Market Spotlight: Online Education
04.05.2007 21:27
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- Source: Forbes
As more working adults enroll in online degree programs, universities are swooping in to lure students at the expense of the for-profit education companies that have offered degrees over the Internet for years. Traditional bricks-and-mortar schools are seeing a burgeoning opportunity in online education as students keep looking for ways to complete degrees while juggling work and school. Online degree programs have already started at well-known schools nationwide, such as the University of Maryland, the University of Florida and Penn State, especially as consumer interest remains strong and online degrees gain acceptance among prospective employers. "Employer concerns tend to melt away, especially as the alma maters of many employers are offering these online degrees," says Richard Garrett, a senior analyst at Eduventures, a Boston-based consulting and research firm for the education market. At the end of 2006, there were at least 1.5 million students enrolled in online programs, up 24 percent from 2005. The figure is expected to reach 2.1 million students in 2008, an 11.5 percent gain, according to Eduventures. But as demand for online programs increases, for-profit education companies that pioneered the space years ago are slowly losing market share as the space becomes more competitive. Apollo Group (nasdaq: APOL - news - people ) Inc.'s University of Phoenix online unit, founded in 1989, was among the first accredited for-profit universities to provide college degree programs over the Internet. As one of the largest online providers in the space, the university offers dozens of online degree programs in areas such as business, technology, health care and education. But Signal Hill analyst Trace Urdan says Apollo's mass-marketing approach of being "all things to all people" may hinder the company when compared to universities that offer more specialized, niche areas of study - often at cheaper prices. "We expect top line growth to continue to slow by virtue of Apollo's size and scope, and believe the company's initiatives to reinvigorate growth will likely disappoint expectations, both in driving the top line and in terms of what they will cost at the bottom line," Urdan wrote in a recent client note. In many cases, public universities charge lower tuition when compared to for-profit schools, especially if a student is an in-state resident. Recent research also indicates that students prefer to study closer to home, which would also favor public, locally focused universities. Furthermore, some for-profit schools are battling legal and regulatory issues that have raised questions from prospective students about the quality of certain schools in the sector. Apollo Group, for example, is currently restating financials after an internal investigation showed certain former officers may have tried to hide deficiencies in options accounting, while Corinthian Colleges Inc. (nasdaq: COCO - news - people ) incorrectly recorded stock-option grants back to 2001. Greater familiarity with certain universities may also work against typically less well-known for-profits, which may in turn try and tap new markets abroad as the domestic working adult market becomes more crowded. "The average consumer is more comfortable with traditional schools, which have stronger brands and have been around for awhile," Garrett says. Copyright 2007 Associated Press. All rights reserved. This material may not be published broadcast, rewritten, or redistributed
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