Is there a future for online ed? Fathom's gone, leaving us to ask, `is anyone making money on online education?' - Viewpoint

University Business, March, 2003 by Jack M. Wilson

Just a few years ago, almost every college and university announced that it was going online. But from Fathom and Harcourt Higher Education to Pensare, many noble experiments are finished, and some have asked, "Is anyone making money on online learning?" The implied answer is, "No," and yet, several organizations have demonstrated viability, including the University of Maryland University College's UMUC-Online, Penn State's World Campus, and the University of Massachusetts' UMassOnline.

Still, with each industry failure comes a reminder to the survivors: Focus attention on what kinds of education people need, want, and are willing to pay for. Another key lesson: It's all about serving learners, and not about using technology (designing educational experiences around technology is a foolish chase; you cannot possibly keep up with the technology). And a surprise for many of the departed ventures is that content is not king--it's actually the least valuable part of the higher education value chain. Over 170 students paid more than $3,000 each for a "live-on-line" class I taught, and yet, the content was available for free on the Web or for $50 in a text. Why were students so anxious to pay $3,000 that we had to raise the course enrollment limit four times? Answer: Students want access to UMass, Columbia, and Stanford degrees, faculty, fellow students, and classes.

Reputation, then, is king, and is more than merely brand name and image. Conventional e-business wisdom suggested that brand could be built by clever ad campaigns, or inherited from the brand equity of the parent. Harcourt Higher Education thought that students would flock to an organization sporting the brand name of a well-known publisher. Cardean thought it could sell its expensively produced courses to a public eager for access to the brands of its partners--Columbia, the London School of Economics, Stanford, Carnegie Mellon, and the University of Chicago. But when individuals look for an educational experience, they want their credentials from an organization with an outstanding reputation and a high probability of being in business throughout their careers.

Although those of us who advocate change in universities certainly chafe at the slow pace of that change, and there is room for universities to move faster and be more responsive to community needs, there is little likelihood that those changes will bring universities to the quarter-to-quarter mentality of the business world. There is a major cultural difference here, and that is probably a good thing. Universities should be institutions that take the longer view.

Joint ventures that bring together high "need for speed" business organizations with universities and their slower, more collegial processes seem to be impossible combinations. The University of Phoenix (the most successful of the for-profit companies) did it (mostly) without entangling alliances. And on the other side, the University of Maryland, Penn State, the University of Illinois, UMass, and others may have a better chance for success because they are not in major partnerships with corporate entities. The organizations also have value systems that conflict in fundamental ways. While universities often strive for access, quality, research excellence, service, and teaching for teaching's sake, a corporation is driven by financial considerations first and then other values to the extent that they are compatible with financial success. There is nothing wrong with this difference; it's just a fundamental difference in culture.

And money does matter. Online and distance learning can be a significant additional revenue stream for traditional universities. In addition to the direct revenue from student tuition there are increased benefits in other areas due to the visibility and connections with corporations. When a university is serving the educational needs of a corporation, the corporation will often think of that school when it comes to research contracts and philanthropy. It may not be the primary driver, but it does make a difference.

It also matters where the money goes. Virtual universities seem to do better when faculty can see that the benefits of the effort accrue directly to the institution and provide extra resources to support research, teaching, and service. For that reason, for-profit spinoffs from traditional universities have had a harder time building the internal support required.

Now that visions of e-learning billions have evaporated for most, we will get down to the serious business of creating the leading virtual universities. Nearly every school will have some involvement in online learning, but not every university will be a Net exporter of educational programs. Reputation, or brand, will be very important, but not the whole story. Strong brands with weak programs will not be successful. There will be room for different kinds of brands to serve a variety of learners. Some will be price-sensitive and some will not. Some will want nothing but the "designer brand" programs and some will seek commodity-style education at wholesale prices.