How are online education companies managing through turbulent times?
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Towards the end of 2022 I wrote a post about the turbulence being experienced by online education companies that partner with universities. This was on the back of a raft of negative company announcements about their performance and financial health.
There’s been a number of changes since then and there’s still plenty of dark clouds looming. What we’re seeing is a more prolonged shake-out of some of these companies.
So it’s an interesting juncture to reflect on what’s unfolded over the most recent period of turbulence. It’s also worth considering what turbulence-driven changes might mean for the way online education companies operate in the future and what we might be left with.
So where were we up to?
Since my last post that covered the serious concerns that came to light over FutureLearn’s liquidity, there’s been a lot of change.
FutureLearn was put up for sale and then in November 2022 was acquired by Global University Systems (GUS). Prior to that a significant number of staff had left and following the acquisition the most recent version of their leadership team have moved on, including CEO Andy Hancock.
Inevitably, FutureLearn is now beginning to look quite different to the company launched by the Open University in the early years of MOOC hype, and that evolved through to the beginning of the 2020s.
It is fair to say that there has been a little bit of disquiet in the UK about their acquisition. Issues that came to light at some of GUS’ providers in the previous years play into a widely held narrative, assumption or worry about quality when it comes to private involvement in higher education.
Alongside this, concerns about potential conflicts of interest between a company that owns universities and is now running a company built upon partnerships with other universities have been mentioned.
However, in the midst of those concerns - it’s worth remembering why we’re here. FutureLearn has never been a profitable online education company and was very quickly running out of money.
Whether GUS can change that only time will tell, but they do have experience in the business of online education. Whether that’s through a profitable OPM business in InteractivePro or through their universities that have significant numbers of online courses & students such as the University of Law.
They face a challenge shared by many others in the tech sector which is to find a route to profitability, and we’ve already begun to see some changes to try to achieve that.
These include increasing their subscription pricing which draws it much closer to Coursera’s equivalent subscription - Coursera Plus. Changing short course access, by essentially creating a paywall on short course self-pacing. So, short course content is now released week-by-week, and any learners looking to access all weeks from the outset and study at a quicker pace will need to pay to upgrade.
There’s been a few noticeable changes in respect to online degrees and B2B activity. A number of online degrees from Brunel University, who are partnered with GUS’s OPM business InteractivePro now feature on the platform, and FutureLearn for Business features much more prominently on the website.
It’s early days yet, but we’re starting to see small changes in the consumer, enterprise and degrees segments (to use Coursera’s terminology) of FutureLearn’s business.
Although these things are of interest, arguably what will be most intriguing is to observe what FutureLearn’s overall strategy is going to be going forward.
Will FutureLearn adopt a similar strategy to 2U when they acquired edX, by putting a lot of stock in the power and pull of an online marketplace or platform? Given the relative size of FutureLearn in terms of registered users and portfolio in comparison to other players like Coursera and edX - is this actually viable as an option for them?
Could they instead take a leaf out of the more traditional OPM playbook? In the past, FutureLearn used to boast about having next to no marketing budget, but will we see an increase in marketing activity particularly focussed around their online degree portfolio?
Universities are inevitably going to be presented with an evolving value proposition and it will be interesting to observe how this and other changes impact existing university partnerships.
Irrespective of the change in ownership I’ve long felt that we’re entering into a new period of university and ex-MOOC platform partnerships.
I would expect universities to more closely scrutinise their partnerships with these types of companies going forward and as contracts come up for renewal.
There are three main reasons for that, the first is time.
Over 50% of the UK universities have been partnered with FutureLearn for over 8 years and I think as more time that elapses the the chances of greater scrutiny of the value of the partnership increases.
The second reason is related to that - which is more universities getting serious about online education and by association online education company partnerships.
A lot of ex-MOOC platform and university partnerships have been characterised by a kind of strategic apathy from the university side. Any activity has been on the basis of being “nice to have” and “something that happens over there” and I would expect some thinking to change on that.
Which brings me onto my third point - and that’s the evolution of what I’m now (probably confusingly!) calling ex-MOOC platforms. Ultimately this compels universities to engage with them on a different basis and their value proposition.
It wouldn’t surprise me that these factors lead to both a reduction in the number of UK university partnerships FutureLearn have, and some revitalised university partnerships pushing on in terms of degrees.
But for now we’ll have to wait and see what happens in this new chapter of FutureLearn as a company.
What about Coursera?
In terms of the other ex-MOOC platforms, Coursera has made some encouraging announcements recently. The online degree segment of its business has now returned to revenue growth on the back of “increased student enrollments and scaling of new program launches”.
They’ve also launched 8 new degree programmes from some new and existing university partners. This takes their degree portfolio size from the over-40 bracket to the over-50 bracket and this includes some from Imperial College, Queen Mary University, University of Leeds and the University of London.
Coursera has a much smaller number of UK university partners (9), but it’s an impressive list of prestigious, big-brand universities. The recent-ish additions of new partner business schools such as University of Oxford’s Saïd Business School, the University of Cambridge's Judge Business School and the London Business School will enhance this list further.
Although they're not a profitable online education company yet and not predicted to achieve that for a few years, Coursera’s revenue continues to grow. Amongst, the big ex-MOOC platforms they stand apart because of their size & growth and the fact that unlike edX and FutureLearn they’ve not had the upheaval of being acquired.
These factors make Coursera an attractive option for UK universities looking to grow their online education portfolios and take advantage of the opportunities of a large online education marketplace. It will be interesting to observe whether this will lead to further growth in the number of UK universities partnered with them.
What about edX?
We’re now much further along the road in terms of 2U’s acquisition of edX and their pivot to an education platform strategy. Unsurprisingly, edX has a significantly increased number of bachelors and masters degrees that combine edX and 2U’s portfolios. This is a big change from the circa. 13 master degrees on the platform prior to the acquisition.
In terms of UK representation there are five university partners and in real terms there’s been limited growth in the portfolios they have on edX.
I say real terms, because the growth in the portfolios listed on edX from the University of Cambridge, University of Oxford and The London School of Economics is due in large part to the fact that these courses and bachelors degrees (in LSE’s case) were pulled over as a result of pre-existing 2U/GetSmarter partnerships.
It’s notable how little a foothold 2U and edX seem to have amongst UK universities currently. In fact, a UK university partner who partnered with 2U in their previous incarnation as an OPM focussed on expensive programmes at elite institutions, has recently been rumoured to have ended their partnership with them.
However, in their 2023, Q1 earnings call they rather cryptically made mention of the UK - saying that “the U.K. is a hotbed of degree activity as these universities cope with lower enrollments following Brexit.”. Which given the context seemed to suggest at UK university interest in what they call their flex degree model. However, we’re yet to see the hard evidence of this on the edX platform.
Perhaps the most interesting aspect of what’s happening with edX is lead generation and marketing. One key aspect of the strategic pivot was about reducing the cost per acquisition (or enrolment) of students to programmes like degrees, by leveraging the power of a platform like edX.
Traditionally OPMs have spent big sums of money on marketing to attract students, but some are struggling with the increasing cost of digital marketing. However, edX/2U seem to be profiting from their strategic shift in terms of reducing the amount of money they spend on marketing without a reduction in the number of leads and enrolments they generate.
In their most recent earnings call they highlighted a big increase in enrolments for two of their online degrees due to the organic marketing the edX platform provides.
It will be interesting in the next year to observe how this melding of two large online education companies and new strategy continues to play out and whether its footprint in UK higher education significantly increases.
What about the traditional OPMs?
The two biggest pieces of news in the world of traditional OPMs has been the two big publishers Pearson and Wiley deciding to ditch their OPM businesses. In March 2023 the private equity company Regent, L.P. bought Pearson Online Learning Services (POLS) - having been put up for sale. Then this month Wiley announced it planned to divest its OPM - Wiley Educational Services.
Although, this news is in some senses surprising - these were two OPM businesses that were suffering rather than growing and in the current climate especially, it makes sense why they were offloaded. Between them they have approximately 8 UK university partnerships, but both have suffered recently in terms of universities drawing their partnerships to an end before 10 year terms had elapsed.
In addition to this, Cambridge Education Group which includes the OPM CEG Digital is also up for sale , and all this taken together points to significant uncertainty around the viability of the OPM business going forward.
OPMs face increasing competition and an increased supply and choice of online degree programmes, they’ve also been navigating issues such as volatility in degree enrolments, increased digital marketing costs and the spectre of new regulation in the US that could impact on their business model.
Some of these things, along with bigger economic factors inevitably makes life more difficult for them to meet university expectations around the numbers of student they recruit. Which is one of the key performance metrics for universities and drivers for them partnering with an OPM in the first place.
All of this leads us to an interesting point in time for OPM and UK university partnerships. It’s clear that OPMs face a more difficult and competitive operating environment which makes it harder for them to deliver for universities. I’ve been hearing that for a number of universities, OPM performance in terms of student enrolments to programmes has been poor and performance as a whole has precipitated a few universities ended their partnerships recently.
Given that there are approximately 15 OPM and UK university partnerships of 5 years or more duration, I would be surprised if we don’t see some more partnerships coming to an end in the next year or so.
But it’s also worth pointing out here that there is still evidence of university demand for OPM partnerships irrespective of the future viability of that model. There are still new partnerships being setup or being sought.
However, it will be interesting to see whether the traditional OPM model will survive this period of turbulence. The largest OPM 2U has already repositioned itself strategically and the online education company Noodle (although it isn’t a traditional OPM) recently announced it was changing the way it works with universities and becoming a “strategy, services, and technology partner”.
It’s clear that some online education companies are actively making changes to their model based on a changing environment and times. It’s also evident that there are universities that still have an appetite for the traditional revenue share model.
But the big question is whether the current operating environment and the headwinds being experienced will ultimately compel some of these companies to change how they operate. It’s clear that in the current climate where profitability really matters, Pearson and Wiley no longer thought the traditional OPM business was the road to that.
