Early insights into 2024's online education developments
Photo by Francesco Ungaro
The year is still in its infancy, yet it has already delivered some noteworthy news in online education. Coursera has just reported its results for Q4 of 2023 and the previous year as a whole, alongside official announcements of Online Programme Management (OPM) company partnerships with two UK universities. These developments are significant for what they reveal about the current state of the online education sector in relation to higher education.
First, the two new partnerships that have been announced: Aston University partnering with OES and the University of Surrey partnering with 2U. While there are similarities between the two institutions, such as their size, based on the overall number of students, and their comfortable positions within the top 50 UK universities in terms of rankings, they diverge in terms of online education activity. In this sense, they represent two of the most interesting positions that institutions find themselves in.
Aston University partners with OES
Aston University was among several UK universities in a post-OPM position. As I noted in an earlier article there were ten partnerships that concluded in 2023.
Previously Aston had been partnered with Keypath. While I don’t know the precise reasons for the conclusion of this relationship, it is reasonable to speculate that it was due to a shift in Keypath's strategic focus. The company has shifted its emphasis towards the Asia-Pacific (APAC) market and healthcare programmes (the Aston-Keypath portfolio was business focussed), and has stated that they had “wound back” programmes in the UK last year.
This situation presents an interesting case, as some might predict and expect that after years in an OPM partnership and having grown its online postgraduate student numbers to approximately 2,000 by 2021/22, Aston would choose to go it alone.
However, Aston University has now embarked on a new, more ambitious partnership with Australian OPM company OES. This partnership plans to introduce 18 online degrees at both postgraduate and undergraduate levels, expanding the subject focus beyond business to include health, computer science, and more.
An interesting aspect of this partnership was the absence of a competitive tendering process, described in the contract notice as an "Award of a contract without prior publication of a call for competition." A key requirement for Aston's company partner was the "ability to make a significant (multimillion pound) upfront investment in infrastructure to support the contract."
The University said it "directly engaged with the market to ascertain the market's ability to meet the university's requirements" and "the engagement did not reveal any other provider with a viable solution and who would be willing to put forward the significant multi-million pound upfront investment for the infrastructure required under the contract."
Now it is certainly the case that some OPMs operating in the UK are in far from healthy positions, and that impact the level of investment they can make upfront, and this perhaps points to that. But this is certainly not the case across the board and so this is an interesting approach.
For OES, this represents a significant new partnership that enhances its presence in the UK. The company began operating here in 2018 and later that year it acquired the UK OPM, Interactive Design Institute (IDI) who at that time had partnerships with the University of Aberdeen and the University of Hertfordshire. This new partnership with Aston marks OES's most significant and notable success in the UK market since then.
University of Surrey partners with 2U
In contrast, the University of Surrey was in a position that many UK higher education institutions (HEIs) now find themselves, they have minimal numbers of online students and want to enter the online education market seriously for the first time.
Recently, Surrey announced a partnership with the US OPM company 2U, aiming to deliver a minimum of 15 online degrees and 15 professional certificates by 2026. The focus on professional certificates is certainly very interesting and gives a different flavour to this deal.
This dual focus on course types, is arguably only possible by virtue of 2U owning the edX platform, and points to a potential evolution of these types of partnerships and the advantages that platform-based OPMs, including Coursera and FutureLearn, might have over others.
One other interesting aspect of the announcement was the collaboration with LearningMate for the development of the online curriculum for these new offerings. While it is not uncommon for OPMs to outsource curriculum development to specialist companies, 2U's decision to announce this partnership publicly provides greater transparency to these arrangements.
However, one of the main points of interest of this partnership is the timing, especially given that 2U are in an extremely challenging financial position. There are rumours swirling around them at the moment and although no official announcement has been made, there are clear signals pointing to more layoffs being made at the company recently.
There’s always a degree of risk with any partnership, but the positions some companies find themselves in means even more care needs to be taken. As Phil Hill noted in his excellent analysis:
"2U holds nearly $1 billion of debt with a significant portion ($380 million minimum) that must be paid off in early 2025, and the company does not have the cash or ability to generate profits to be able to cover the debt maturity."
Whilst not necessarily fatal for them, bankruptcy is one plausible scenario for 2U in 2024. Obviously none of us can see the future but it would not be without precedent for a fledgling partnership to be knocked off course by financial problems faced by the company.
For UK universities considering future partnerships, this situation underscores the importance of carefully assessing the financial stability of companies and being clear on your risk appetite, as some choices now come with increased risk.
Despite these challenges, these announcements collectively underscore a continuing appetite for full-service, long-term contract, revenue share based OPM partnerships, despite some claims to the contrary.
Coursera’s 2023 results
The second notable development this year was Coursera's Q4 and 2023 results, which, continuing on the financial theme, indicate that Coursera is in a much stronger financial position than many OPMs.
According to Coursera’s CFO, Ken Hahn:
“we (Coursera) ended the quarter with approximately $722 million of unrestricted cash, cash equivalents, and marketable securities with no debt.”
The company also reported revenue of $635.8M in 2023 marking a 21% increase from 2022, along with signs in Q4 that the company is edging to profitability.
The financial position they find themselves in is allowing them to invest in the growth of their course portfolio. In certain cases they are now funding the production of new courses, particularly their growing suite of entry-level professional certificates developed in partnership with leading companies.
Industry microcredentials leading the way
In terms of Coursera’s portfolio they are focused on growing the number of entry level professional certificates and degrees on their platform. Coursera views entry-level certificates as an industry microcredential that will increasingly lead to either a first job or act as an on-ramp to a degree.
Over the course of the year Coursera increased the number of certificates it offers from 28 to 45 with many more in the pipeline from new and existing partners such as Google, IBM and Microsoft.
These certificates are an increasing priority and seem to be playing a more instrumental role in shaping and defining Coursera's degree portfolio, as a key strategy involves certificates being recognized for credit and providing a pathway to degrees.
Coursera aren’t simply focussed on growing the number of certificates and degrees they offer but also achieving an optimal and cohesive relationship between the two.
To that end, the company has been actively working on securing credit recognition for their microcredentials, wheeling the oils of this strategy by gaining credit recognition for their courses from the American Council on Education (ACE️®) and the European Credit Transfer and Accumulation System (ECTS).
Significantly, Coursera attributed a 22% growth in income in their Consumer segment in 2023 to strong demand for these professional certificates.
Degrees back to growth
There has also been growth in their Degree segment, with revenue increasing by 12% from a year ago and the number of new online degree students growing by 22% from last year to a total of 22,025. Their portfolio continues to expand; this time last year, 41 degrees had been announced, but this has now increased to 55.
Of their three segments, Degrees is the smallest revenue generator, bringing in $51 million in 2023, compared to $365 million in their Consumer segment and $220 million in their Enterprise segment. However, it is arguably the most relevant barometer for the sector.
2023 represents a return to growth, as this time last year they reported an 11% decrease in degree revenue caused by lower student enrolments in masters degree programmes. The news represents a positive signal for online student numbers as a whole.
AI, AI, AI…
Coursera’s report emphasised their strong focus on AI and their activity last year really demonstrates proactive efforts to leverage AI to enhance the efficiency of content creation for courses and to translate their courses and certificates. They reported having:
“more than 4,000 courses, 600 specializations, and 50 certificates available in up to 18 languages”
Achieving this through an “AI-powered language translation initiative”.
Unsurprisingly, they have also launched an AI virtual assistant called Coursera Coach. But perhaps of most interest is how they are really pushing forward with Ai-focussed courses, recognising that this presents as a significant commercial opportunity for them.
Coursera has launched a Generative AI Academy aimed at both a general audience and a specific executive-level audience. Coursera’s CEO, Jeff Maggioncalda has also got in on the act by launching a course called Navigating Generative AI a CEO Playbook.
I am frequently asked about AI-focused innovations in UK higher education and it's been a hard question to answer as the sector still feels in a defensive stance. However, it is evident that while universities may be cautious, some online education companies are actively advancing in this area.
What does it all mean?
The news and announcements from the early part of this year highlight yet again, that despite turbulence in the online education company sector, there is still demand for partnerships with OPMs among universities. Universities are still seeking help to successfully navigate the online education landscape and in offering online degrees.
The news also amplifies the increased jeopardy that exists when choosing a company partner. The differences between Coursera’s and 2U’s financial standing exemplify this.
There are also positive indicators regarding the growth in the number of online students. While there is a delay in the publication of 2022/23’s student data in the UK to corroborate this more broadly, a variety of formal and informal reports align with these positive trends.
However, the challenge, as always, is not simply launching online degrees but devising a strategy that ensures their success. Coursera’s strategy certainly bears reflection by UK HEIs across several dimensions, but that’s one for a future article.
