OPM Market Landscape and Dynamics: Summer 2021 updates

I’ve had a few requests to update our OPM graphics shared in last year’s update, especially with the recent market changes with 2U / edX, Coursera, Noodle, and Keypath Education, among others.

Summer 2021 OPM Market Landscape

Since last year’s version, there have been several changes made to the Landscape graphic.

• 2U acquired edX (with the deal expected to close this fall).

• As part of the Keypath Education IPO, 2U sold its minority share in that company.

• Noodle acquired the assets of HotChalk.

• The University of Arizona Global Campus transaction is complete, with Zovio fully entering the market as an OPM.

• There are more providers working with university partners with undergraduate degrees.

As before, please note that this view is intended to give a visual overview of the market landscape and is not comprehensive in terms of vendors represented. This is particularly true as you approach the bottom of the graphic.

Summer 2021 OPM Market Dynamics

There has been growing interest in the OPM market, as more schools try to develop a strategy and revenue model for online programs both at the masters and professional degree level (the historic center of this market) as well as undergraduate and non-degree offerings. In addition, there has been a broad question to what degree schools would turn to OPM partners to help out with the Covid-driven move to online education. The consistent message is that OPM vendors are seeing a marked increase in interest from colleges and universities during the pandemic, and this market acceleration is expected to continue.

Typically the description of the OPM market is that the total annual revenue is somewhere between $4 – 7 billion and that it is growing. The implications are that we have a land grab as companies get rich off the new programs. The reality, however, is more complicated. The OPM market may be growing – and even accelerating during the pandemic – but it is chaotic and messy. Consider the following problems within the market:

• This is not an easy market, as many programs take millions of dollars of investment by the OPM provider before an account becomes profitable, often 3 – 5 years down the road.

• 2U’s Semester Online initiative, targeted at the undergrad market as a consortium, shut down in 2014 due to the departure of several founding member institutions and due to low enrollment.

• Later that same year Cal State Online shut down in all but name, along with its usage of Pearson as its OPM partner.

• In 2015 Synergis Education pulled out of its work with USC’s Master of Integrated Design, Business and Technology program, to be eventually replaced by 2U. Since that time Synergis has emerged with a stronger focus on medical programs and more of a niche strategy.

• In 2016 the University of Florida Online (UF Online) canceled its contract with Pearson and pivoted to a new approach not using an OPM partner.

• After raising $230 million from Bertelsmann in 2015, HotChalk has failed to bring in any new clients of the scale of Concordia University, and early this year Concordia announced it would shut down all operations. Noodle acquired the assets of HotChalk earlier this year.

• Sometime in 2016/17, the nonprofit OPM Educators Serving Educators from Excelsior College shut down.

• In late 2017 Greenwood Hall – a call center-based fee-for-service OPM provider – collapsed in dramatic fashion, with AnswerNet eventually buying the remaining assets.

• There has been growing pushback on the mainline revenue-sharing model, where full-service OPM providers make 50% or even more of tuition dollars from online programs. Leading this charge has been The Century Foundation, although there appears to be an informal alliance of like-minded organizations lending support. This includes Noodle.

The biggest change this year, however, has been the emergence of a new Online Education Platform market, initially from Coursera and quickly followed by 2U with its acquisition of edX. Noodle, for its part, wants to enter this emerging market and announced plans to do so by early 2022.

The other significant change is that the OPM category coming from nonprofit conversions, where for-profit schools are sold or changed status to nonprofit while the original for-profit company becomes an OPM, is more pronouced with the addition of Zovio (and the University of Arizona Global Campus) and Grand Canyon Education (and the spinoff Grand Canyon University). While these providers start with one primary OPM customer, what is significant is the size. These vendors instantly become OPM providers with revenues of hundreds of millions of dollars – larger than the majority of their new competitors.

The picture one gets is of a chaotic market that is not for the faint of heart, and one that will likely see further consolidations and category changes. All of this in a Mad Max-style pursuit of college online program revenue (whether rev share or fee-for-service or a blend, and whether degree- or certificate-based).

Summer 2021 Emerging Market: Online Education Platform

The key elements that differentiate the emerging Online Education Platform market segment from the broader, traditional OPM version is the offering of free or low-cost courses to generate a large number of global registered learners, a spectrum of course and program offerings – some free, some monetized – that span lifelong learning through accredited degrees, and critically a feedback loop or flywheel to create network effects.

• The core is starting with millions of registered global learners with a direct relationship with the platform provider, not mediated by digital marketing through Google, Facebook, etc. These learners are attracted mostly by free online courses, or very low-cost online courses. In the traditional market, digital marketing spend is the primary acquisition method , and the Online Education Platform providers still have significant marketing expenses, but there is the existence of this different learner acquisition model.

• The platform includes paid offerings, signified by certificates or university degrees, with direct marketing to encourage learners to try a paid offering.

• The platform offers a full spectrum of offerings, from free MOOCs, short courses, professional certificates, bootcamps, sub-degree certificate stacks (think micro-bachelors or micro-masters as popularized by edX), all the way to fully-accredited degrees. Most or all of this spectrum is intended to offer credentials that have some value in the workforce.

• Both the university partners and the platform providers share the revenue, and thus the upside, with varying percentages depending on what part of the spectrum has been sold.

• The core of the flywheel effect is that university partners will see increasing revenue and brand visibility from the platform, then incentivizing these schools to create additional course content and to offer additional programs.

• And the more content and programs that become available should lead to an increase in the number of registered learners.

This new model is emerging and has not proven itself yet, in terms of being fully-sustainable. But I think the new market is significant and could help redefine the broader OPM market over time. Should this move be successful, we will see some of the winner-take-all platform dynamics seen in other technology markets, where only a handful of providers will have the capability to benefit from the flywheel effects.

Our landscape view of the market is temporal in nature – expect more shake ups and category changes as the OPM market continues to grow in new ways.

Update 9/3: In the market landscape, I extended Bisk to include certificates, OES to include undergraduate degrees, and Everspring to include undergraduate degrees.

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