold and will it get warmer?”. As we prepare to enter what will hopefully be a summer-like July and the 3rd quarter of 2024, it’s time to reflect upon all the developments in online education we’ve seen in April, May, and June.
The last quarter has been full of interesting news, announcements, and developments from various companies operating in online education and several UK higher education institutions (HEIs).
Partnership update
I recently published an update on the current state of UK HEI and online education company and online programme management (OPM) company partnerships. One of the takeaways from that is that partnerships continue to be established year-on-year. Q2 of 2024 confirms this trend, with a few new partnerships being established and several being pursued away from the public eye.
In April, FutureLearn announced an OPM-style partnership with the University of Roehampton to deliver nine postgraduate business programmes, which have already been launched. This deal highlights two things: the speed to market that can be achieved via these partnerships and further proof of the evolution of FutureLearn as a hybrid OPM and online education platform company.
Another partnership announced in April was between King’s College London and CEG Digital. This partnership is an example of an unbundled services deal, as CEG Digital will be providing marketing and recruitment services. This partnership largely continues a trend of King’s outsourcing this activity, with CEG Digital taking on the mantle from a previous partnership that has ended.
One other interesting partnership announced this quarter was between the University of Huddersfield and Coursera. One might say this is a product-specific partnership rather than a wider-reaching one, as it is initially based on an online MSc in Management with performance-based admissions.
This type of degree and the way it is offered aligns with Coursera’s strategy of growing their degree portfolio, whilst also furthering their pathway strategy through this admissions approach. It also represents another quarter in which Coursera has added a new UK HEI partner, expanding the type of HEI they are partnering with, as their pre-existing UK HEI partnerships have almost exclusively been with Russell Group universities.
This approach highlights another example of a diversified partnerships strategy being adopted by UK HEIs, as Huddersfield also has several other online degrees listed on FutureLearn’s platform. This perhaps points to an environment where there is greater scope for more HEIs to pursue such a strategy.
One last bit of partnership news in Q2 2024 was the end of a partnership between CEG Digital and Queen Mary University. This was reported in a somewhat strange piece in PIE News, that really conveyed the fact that they knew something had happened but didn’t know why.
Partnerships come to an end for various reasons, but this appears to be another example of an OPM exiting a partnership that is no longer viable for them. In recent years, we’ve seen similar moves from OPM companies Keypath and 2U either in respect to partnerships and/or specific programmes.
Health and wealth
Which leads me nicely to some financial reporting we’ve seen this quarter. Two of the biggest US players, 2U and Coursera, published their Q1 2024 results, and UK-focused OPMs Higher Ed Partners, CEG Digital, and Kaplan Open Learning all published accounts covering some or all of 2023.
Coursera reported another quarter of revenue growth, generating total revenue of $169.1 million, up 15% from the same period last year. However, the company had to revise down revenue projections for the year, and two of its three segments, consumer and enterprise, both saw their second quarter of revenue decline.
In the consumer segment, they attributed this to lower than expected revenue from North American learners due to a delay in launching “important content”, likely referring to the Google AI essentials course which is now on the platform.
Despite two faltering segments, they reported another quarter of revenue growth in their degrees segment. Although this is their smallest segment, it gives a bit of a signal about the health of the online degree market. Their total number of degree students was 22,200, representing growth of 23% from a year ago. However, in absolute terms, this represents an increase of just 175 learners from the 22,025 reported in Q4 2023. This will be one to watch as the year progresses and new programmes come to market.
Another of the big US players, 2U, also announced Q1 2024 results. The company continues to strive to turn itself around but experienced a quarter of revenue decline across its two segments, degrees and alternative credentials. They reported 44,693 Full Course Equivalent (FCE) enrolments in Q1 2024, an increase of 1,384 from Q4 2023, but nowhere near the circa 60,000 reported in 2022. However, 2U continues to engage in what it describes as portfolio management, meaning some degrees offered in 2023 are no longer available, and it is bedding in 42 new degrees that it reports have been launched.
The company’s 2024 revenue guidance remains the same although its net loss guidance has increased. 2U continues to drag itself out of the mire by reducing costs, mainly through reducing staff, and trying to improve its liquidity, which it has this quarter. However, most importantly, given it has also reported that its revenue is not going to be sufficient to satisfy commitments to creditors, it continues to engage in discussions with them to find a solution that ultimately provides a long-term future for the company. The outcome of these discussions will arguably be the most significant development for 2U and their growing number of UK partners this year.
As publicly traded companies, we have much greater transparency when it comes to the performance of the likes of Coursera and 2U, something we don’t often have with the OPMs and online education companies operating in the UK. However, three largely UK-focused OPMs have posted their accounts for 2023 or part of that year, depending on their accounting period.
CEG Digital posted their accounts covering 1 September 2022 to 31 August 2023, showing revenue of £16.2 million, up from £14.9 million in 2021/22. However, they also posted their most significant loss (after tax) in the past five years of £4.1 million, following two years of profit. They seem to have attributed this to the setup costs associated with several new partnerships, but no doubt there will have been other factors such as increased costs in areas like digital marketing.
Higher Ed Partners, taking advantage of a particular exemption, do not report their annual revenue in their accounts. However, they also reported a loss of £1.4 million based on a 2023 full-year accounting period. This is significantly less than in 2022 when the loss reported was £4.7 million.
Lastly, Kaplan Open Learning, another UK-focused OPM, reported increased revenue of £22.8 million and a slight drop in profits to £2.1 million for a 2023 full-year accounting period.
In the absence of more transparent reporting on how financial performance relates to student recruitment for degrees and other metrics, it’s somewhat difficult to analyse some of the OPM and online education companies that primarily operate in the UK.
However, with some exceptions, we see a fairly consistent tension between growing revenue and underlying profitability. There have, of course, been some particularly challenging economic times that many companies have had to navigate through, but this financial reporting does not go very far in addressing the questions many have about the longer-term viability of the OPM business model.
One last piece of news this quarter perhaps nods to this, as it was recently announced that the private equity firm Sterling Partners acquired the OPM Keypath Education. However, this is not quite the fire sale we saw when Regent acquired Pearson Online Learning Services (POLS), as they were already the majority shareholder.
I see this move as largely about creating better conditions for them to deliver on the strategic moves they’ve made in recent years, which have included exiting the UK market and exiting several programmes to concentrate their focus on the US and the APAC region, and on healthcare programmes.
New VLE partnerships and product developments
Although not exclusively focused on online education, it’s worth reporting two announcements from UK HEIs about virtual learning environment (VLE) implementations. In April, the University of Manchester announced it would be changing its VLE to Canvas by Instructure, and in June, it was announced that De Montfort University would be adopting Brightspace by D2L.
These announcements represent a continuation of trends seen in the UK VLE market for several years. Broadly speaking, Canvas and Brightspace are growing their market share, largely at the expense of Blackboard by Anthology, which has now lost these two UK HEI clients.
On the subject of products, this last quarter has seen AI continue to drive product developments, with some interesting announcements from Coursera recently. If there were a "how hard are you betting on AI-ometer," then Coursera would be pushing into the red for sure. However, one of the most interesting aspects of their developments was the sheer number and scope of them.
I counted ten product developments that led them into interesting areas such as plagiarism detection, proctoring, and browser lockdown. Reading between the lines, these moves seem heavily aligned with competing in the Indian higher education market and addressing concerns over academic integrity in what is a growing and large market.
Portfolio, products and subjects
I’ve already spoken about company partnerships with UK HEIs, but I haven't directly addressed one of the obvious by-products: an ever-increasing supply of online degree programmes. This is an area I intend to dive into deeply later in the year, but we have seen a significant increase in the number of online degrees this year. Since the start of the year, more than 65 new online degrees have been launched. While these are primarily postgraduate master's degrees, there is a not insignificant amount of undergraduate degrees too.
While many of these fall within the common subject categories that dominate the market, there are incremental moves into other subject areas. This is perhaps best represented by the suite of online design master's programmes recently launched by the University of Sunderland.
In addition to online degrees, this year has seen developments in the online short course space. One of the most notable has been London Business School’s establishment of LBS Online. Their prestige and type of offering put them in a pool of HEIs that includes the business schools of Cambridge and Oxford, and LSE, albeit they are somewhat later to the party. This move resonates with recent findings that showed an increase in executive education courses for companies being delivered online. Developments have not been limited to the world of business and management though; the creative industries-focused BIMM University has also launched a suite of online short courses focused on music production. This further highlights that while certain subject areas still dominate, there is a growing diversity in the subject areas for online education.
Summing up
The combination of the need for diversification of income streams and growing market saturation in certain segments should lead to more developments of interest in terms of course products and their focus areas in the next 6-12 months and beyond.
It will be interesting to observe how, and whether, this will influence the strategies of the continuing stream of HEIs entering the online education market. These moves have been evidenced through recruitment, although this quarter has not seen quite the same level of activity. However, Goldsmiths, University of London has recently advertised for an inaugural Director of Online Learning.
The next six months should also result in more partnerships and perhaps a clearer picture of the future prospects of some companies. Given the current dynamics of the online education landscape in UK higher education, I’m not anticipating a struggle in finding topics to cover in Q3.
