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Some E-learning businesses have successfully converted ideas into profits while others founder
Harcourt Higher Education and Temple University both said in July they were closing their online operations. And E-learning companies from Hungry Minds to UNext have lately laid off workers. Can it be that hard to make a buck in online education?
Well, yes, actually. Although enthusiasts still argue that E-learning will eventually be huge--market estimates are in the multibillion-dollar range--for now it has a decidedly mixed report card. Some schools, including the University of Phoenix Online, are shaping up as winners, as are a few other segments of the market, including corporate training. But the outlook for many more facets of the E-learning market is dim or uncertain.
What happened? After all, the Internet seemed like a perfect way to reach a huge pool of potential students, as well as reduce the high infrastructure and personnel costs of traditional schooling. And in the mid-to-late 1990s, money flooded into the E-learning sector--just as it did E-commerce, E-advertising, and pretty much E-anything else.
But like so many Internet businesses, some E-learning companies had trouble translating ideas to profits, says Michael Moe, a partner with ThinkEquity Partners, an investment banking and research firm. For instance, portals were the hot thing once, back when Yahoo! and Amazon.com were riding high. But just as those companies have suffered, so have their educational equivalents--and for some of the same reasons, including high development costs and a huge falloff in the online ad market.
In addition, demand for online courses was smaller than imagined. To be sure, many adults are looking for additional credits and training. But not all have the motivation and self-discipline needed to succeed at E-learning, says Vicky Phillips, CEO of geteducated.com, a consulting firm.
Targeting "leisure learners" hasn't proved to be a road to riches either. First, Americans aren't necessarily willing to pay much for noncredit courses. Also, although leisure learners want practicality, says Phillips, many recreational E-courses were of the "why stars twinkle" variety.
But there's been good news along with the bad. Many staid, ivy-walled universities have set up enviable E-learning centers. The University of Maryland-University College enrolls 26,500 students. Another success story is the University of Phoenix Online. With more than 25,000 students, Phoenix is growing like a weed. Why? Founded in 1976, it has many more years of experience serving older, adult learners than Internet-era upstarts. Convenience has always been paramount, and it retained that focus when it began offering courses online in 1989.
Companies targeting corporations, like Redwood City, Calif.-based SmartForce, are also doing well. That's not surprising, since corporations see a tangible benefit from putting training online: lower costs. But there are motivation issues among corporate learners, too, especially those who know that, in past years, their company might have sent them to a resort for a week for their training.
Take it abroad. English-language training is another growth area, says Liam Donohue, a founding partner of DHM Arcadia Partners, a venture capital firm. U.S. universities also have a big opportunity to take their brands abroad, he says. Last August, Thomson Corp. said it would invest $25 million in Universitas 21 Global, an online university targeting Asia and Latin America. The venture will involve 16 universities, including the University of Virginia and New York University.
True believers say the outlook for online education is bright. More mergers and acquisitions are likely as big companies look for a chance to snap up start-ups on the cheap. But there's a new caution in the air. Practicality and profits matter. Call it back-to-basics education.
This story appears in the October 15, 2001 print edition of U.S. News & World Report.