trends in online education

Online Education Research Sami Muneer, SAP

Services

Content Delivery Engagement Evaluation

Tools

Structured Delivery Aggregation

Categories of Suppliers in Education

Content Structured Delivery (push)

Open Distribution (pull)

Engagement & Learning

Evaluation

Publishers Pearson, J. Wiley, McGraw Hill, K12,

LMS Docebo, Litmos,

Cornerstone

MOOC, OER, OCW MOOC: Coursera, edX, OER: Khan Academy

OCW: MIT OCW

Game & Simulation tools Languagelab, Dreambox

Formative (check learner’s progress)

Content Developers Vocational: Redvector,

Kineo, Tribal Custom: Brightwave

Talent Mgmt Systems SAP, Oracle, SABA

Skill Learning Platform Lynda, Pluralsight

Gamified Learning codeacademy, duolingo

Summative (benchmark progress)

ETS, Btl, Knewton

Gaming Kidspring, Quipper,

Serious Games Interactive, G-Cube

Learning CMS (education)

Desire2Learn, Blackboard

Social Network BetterLesson, Lore

Collaboration USC Online Program

Independent Experts e.g teachers

Degree Programs Devry, ITT, Capella, Career Education

Content Aggregator Catalogs: iTunes

University Social Media: youtube

Tools

Authoring Tools Trivantis, Adobe, Lectora, Kenexa, Courselab

Services

Business, Technical Bersin (Deloitte), Tutor.com

eLearning is a $135Bn* Market Globally With diverse suppliers across segments

Source: GSV Advisors

The Rise of the Aggregation Segment

Content Structured Delivery Aggregation Engagement Evaluation

790 54%

620 42%

57 4%

K-12

Postsecondary

Corporate

9 18%

28.6 58%

12 24%

Relative US expenditure in education $Bn, 2014

Relative US expenditure in elearning $Bn, 2014

•  While K-12 sector represents the biggest education expense

•  Higher Ed has led the expense in elearning

•  Corporate sector spends almost 20% on elearning vs. traditional

Higher Ed has led the Transition to eLearning While corporate sector boasts a higher ratio of spend in it

Source: GSV Education Report, McKinsey, BMO Capital Markets

With Online-Only Degrees by For-Profit Schools Other postsecondary institutions followed suit

1989

Univ. of Phoenix first online university

(320K students today)

1994

CalCampus first complete online curriculum

1996

Jones International University first accredited fully web-based university

96% of universities offer online

coursework

Top online degrees by traditional universities*

•  Bachelors: Penn State, U. of Illinois

•  Graduate Engineering: UCLA, Columbia

Generate more money with online

Online MBA program, of

UMass, Amherst, makes up 26% of MBA enrollment but generates 40% of revenue

NOW

With Online-Only Degrees by For-Profit Schools Other postsecondary institutions followed suit

Source: US News and World Report

Leading to New Entrants focused on Higher Ed Segment

*More focused on skill-‐based programs

Higher Ed Provider 3rd Party

Aggregation OpenCourseware e.g. MIT, Stanford

MOOC / Online courses

(MOOCs: an aggregation model)

Year Founded # of Courses # of Students Cost

Udemy* 2010 9000 1MM $0 - $399

Coursera 2012 700+ 6MM Free

Udacity 2012 30 1.6MM $0 or $150 for college credit

Edx 2012 150+ 1.6MM Free

Most VC Investments in Open Distribution the Last 3 Years (New business models emerge to capitalize on trends)

Company ($MM) Sector Category

Users Content Structured

Delivery Aggregation Engaged Learning Evaluation Tools &

Services

Lynda.com 289 Corporate ✔ ✔ 4m+

Pluralsight 165 Corporate ✔ ✔ 750k

Desire2Learn 165 All ✔ 8m

Laureate Education 150 Post Secondary ✔ ✔ 800k

OpenEnglish 120 All ✔ 100k

Kaltura 116 Post Secondary / Corporate ✔ N/A

TutorGroup 115 Corporate ✔ N/A

Craftsy 106 All ✔ 5m

Knewton 105 Corporate ✔ 10m

Dude Solutions 100 All ✔ 2m

Coursera 85 Post Secondary / Corporate ✔ 11m

TeachersPayTeachers 64 K-12 ✔ 3.4m

Remind 60 K-12 ✔ 10m

Udemy 48 All ✔ 10m+

Aggregation Receives Most Funding Globally Primarily in US, followed by India and China

Source: GSV Educa=on Report, McKinsey, BMO Capital Markets

58%

12%

9%

21% USA

India

China

ROW

Global Education Fundraising Volume by Region, 2012-2013

70% Funding went into

aggregation globally

Importance of Curation

Selective vs. Open Aggregation


Category Company

Content Source Platform Services Evaluation

Own Content

Open Community

Authoring Tools

Expert-Curation

Algorithmic Curation

Social Features Testing Analytics

Open Aggregator $538m

(33% of total VC)

TutorGroup

OpenEnglish ✔ ✔ ✔ ✔ ✔

Craftsy ✔ ✔ ✔ ✔

Udemy ✔ ✔

Coursera ✔ ✔ ✔

TeachersPay Teachers ✔

Selective Aggregator

$454m, (28% of total VC)

Lynda.com ✔ ✔

Pluralsight ✔ ✔

Importance of Curation Open vs. Selective Aggregation

Category Company Focus

Monetization Rev ($M)

Subscription Paid Courses

Software Subscription

Add on Services

Open Aggregator

$538m

(33% of total VC)

TutorGroup Language courses ✔

OpenEnglish Language courses ✔ 70

Craftsy Video Tutorials ✔ 23

Udemy Courses ✔ 3+

Coursera Courses ✔ 8-‐12

TeachersPay Teachers Educational Materials ✔ ✔ 71

Selective Aggregator

$454m, (28% of total

VC)

Lynda.com Courses ✔ 100

Pluralsight Courses ✔ 85

Subscription Model Drives the Most Revenue Across both aggregation approaches

0

20

40

60

80

100

120

2012 2013 2014

iVersity (2013/2014 est)

Udacity

EdX

Coursera

Declining VC Investment in MOOCs ($Bn) Initiative Examples

Partner with companies to identify needs

Udemy with 1800-Flowers creates MOOC for florists Bank of America with Khan Academy creates MOOC for consumers Udacity with AT&T and Georgia Tech for Master’s Degree

Partner with university for content

edX with MIT Sloan, Rice and Delfts University

Specialized programs Udacity nanodegrees

Technology partnership

Google and edX to create “Youtube for MOOCs”

MOOCs Tap Corporations to Increase Revenue VC Investment in MOOCs taper meanwhile


Democratization of Content Creation

With cheaper and improved authoring tools and services

Source: The Learning Guild research survey of authoring tools users (1055 respondents , Oct. 2013

Tool Features Free

Captivate (Adobe)

Screen application capture; HTML5; Tin Can

Storyline (Articulate)

Development tool to create mobile learning apps. HTML5

Lectora Inspire

(Trivantis) Screen application capture tool

Camtasia Studio

(Techsmith) Screen recorder and simulation tool

Presenter (Articulate) Powerpoint converter √ SmartBuild

er (Suddenly

Smart)

Web-based authoring tool with HTML5 converter. √

Presenter (Adobe) PowerPoint converter

Service Features

School Keep For instructors:

•  Guidance to create online learning videos

•  offer “white label” and hosted solutions

Fedora

Skilljar

+

Tools

Services

Content Creation Becomes Easier

Enabling the Rise of the Independent Instructor Independent instructors now earn supplemental income or entire salaries

Source: TechCrunch

>50% Udacity courses created by industry leaders, not traditional professors or

instructors

Top instructors earn >$MM

Platform Average Yearly Income

Top Instructor Yearly Income

Pluralsight 40-50K 10-20X

Udemy 7K 10-20X

Consolidation In Mature Sectors


Given New Sources for Content

Content Growth Addressed by Alternatives Not capitalized by traditional publishers

Source: Veronis Suhler Stevenson, BCG

Publishers Miss Growth of Postsecondary Instructional Materials Market (US, $Bn)

0

2

4

6

8

10

12

Total Market Publisher's Market

2008

2012

Content Sources Examples Approach

OCW Carnegie-‐Mellon, MIT, Apex Learning, K12

Developing digital-‐specific courseware

Self-‐Publishing Flat World Knowledge Tools to build own custom textbook

Open Educa?onal

Resource (OER)

Khan Academy, Be[erLesson, Gooru

Tools to help instructors customize high quality content

Used Books and Rentals Chegg, Amazon Reduces ownership

cost to student

Who? Whom? Sector

M&A 42%

Kroton Educacional S.A.

Anhanguera Educacional

SA

Corporate/Higher Ed

CAE, Inc. Oxford Aviation Academy, Ltd.

Aviation

PLATO Learning, Inc. Archipelago Learning, Inc. Higher Ed John Wiley & Sons, Inc. Deltak edu Higher Ed

NTT DOCOMO ABC Cooking Studio Cooking

Private Equity 55%

Apollo Global Management

McGraw-Hill Education

K-12/Higher Ed

Charterhouse Capital Partners SkillSoft Limited Corporate

TPG Capital

TSL Education Ltd.

Higher Ed

Source: BerkeryNoyes

Leading to Consolidation in Content: $10B in 3 Years Driven by horizontal integration among traditional publishers

Who Whom Primary Drivers

Corporate

57%

SAP SuccessFactors Market entry: HR software into LMS Oracle Taleo

IBM Kenexa

Pearson Certiport Market entry: certification

Non Corporate

43%

Datatel SunGard Higher Education Horizontal

Pearson EmbanetCompass Market entry: online learning

Plato Learning Archipelago Learning Market entry: online learning

John Wiley & Sons Deltak edu Market entry: technology

Providence Equity Blackboard Private equity

Permira Renaissance Learning Private equity

Similar Consolidation in LMS: $20B in 3 Years

Source: IBS Capital Market "Global E-‐Learning investment review"

Driven primary by vertical integration

Mobile “First” Lend to New Learning Experiences


Technology/Service Use Cases Mkt Size (2020, $B) CAGR

Content •  Educa=on apps •  Aula 365 (Telefonica) •  Urban Planet Mobile •  (E-‐books)

•  Fun, instruc=onal media •  Language learning 17 31%

Structured Delivery

•  Blackboard Mobile •  Download courses, assignments anywhere 1 10%

Open Distribu=on

•  MIT’s Educa=onal Collabora=on Space

•  Na=onal College for School Leadership

•  Help under-‐trained educators

Engagement •  Educa=on games •  Dreambox •  Ultranet

•  Gamified learning •  Share live field results for feedback 16 38%

Evalua=on •  DreamBox Learning •  Wireless Genera=on*

mClass •  Linkit

•  Compliance assessment before entering mines (mining industry)

•  Benchmark students across loca=ons

1.5 28%

Technology/Service Use Cases Mkt Size (2020, $B)

CAGR

Content

Education apps Aula 365 (Telefonica) Urban Planet Mobile

(E-books)

Fun, instructional media Language learning 17 31%

Structured Delivery Blackboard Mobile Download courses, assignments anywhere 1 10%

Open Distribution

MIT’s Educational Collaboration Space

National College for School Leadership

Help under-trained educators

Engagement Education games

Dreambox Ultranet

Gamified learning Share live field results for feedback 16 38%

Evaluation DreamBox Learning

Wireless Generation* mClass Linkit

Compliance assessment before entering mines (mining industry)

Benchmark students across locations 1.5 28%

Source: McKinsey, BCG

Mobile Adds Value Across the Learning Process With most opportunity in new learning experiences

342%

270%

239%

234%

232%

226%

226%

223%

193%

177%

175%

145%

News

Travel

Education

Healthcare & Fitness

Lifestyle

Books & Reference

Music

Social Networking

Business

Sports

Entertainment

Games

221

213

212

208

201

185

180

175

174

171

156

136

Business

Healthcare & Fitness

Music

Social Networking

Books & Reference

Entertainment

Education

News

Sports

Lifestyle

Games

Travel

CAGR of free apps* by category 2010-2012

CAGR of paid apps* by category 2010-2012

Source: Strategy analy=cs 2012 download forecast across Apple, RIM, Android and Windows app stores

3rd Fastest

Education Apps is One of the Fastest Growing Segments Across all device platforms

7%

59%

25%

5%

5%

1%

35%

42%

8%

14%

0% 20% 40% 60% 80%

Pre-Primary

K-12

Higher ed

Vocational

Corporate

Expected Mobile Education Spend Relative Overall Spend

Corporations and Higher Ed will Spend More on Mobile Relative to Overall Spend % by 2020

Corporate & Vocational •  Caters to segment needs:

flexibility, mobility •  New levels of experiential learning

Higher Ed •  Underserved markets:

international, late entrants •  New forms of social learning

Source: McKinsey, BCG

Some Segments Benefit More with Shift to Mobile Larger spend in Higher Ed, Corporate, and Vocational Areas

Overall Situation in Providers

New Sectors Growth Sectors Sector Consolidation Mature Sectors

Social and Experiential Learning

(e.g. gamification, mobile first)

Aggregation (both selective and open),

Mobile Apps Corporate LMS Traditional Content Publishers,

Assessment

New VC investment Large sums of VC investment; broad adoption

Enterprise HR/talent mgmt. vendors buy standalone LMS

vendors (M&A) Leveraged buyouts

Aggregation is the Growth Sector New opportunities with social and experiential learning

Growing Need for Continual Education

65%

68%

52%

60%

76%

78%

80%

83%

0% 20% 40% 60% 80% 100%

US

India

Brazil

Germany

France

Spain

Portugal

Greece

% of youth1 unable to complete postsecondary and/or find a job that they want

Situation Much Worse in Europe

Unemployment rates as high as 60% (e.g. in Greece, Spain)

Jobs taken by those with experience: •  18% increase in employment in women

aged > 34yrs •  12-14% overall increase for people > 50yrs

High % of Youth Are Struggling to Get Jobs Road to employment has obstacles

1Ages 18-‐24 Source: Labor Bureau of Sta=s=cs, Eurostat, McKinsey Research

42%

45%

72%

0% 20% 40% 60% 80%

Employers

Students

Providers

Agreement that graduates are prepared for the job market, %

Source: McKinsey Research, (8000 respondents in 9 countries, 2012)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Provider perspective Employer perspective

Big gap

Employers Perceive College Grads Lack Skills Which is different from what education providers think

High % of businesses in most countries are SMB (<50 employees), %

99.50%

41%

45%

63%

69%

73%

0% 20% 40% 60% 80% 100%

South Korea

Germany

France

Spain

Italy

Greece

SMBs: <40% happy with level of general skills 60% lack effective training resources

Source: Docebo, IDC, BMO Capital Markets, McKinsey Research

62.27

12.93 9.32

5.71

62.44

15.56 11.47

7.38

0

10

20

30

40

50

60

70

500 10K 25K 100K

SaaS

Local

Cost of LMS per learner is much higher for SMB, $

The Skill Shortage is Felt Most by SMBs Who also resources to effectively recruit and train

Top 10 job titles used by employees today did not even exist 5 years ago1 •  iOS developer •  social media analyst, •  big data architect, •  cloud services specialist, •  digital marketing specialist

Big data + smart machines = 47% of job categories likely automated next 10-15 years2 •  telemarketers •  accountants, •  retail, real estate sales •  technical writers •  health technologists

20% freelance economy3

Average job tenure 4.4 years Technology-assisted access to global pool

Increase in New Skills Automation of Existing Skills Changing Labor Mix

3Bersin Deloitte, 2014 1 Linkedin 2Economist, 2014

Technological Changes Exacerbate Skill Gap Amplified by social and regulatory changes

$9,000

$13,950

$14,280

$38,700

$88,120

$0 $50,000 $100,000

3

8

12

18

18

0 5 10 15 20

Stanford University (Masters degree)

Santa Clara University (Masters degree)

University of Phoenix (Online)

Dev Bootcamp (Intense hybrid) *

Stanford Continuing Study (Hybrid) *

Source: Ins=tu=ons’ websites

* Deb Bootcamp and Stanford Con=nuing Study are not accredited programs. But s=ll accepted by many employers

Time Required Cost

Traditional Options are not Often Optimal May fail to address price and lifestyle needs

65% 68% 80%

Creating Need for Education Alternatives For continual education to address skills gaps

Source: Edx, Coursera, Deloi[e research, Economist

MIT courses On EDX

Harvard courses On EDX

Upenn courses On EDX

% of registrants with at least an undergraduate degree 2013–2014

Average age of online learner:

36 years

Stories for Continual Education

Michelle’s Continual Education Driven by changing circumstances

Conferences, seminars

Josh’s Continual Education Driven by desire to learn a new skill to work in

Mary’s Continual Education Driven by need to keep up with trends

4 Types of Learners for Continual Education

4 Types of Learners Differing drivers

Tool Box Personal Enrichment/ Career Advancement

4 Types of Learners Differing drivers

Field Promotion Skill Gap

Resume Builder Degree/License/Certification

Trouble Shooter Project-related issues

2.7 3.4

6.3

10.1

0

2

4

6

8

10

12

14

16

2014 2019

Soj Skills

IT Skills

1 TLSA Survey, 2013 2Babson Research, 2013

23% of employees left jobs citing lack of opportunities for

professional development1

46% of students of online programs cite career advancement

as the primary driver2

Rapid growth of:

Life coaching industry3

$2Bn annually

Self-help books3

$11Bn annually

4.4%

10%

Growth of corporate training content4, $Bn

3Forbes July 2014, “What people are willing to pay for” 4IDC Research

Toolbox Learner Drivers and Motivations

Experience of Learning

For MOOCs 35% of registrants never engaged with the

online content, 5% earned certificates of

completion 2.

1Edsurge.com 2 Forbes.com 3http://venturebeat.com/2013/03/26/babbel-funding

22-year old company, Rosetta Stone, no

longer profitable and loses half its value in 3

years

Given new free alternatives e.g. Duolingo, Anki,

Memrise3,4

Variability in Options

In 2012, over 700 MOOC’s were offered.

Top 5 searches on accounted for only 5%

of all searches. 1

1 Cost 2 3

Toolbox Learner Preferential Needs

4 Yahoofinance.com

Toolbox Learner Preferential Needs

Have to constantly refresh their skills, and are willing to pay for it

Benefits from high return of investment in learning

1-2 Bersin / Deloitte

62% of IT professionals report having paid for

their learning out of their pocket1

2.5-5 year is the half-life of many

professional skills 2

$23,000 average increase in annual income after spending

$13,000 on a 10-week bootcamp3

3Generalassemb.ly blog

Field promotion Drivers and Motivations

Field Promotion Drivers and Motivations

Flexibility in consumption

1 Michaels & Associated Learning Solutions 2 Deloitte University Press 3 Generalassemb.ly blog

1 Quality of content

2 Time sensitive

3

175% increase in the number of graduates from specialized intensive programs, or vocational schools, in the past year. 2

Field promotion Preferential Needs

63% of tech bootcamp attendees are full time employees. 3

65% of e-learners start searching for information on a mobile device. Majority of them switch between devices. Mobile learners get 40 min more learning per week in average because of flexibility. 1

Field Promotion Preferential Needs

1 PMI.org 2 2015 Robert Half Salary Guide

3Labor.NY.Gov / AICPA.org 4US News and World Report 2014

Resume Learner Drivers and Motivations

Higher Income is Expected

CPAs can expect a salary 5%-15% higher than

non-CPAs2.

CPA’s / PMPs must recertify every 3 years /

60 hours of continuing Ed is required1/2.

Need to Attain License / Certification

~130 Licensed occupations certified by

16+ licensing authorities3.

Resume Learner Drivers and Motivations

Accreditation

In 2013 the rise in overall

Online enrollment was 10% YoY 4.

For profit degree were 22% less likely to get a

“callback” than “accredited” applicants 5.

1 Washington post http://wapo.st/1uMaoZE 2 Washington Examiner 3 NY Times http://nyti.ms/167tGSV

1

86% of 2011 MBA graduates found

employment 4

Millennial unemployment rate is 15.5% at April 2015.

(Excludes the ~2M individuals not in) 2.

.

2 Need for Continuing

Ed

3

~2/3s of credentials earned at for-profit colleges are

certificates1.

6% of 2 & 4 year nonprofit universities award

certificates rather than degrees. 3

4 elearninginfogrpahics.com 5 Washington Post

Perceived Opportunity

Resume Learner Preferential Needs

Care about solving project issues

70% of learning is informal and project related1

1 BLS, 1995 Labor survey 2Alexa, 2015

50% of 20 most visited websites in the world are

search engines or information portals2

4Poe=ceconomics, 2014 4DBersin, Deloi[e

Open access monographs growing 40%+ for both books and publishers.3

80% of workforce learning happens

through interactions with peers4

Want options to get answers quickly

Trouble Shooter Drivers and Motivations

Immediacy of Access

1 Huff Post, 2012 2Mashable, 2014

1

Access to Experts

2

Cost

3

People are identifying learning opportunities everyday for little or no cost5

Leverage subject matter experts at work and online communities3 Experts are becoming networked4

Inventing new ways to engage with knowledge (see Reddit.com; IAMA)1 Millennials trust user-generated content 50% more than other media2

3Social Media Explorer, 2013 4Learning Layers, 2012

5Slate, 2014

Trouble Shooter Preferential Needs

Learner type Op?ons Today Opportunity

Field promo=on Lynda, LMS •  More skills •  Personaliza=on

Tool box MOOCs/OCW LMS

•  Soj skills •  Gamifica=on for learning •  Low-‐cost cura=on (algorithmic)

Resume builder Cer=ficates, extension schools •  Badges for other skills

Troubleshooter Google, YouTube •  Ac=ve community with content (e.g. templates)

Opportunity for Learner Types Beyond what current options provide

So What?

In Summary

There is a clear opportunity in continual education Field promotion learners: •  Most motivate to

close skill gap •  Willing to pay

Aggregation is the most conducive model There is a premium on content quality and curation

Diverse Options for Design Content

Category

Type of Design Content Rating on Completeness

UX Visual SW DT

Open Distribution

Lynda ✔ ✔

Coursera ✔ ✔

General Assembly ✔ ✔

Udemy ✔ ✔ ✔

Pluralsight ✔ ✔

Skillshare ✔ ✔ ✔

CreativeLive ✔ ✔

BLOC ✔ ✔

University Program

Parsons ✔ ✔

FullSail ✔ ✔

The Art Insititute ✔ ✔

Industry Program

Interaction Design Foundation ✔

A List Apart ✔

HowU ✔ ✔ ✔

Key Takeaway Opportunity for a well- balanced Course of Study Design Thinking education is very limited

Category

Source of Content Rating on

Quality Own the content

Selective Community of Experts

Partner e.g. university

Open Community

Open Distribution

Lynda ✔ ✔

Coursera ✔ ✔ ✔

General Assembly ✔

Udemy ✔

Pluralsight ✔

Skillshare ✔ ✔

CreativeLive ✔ ✔

BLOC ✔

University Program

Parsons ✔ ✔ ✔

FullSail ✔

The Art Insititute ✔

Industry Program


A List Apart ✔ ✔

HowU ✔ ✔ ✔

Key Takeaway Quality is all over the map with no clear leader in this space.

Category

Monetization Adoption

Subscription Individual courses Add On

Open Distribution

Lynda ✔

Coursera ✔ ✔

General Assembly ✔

Udemy ✔

Pluralsight ✔ ✔

Skillshare ✔

CreativeLive ✔

BLOC ✔

University Program

Parsons ✔

FullSail ✔

The Art Insititute ✔

Industry Program


A List Apart FREE

HowU ✔

Mone?za?on

Adop?on Category Subscrip?on Individual

courses Add On

Open Distribution

Lynda

Coursera

General Assembly

Udemy

Pluralsight

Skillshare

Crea=veLive

BLOC

University Program

Parsons

FullSail

The Art Insi=tute

Industry Program

Interac=on Design Founda=on

A List Apart FREE

HowU

Content Quality

Evaluation

Reputation Categories

University Program

Peer Grading (Coursera) TA (Coursera) 1:1 Mentoring services (Bloc) Virtual Office Hours (SkillShare)

Industry Program True “Experts” (Interaction Design Foundation)

Open Distribution Broad Range of Topics (Udemy) Higher Reviews (SkillShare)

University partnership (Parsons with New School)

Fully Accredited / Degree Options (Parsons)

Well Known in Industry (HowU)

Differentiators