Thoughts on the New .Edu

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DM CONFIDENTIAL – Of the many lead generation verticals, one probably takes top honors in lifetime overall spend: the education industry. That sector is anything but new. For-profit education as a whole has existed since 1636. That is the year when Harvard was founded. When you hear the term “for-profit education” today, though, you don’t think of Harvard or the hundreds of other for-profits, both big and small. And, true, the landscape today has most private colleges, like Harvard, split into for-profit and not-for-profit sectors. Harvard is a not-for-profit private college, a status that enabled the university to enlarge its endowment from $4.7 billion to more than $40 billion today, without having to pay any taxes on the gains. It also saves tens of millions of dollars per year by not having to pay real estate taxes, and gets tens of millions more from the government, which along with yearly untaxed givings means hundreds of millions of dollars per year in money a for-profit Harvard would owe.

Dr. John Sperling started the University of Phoenix in 1976. It is a private university, but a for-profit. The more students it can serve, the more the company of Phoenix can make. You could argue that incentives are better aligned in the not-for-profit world, where schools make the majority of their money off their students after they graduate in the form of donations, not as they go to school. Similarly, we can assume that Dr. Sperling began the University to not just make money but to be rewarded for solving a problem. The opportunity he saw was to focus on the adult learner, one whose schedule demands classes where they are and when they can take them. School is a priority, but it’s a planet in their solar system, not the sun.

For-profit education and the world of performance marketing started coming together in the late 1990s, but really latched onto each other in the early 2000s. By that time, the University of Phoenix had more than a hundred campuses, but it couldn’t compare to the unlimited number of locations available through the internet. Come 2002 — with broadband penetration becoming more affordable, no amount of physical locations could match the scalability and ultimate profitability of the web. This also coincided with an economic slump, and if there is one thing that has proven itself again and again, it is the correlation between the change in unemployment and the enrollments in post-secondary school. The number of potential students in conjunction with the price of inventory inadvertently turned education campaigns into the ultimate run of network campaigns.

As the saying goes, if it ain’t broke, don’t fix it. And so, neither the schools nor those helping to raise awareness about them had an incentive to change. The schools did moreso, as their product is enormously complex. They are selling, for the most part, multi-year degrees. It is a product that those who completed just some degree or have an associate’s but want a bachelor’s degree really wanted. What happens, though, when the pool of potential students knows of the program, when shooting fish in a barrel becomes shooting fish in a fast-moving stream outside of spawning season? That’s where we are today.

It may seem like just a few years ago, but the world has fundamentally changed since then. Employment has stayed flat, which is almost worse than if it had increased. With flat unemployment comes lots of people out of jobs, but that doesn’t help the demand for degrees. Plus, there aren’t a lot of people who do not already know about online education as an option. So, you have an operations staff ready to handle a certain amount of people, but you don’t have people who really fit the product. As a result, you have two types of companies trying to make it work — those used to doing marketing, and those used to turning inquiries to students. Unfortunately, one could argue that neither are really trying to solve the problem that started it all — finding a solution for the would-be students.
What do people need today? They need degrees, but what they really need are jobs. The question is: What will get them jobs? Is it degrees? That’s where things differ from the past. In the past, you had a huge population of people completing degrees or getting the next degree to get jobs. The jobs today aren’t for lack of degrees. They are for lack of skills. The skills generations ago were the heart of the middle class. They were the factory workers. The parallel today are the social media managers, the paid search managers, the intro-level programmers, the UX designers, etc. These are the skills that power our new economy. Just as the factory workers powered generations ago.

Degrees will never go out of style, but if we judge the success of education solely on the number of people who get degrees, we will miss the original need filled by for-profit education and we will miss the new void that for-profit education can fill. If we think of education only as curriculum of a certain length and not a certain need, we all miss the chance to ride the next wave of students where for-profit means success for them and the marketers who serve them.

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