An Overseas Ed-Tech Firm Wants to Buy 2U. What Could That Mean for Colleges?

“Byju’s, an ed-tech behemoth based in India, has put more than $1 billion on the table to acquire the online program manager, Bloomberg first reported late last month. 2U is one of the largest online-program managers, or OPMs, in the United States, known for scaling up online-degree programs and teaming up with more than 130 American colleges, including large institutions such as Arizona State, New York, and Syracuse Universities. It’s also the parent company of the online-course provider edX….

The worry among colleges, these experts say, is that if Byju’s wanted to shave costs or focus more on short-term, course-level products, it could scale back that “high-touch” model that many institutions have come to expect in exchange for paying 2U millions of dollars through tuition-sharing agreements. There’s wariness, too, of temporary disruptions that can happen whenever a company undergoes reorganization.

College leaders fear that Byju’s intent is to “use the toehold and cash flow to accomplish some other goal,” and that 2U’s clients will not be a priority, said Clay Shirky, vice provost for educational technologies at New York University, which works with 2U. “That’s what we’re worried about.” …”

‘‘They Didn’t Care’: Inside One University’s Sputtering Online Partnership With 2U’ | Jeff Pooley

Michael Vasquez, writing for The Chronicle [paywalled] a few weeks ago: When a pair of professors stepped down from their posts at Arcadia University this year, without another job lined up, they did so to halt the creation of a physician-assistant program in partnership with 2U, the online-learning giant. […] After the full-time faculty members left, the program director also stepped down — further dampening any hopes of launching the program soon, as a program director must be on the job for 15 months before any accreditor visit. The resignations came several months after the accreditor’s virtual site visit to evaluate Arcadia’s fledgling hybrid physician-assistant program. That virtual visit did not go well. If and when the delayed, staff-less program gets launched, 2U will receive 62.5% of tuition revenue for 15 years, The Chronicle reported. Online Program Managers (OPMs) like 2U are stealth privatizers of nonprofit higher ed, even as they drain dollars from our universities and students. The Government Accountability Office’s mild-mannered May report [pdf] calling on more oversight was followed, earlier this month, by a hard-hitting Wall Street Journal piece (“2U Inc. isn’t a university, but it sometimes looks like one”), so maybe scrutiny of the sleazy sector is picking up. Just in time for 2U’s likely sale to an Indian ed-tech giant. What looks worse than ever is Harvard and MIT’s shameless decision last year to sell edX.  

Concrete Details Emerge on edX’s Role After 2U Acquisition — Class Central

“Broadly speaking, 2U’s motivation for acquiring edX boils down to acquiring two assets:

edX.org website — the “marketplace,” as 2U referred to it during the acquisition.
edX brand.

What we haven’t seen yet is how 2U is planning to turn edX around and compete with Coursera. 2U’s “marketing engine” was supposed to help with this aspect.

Since the acquisition, 2U’s stock has dropped dramatically, and at the time I’m writing this article, 2U’s market cap is at the same amount as the cost of the edX acquisition….”

A Decade of MOOCs: A Review of Stats and Trends for Large-Scale Online Courses in 2021 | EdSurge News

“In 2021, two of the biggest MOOC providers had an “exit” event. Coursera went public, while edX was acquired by the public company 2U for $800 million and lost its non-profit status.

Ten years ago, more than 300,000 learners were taking the three free Stanford courses that kicked off the modern MOOC movement. I was one of those learners and launched Class Central as a side-project to keep track of these MOOCs.

Now, a decade later, MOOCs have reached 220 million learners, excluding China where we don’t have as reliable data, . In 2021, providers launched over 3,100 courses and 500 microcredentials….”

With purchase of edX, online higher ed company 2U bets big on power of a brand – The Washington Post

“The pandemic that shuttered campuses worldwide last year also created a rare opportunity for online higher education. And a company based in Maryland just placed an $800 million bet that it can seize the moment.

 

For that sum, 2U Inc. bought an online course platform called edX that was created nine years ago as a nonprofit and joint venture of the Massachusetts Institute of Technology and Harvard University. The platform has a brand with prestigious origins and more than 40 million registered users around the world….

The company’s track record is not without controversy. The Wall Street Journal reported this month that an online master’s program in social work at the University of Southern California — for which 2U recruits students — had left many graduates with high student loan debt compared to their earnings. The degree had been priced at $115,000….

Some in academia believe Harvard and MIT should have held on to edX as a high-profile nonprofit venture in the growing online world. “Their decision to fold is a major, and potentially fateful, act of betrayal,” Jefferson Pooley, a professor of media and communication at Muhlenberg College, wrote in July in the Chronicle of Higher Education….

Net proceeds from the sale have gone to a new nonprofit organization under MIT and Harvard that will explore education innovation….

Anant Agarwal, an MIT professor who was chief executive of edX, has joined 2U as chief open education officer. He said edX’s university partners support the merger. “Not a single partner has opted out because of the deal,” he said….”

 

What the edX Acquisition Means for the Future of Higher Education

“By entering into this deal, Harvard and MIT have shown that they’re committed to a new business model. That is, they’ll continue their excellence in the residential model for a select few but will also leverage their expertise and teaching resources to provide high-quality education to the masses at affordable prices. To start with, they developed an incredible collection of content in edX, which netted them $800 million. They’ll use that money to further expand their online strategy.

This development should serve as a wakeup call for other colleges and universities. Lamenting a lack of government support and declining enrollments won’t help. They must instead ask how they can orchestrate an ecosystem to offer high-quality education at low cost. They currently follow a vertical integration model where they perform the entire value chain in house, from admitting students all the way to awarding degrees. They must start thinking about how to unbundle the value chain and outsource areas where others possess superior core competencies — for example, to content creators like Outlier.org, outreach platforms like edX, and those in the gaming industry with expertise in artificial and augmented reality and capabilities to create immersive experiences. By partnering and controlling significant parts of value chain instead of resisting them, universities can gain a significant portion of revenues that would steadily migrate toward EdTech companies. Those additional revenues can provide seed capital to universities to drive their own EdTech initiatives. Right now, they’re mere spectators in the game.”

MIT and Harvard Have Sold Higher Education’s Future

“Last week Harvard University and the Massachusetts Institute of Technology sold their edX platform to a for-profit company for $800 million. Founded by the two institutions nearly a decade ago, edX was higher education’s answer to the venture-backed start-ups jostling for an online-course windfall. With the sale to one of those firms, Maryland-based 2U, Harvard and MIT have surrendered. Their decision to fold is a major, and potentially fateful, act of betrayal.

Alan Garber, Harvard’s provost, adopted the language of edX’s profit-maximizing rivals in conceding defeat. “Taking full advantage of [online learning’s] potential,” he told The Harvard Gazette, “will require capital investments at greater scale than is readily attainable for a nonprofit entity like edX.” The decision to sell comes as investor interest in higher education has swelled during the pandemic. Coursera, the Silicon Valley online-course provider, went public in March, and Instructure — the maker of the popular learning-management software Canvas — filed for an IPO last week. The Covid Zoom boom has brought the inevitable wave of start-ups hoping to cash in on the virtual college classroom. So it’s no surprise that the market value of 2U, after the edX announcement, surged past $3 billion.

Before the sale, edX was academe’s public option — a mission-aligned satellite of the brick-and-mortar campus. Now all the major players in the sector are profiteers, legally obligated to maximize shareholder return….

By the turn of the millennium, most societies had handed over their journals to be published by the big commercial players, in exchange for a share of profit. Now most scholarship is published by an oligopolist quintet of information conglomerates that, in turn, charge their college customers usurious fees.

That industry is among the most profitable in the world, in part because academics write and review for free. As the historian Aileen Fyfe has shown, there was nothing inevitable about the joint custody — nonprofit colleges and for-profit publishers — we’ve ended up with. We owe our current predicament, in part, to the decisions of learned societies who chose short-term cash over their scholar-members’ long-term interests. Harvard and MIT have just made the same disastrous miscalculation….

2U’s mission is fundamentally misaligned with the university tradition. 2U, Coursera, and their venture-funded competitors are built to squeeze profit from our students, using our faculty and course offerings. Harvard and MIT had no right, in the meaningful sense, to sell us off. None of us — not faculty members, not students — signed up for edX to increase Silicon Valley’s wallet share. We will look back on this careless abrogation of stewardship as the tragic squandering that it is.”

edX: A Look Backward

“It soon became clear that edX was pursuing a strategy fundamentally different from that which I had signed up for. Rather than being a force for innovation and educational research, it would instead be content aggregator, marketing platform, and a (second-tier) LMS.

This week, edX announced that it would be absorbed by 2U in exchange for $800 million that would establish a non-profit dedicated to access, research, and innovation 

Talk about lucrative investments. Over nine years, Harvard and MIT transformed an initial “loan” of $60 million plus a subsequent investment of $20 million into $800 million that will be fund the non-profit that the two institutions will govern. 

By my calculations, that’s a return of 900 percent – or over 29 percent a year.

It’s my understanding that neither Harvard nor MIT will receive any cash from the transaction. But the two institutions will no longer have to bankroll any aspect of edX and will, it appears, exercise control over the new non-profit entity that the edX sale will create….

edX’s sale will not be widely mourned. But I, for one, feel an acute sense of loss, frustration, and, yes, disappointment. edX had promised to make high quality courses by the best professors in the world available globally for free. It was to drive technological and pedagogical innovations in online education. It was to create an international consortium of educational researchers and innovators. Spoiler alert: It didn’t….”

Harvard and MIT to Sell edX for $800 million | Harvard Magazine

“HARVARD, MIT, AND EDX ANNOUNCED TODAY that edX, the two institutions’ 2012 joint venture into online education, would be sold to leading educational technology company 2U for $800 million. 2U, a publicly traded company listed on the NASDAQ, with revenues expected to approach $1 billion in 2021, is an online program manager. The company provides digital platforms and marketing and logistical support that allows colleges and universities to offer online instruction but does not itself provide degrees. 

As part of the agreement, which is subject to approval by Massachusetts attorney general Maura Healey ’92, 2U will own and plans to operate edX as a public benefit entity, which means that in addition to creating value for shareholders, edX will also provide a specific public benefit—in this case, online courses, some of which can be audited for free. Currently, edX offers more than 3,000 online programs. “With the acquisition,” according to a University statement, “2U’s network will expand to include more than 230 partners, including over 185 nonprofit colleges and universities and 19 of the top 20 ranked universities globally.”

 

 

Harvard University provost Alan M. Garber said in an interview that the most important aspect of the match with 2U is that the company will continue edX’s mission. “They have committed to continuing to provide free audit tracks—in other words, free courses—in a wide range of subjects. And there are other provisions of the agreement,” said Garber, “that give us a great deal of comfort” that they will continue to make “great courses available at low or no cost to learners throughout the world.” …”

Three Charts That Help Explain the 2U / edX Acquisition – PhilOnEdTech

“I won’t describe the announcement here but instead list preliminary media coverage and then share three charts that I think help explain why 2U would acquire the edX assets for $800 million. I’ll add some additional analysis on what this deal means for online education in a second post….”

 

2U, Inc. and edX Agree to Industry-Redefining Combination in Higher Education.

“2U will acquire substantially all of the assets of edX—a leading nonprofit online learning platform and marketplace—for $800M in cash. Together, 2U and edX will reach over 50 million learners globally, serve more than 230 partners, and offer over 3,500 digital programs on the world’s most comprehensive free-to-degree online education marketplace. The combined scale, reach, capabilities, marketing efficiency, and relationships of 2U and edX will unlock unprecedented opportunity for learners, universities, and employers worldwide….”

 

The big deal this week in online ed.

“The announcement on Tuesday that 2U will buy the assets of the nonprofit MOOC company edX for $800 million is shaking up the world of online higher ed. It also means I’ll riff on that news for you this week instead of giving you an annotated reading list, per The Edge’s summer programming (back to that next week).

This deal has ramifications in many directions. For starters, it will realign the commercial marketplace for online education, where colleges now pay billions annually to companies known as online-program managers, or OPMs, to help develop, market, and deliver online courses and degrees. The $800 million now headed to a successor nonprofit to edX could also have a huge impact on the future of open-source online options — and maybe breathe new life into the original mission of the nonprofit, which began in 2012 with the goal of democratizing education around the world.

I say “could” because, at this point, we know precious little about what the new nonprofit plans to do with this gargantuan infusion of cash. A joint news release says the money will be “dedicated to reimagining the future of learning for people at all stages of life, addressing educational inequalities, and continuing to advance next-generation learning experiences and platforms.” Lofty, ambitious language to be sure. But $800 million is a lotta clams, and I’m sure the hundreds of colleges and thousands of professors whose own financial and in-kind contributions over the last nine years have helped bring edX to this point would love to know some specifics — perhaps even more than I would….”

2U Buys edX for $800M, In Surprise End to Nonprofit MOOC Provider Started by MIT and Harvard | EdSurge News

“When MIT and Harvard University started edX nearly a decade ago, it was touted as a nonprofit alternative to for-profit online course providers. Today, the universities announced that they are selling edX to one of those for-profit providers for $800 million.

edX had fallen behind rivals like Coursera, a similar platform founded by Stanford University professors, in fundraising and reach, though it still boasts 35 million users and more than 3,000 courses….

What happens now is a bit complicated….

In the end, 2U officials said in a statement that they have pledged to:

Guarantee affordability through the continuation of a free version of online courses
Protect the intellectual property rights of faculty and universities that contribute courses
Protect the privacy of individual data for all learners who use the edX platform
And contribute to the ongoing development of the open-source Open edX platform that the universities will continue to oversee. …”

Three big ed tech projects: cashing out or historic investments?

Over the past few days three big ed tech entities made major financial moves. I was struck by that coincidence and wanted to explore what the combination might means.

ITEM: To start with, major online program manager (OPM2U purchased much of online class provider edX for $800 million. As part of the deal Harvard and MIT will launch a new and so far unnamed education nonprofit.

For more information, here are the official announcements from 2UMITHarvard, and what seems to be the nonprofit’s placeholder, “Transforming Digital Education.”  There is also some good, early commentary and analysis from EdSurge and Trace Urdan.

ITEM: Language learning app Duolingo, founded by Luis von Ahn, filed an IPO.  As  TechCrunch and others have noted, the market values Duolingo above $2 billion.  Its user base and earnings are rising.

ITEM: major learning management system/virtual learning environment provider Instructure, maker of Canvas, also  filed for an IPO. They tried this before, so now it’s a  second attempt.  Instructure is, unlike Duolingo, losing money.

So what does this big money trifecta tell us?

It may be a huge boost for 2U. They now have access to tens of millions of potentially new students.  According to a slidestack for investors, 2U stands to gain:

Increases TAM through combined 50M+ global learner base, 1,200+ Enterprise clients, 230+ university and corporate partners, and comprehensive suite of 3,500+ offerings ranging from free-to-degree

Combined entity will have massive global audience and strong consumer brand, top five education website with traffic of 120M+

They can also trade on the elite reputation of campuses associated with edX, namely MIT and Harvard.

Eddie Maloney and Joshua Kim go further, seeing the 2U+edX combination as a challenger to the much larger Coursera. What we see now are OPMs on steroids.  As Paul Fain put it, “MOOCs have become OPMs.”

Well-placed source on 2U’s acquisition of edX for $800M — “It simply formalizes what we knew: MOOCs have become OPMs.” https://t.co/bLMQC7Au0z

— Paul Fain (@paulfain) June 29, 2021

 

I’m not sure what to make of the new MIT-Harvard nonprofit since there’s so little information available. I do like Goldie Blumenstyk’s comments:

It’s hard to even fathom the potential impact of an $800-million nonprofit devoted to the future of online learning and eliminating educational disparities around the world. Add to that the academic muscle undergirding the nonprofit, overseen by edX’s founders, Harvard University and the Massachusetts Institute of Technology, and the societal, technological, and pedagogical potential here feels enormous. But what actually will be realized? Harvard and MIT promise that the new nonprofit’s mission, name, research, and other activities will be developed more fully in the coming months. [emphases in original]

Even more from Phil Hill here.

Duolingo: much depends on how the sale goes and what happens to its value over the next few months, but a successful infusion of cash could drive the owl into expanding or adding offerings.  New languages are a clear development, but what about adding conversations with native speakers, or even branching out into new curricula beyond language?

Note that criticisms of Duolingo – for not being good on spoken languages, for not doing much on culture and language – don’t seem to have dimmed its prospects so far.

Instructure: Phil Hill does good work in showing the complexity of the offering, based on the structure of Instructure and its holding.  I don’t have a good sense of its odds for a successful IPO.

Overall, these three stories remind us that serious money is interested in ed tech.  COVID-19 may have increased investments as so much of higher ed moved online.  Perhaps that’s a long-lasting change… unless people flee the pandemic’s online experience and rush to embrace in-person life, in which case June 2021 might represent a peak before a financial fall.

What do you think about these three ed tech financial stories?