Trends in Online Education

1. Online Education Research Sami Muneer, SAP

2. Services Content Delivery Engagement Evaluation Tools Structured Delivery Aggregation Categories of Suppliers in Education

3. Content Structured Delivery (push) Open Distribution (pull) Engagement & Learning Evaluation Publishers Pearson, J. Wiley, McGraw Hill, K12, LMS Docebo, Litmos, Cornerstone MOOC, OER, OCW MOOC: Coursera, edX, OER: Khan Academy OCW: MIT OCW Game & Simulation tools Languagelab, Dreambox Formative (check learner’s progress) Content Developers Vocational: Redvector, Kineo, Tribal Custom: Brightwave Talent Mgmt Systems SAP, Oracle, SABA Skill Learning Platform Lynda, Pluralsight Gamiﬁed Learning codeacademy, duolingo Summative (benchmark progress) ETS, Btl, Knewton Gaming Kidspring, Quipper, Serious Games Interactive, G-Cube Learning CMS (education) Desire2Learn, Blackboard Social Network BetterLesson, Lore Collaboration USC Online Program Independent Experts e.g teachers Degree Programs Devry, ITT, Capella, Career Education Content Aggregator Catalogs: iTunes University Social Media: youtube Tools Authoring Tools Trivantis, Adobe, Lectora, Kenexa, Courselab Services Business, Technical Bersin (Deloitte), Tutor.com eLearning is a $135Bn* Market Globally With diverse suppliers across segments Source: GSV Advisors

4. The Rise of the Aggregation Segment Content Structured Delivery Aggregation Engagement Evaluation

5. 790 54% 620 42% 57 4% K-12 Postsecondary Corporate 9 18% 28.6 58% 12 24% Relative US expenditure in education $Bn, 2014 Relative US expenditure in elearning $Bn, 2014 •  While K-12 sector represents the biggest education expense •  Higher Ed has led the expense in elearning •  Corporate sector spends almost 20% on elearning vs. traditional Higher Ed has led the Transition to eLearning While corporate sector boasts a higher ratio of spend in it Source: GSV Education Report, McKinsey, BMO Capital Markets

6. 1989 Univ. of Phoenix first online university (320K students today) 1994 CalCampus first complete online curriculum 1996 Jones International University first accredited fully web-based university 96% of universities offer online coursework Top online degrees by traditional universities* •  Bachelors: Penn State, U. of Illinois •  Graduate Engineering: UCLA, Columbia Generate more money with online Online MBA program, of UMass, Amherst, makes up 26% of MBA enrollment but generates 40% of revenue NOW With Online-Only Degrees by For-Profit Schools Other postsecondary institutions followed suit Source: US News and World Report

7. Leading to New Entrants focused on Higher Ed Segment *More focused on skill-‐based programs Higher Ed Provider 3rd Party Aggregation OpenCourseware e.g. MIT, Stanford MOOC / Online courses (MOOCs: an aggregation model) Year Founded # of Courses # of Students Cost Udemy* 2010 9000 1MM $0 - $399 Coursera 2012 700+ 6MM Free Udacity 2012 30 1.6MM $0 or $150 for college credit Edx 2012 150+ 1.6MM Free

8. Most VC Investments in Open Distribution the Last 3 Years (New business models emerge to capitalize on trends) Company ($MM) Sector Category Users Content Structured Delivery Aggregation Engaged Learning Evaluation Tools & Services Lynda.com 289 Corporate ✔ ✔ 4m+ Pluralsight 165 Corporate ✔ ✔ 750k Desire2Learn 165 All ✔ 8m Laureate Education 150 Post Secondary ✔ ✔ 800k OpenEnglish 120 All ✔ 100k Kaltura 116 Post Secondary / Corporate ✔ N/A TutorGroup 115 Corporate ✔ N/A Craftsy 106 All ✔ 5m Knewton 105 Corporate ✔ 10m Dude Solutions 100 All ✔ 2m Coursera 85 Post Secondary / Corporate ✔ 11m TeachersPay Teachers 64 K-12 ✔ 3.4m Remind 60 K-12 ✔ 10m Udemy 48 All ✔ 10m+

9. Aggregation Receives Most Funding Globally Primarily in US, followed by India and China Source: GSV Educa=on Report, McKinsey, BMO Capital Markets 58% 12% 9% 21% USA India China ROW Global Education Fundraising Volume by Region, 2012-2013 70% Funding went into aggregation globally

10. Importance of Curation Selective vs. Open Aggregation Content Structured Delivery Aggregation Engagement Evaluation

11. Category Company Content Source Platform Services Evaluation Own Content Open Community Authoring Tools Expert- Curation Algorithmi c Curation Social Features Testing Analytics Open Aggregator $538m (33% of total VC) TutorGroup OpenEnglish ✔ ✔ ✔ ✔ ✔ Craftsy ✔ ✔ ✔ ✔ Udemy ✔ ✔ Coursera ✔ ✔ ✔ TeachersPay Teachers ✔ Selective Aggregator $454m, (28% of total VC) Lynda.com ✔ ✔ Pluralsight ✔ ✔ Importance of Curation Open vs. Selective Aggregation

12. Category Company Focus Monetization Rev ($M) Subscription Paid Courses Software Subscription Add on Services Open Aggregator $538m (33% of total VC) TutorGroup Language courses ✔ OpenEnglish Language courses ✔ 70 Craftsy Video Tutorials ✔ 23 Udemy Courses ✔ 3+ Coursera Courses ✔ 8-‐12 TeachersPay Teachers Educational Materials ✔ ✔ 71 Selective Aggregator $454m, (28% of total VC) Lynda.com Courses ✔ 100 Pluralsight Courses ✔ 85 Subscription Model Drives the Most Revenue Across both aggregation approaches

13. 0 20 40 60 80 100 120 2012 2013 2014 iVersity (2013/2014 est) Udacity EdX Coursera Declining VC Investment in MOOCs ($Bn) Initiative Examples Partner with companies to identify needs Udemy with 1800-Flowers creates MOOC for ﬂorists Bank of America with Khan Academy creates MOOC for consumers Udacity with AT&T and Georgia Tech for Master’s Degree Partner with university for content edX with MIT Sloan, Rice and Delfts University Specialized programs Udacity nanodegrees Technology partnership Google and edX to create “Youtube for MOOCs” MOOCs Tap Corporations to Increase Revenue VC Investment in MOOCs taper meanwhile

14. Content Structured Delivery Aggregation Engagement Evaluation Democratization of Content Creation

15. With cheaper and improved authoring tools and services Source: The Learning Guild research survey of authoring tools users (1055 respondents , Oct. 2013 Tool Features Free Captivate (Adobe) Screen application capture; HTML5; Tin Can Storyline (Articulate) Development tool to create mobile learning apps. HTML5 Lectora Inspire (Trivantis) Screen application capture tool Camtasia Studio (Techsmith) Screen recorder and simulation tool Presenter (Articulate) Powerpoint converter √ SmartBuild er (Suddenly Smart) Web-based authoring tool with HTML5 converter. √ Presenter (Adobe) PowerPoint converter Service Features School Keep For instructors: •  Guidance to create online learning videos •  oﬀer “white label” and hosted solutions Fedora Skilljar + Tools Services Content Creation Becomes Easier

16. Enabling the Rise of the Independent Instructor Independent instructors now earn supplemental income or entire salaries Source: TechCrunch >50% Udacity courses created by industry leaders, not traditional professors or instructors Top instructors earn >$MM Platform Average Yearly Income Top Instructor Yearly Income Pluralsight 40-50K 10-20X Udemy 7K 10-20X

17. Consolidation In Mature Sectors Content Structured Delivery Aggregation Engagement Evaluation

18. Given New Sources for Content Content Growth Addressed by Alternatives Not capitalized by traditional publishers Source: Veronis Suhler Stevenson, BCG Publishers Miss Growth of Postsecondary Instructional Materials Market (US, $Bn) 0 2 4 6 8 10 12 Total Market Publisher's Market 2008 2012 Content Sources Examples Approach OCW Carnegie-‐Mellon, MIT, Apex Learning, K12 Developing digital-‐ speciﬁc courseware Self-‐Publishing Flat World Knowledge Tools to build own custom textbook Open Educa?onal Resource (OER) Khan Academy, Be[erLesson, Gooru Tools to help instructors customize high quality content Used Books and Rentals Chegg, Amazon Reduces ownership cost to student

19. Who? Whom? Sector M&A 42% Kroton Educacional S.A. Anhanguera Educacional SA Corporate/Higher Ed CAE, Inc. Oxford Aviation Academy, Ltd. Aviation PLATO Learning, Inc. Archipelago Learning, Inc. Higher Ed John Wiley & Sons, Inc. Deltak edu Higher Ed NTT DOCOMO ABC Cooking Studio Cooking Private Equity 55% Apollo Global Management McGraw-Hill Education K-12/Higher Ed Charterhouse Capital Partners SkillSoft Limited Corporate TPG Capital TSL Education Ltd. Higher Ed Source: BerkeryNoyes Leading to Consolidation in Content: $10B in 3 Years Driven by horizontal integration among traditional publishers

20. Who Whom Primary Drivers Corporate 57% SAP SuccessFactors Market entry: HR software into LMS Oracle Taleo IBM Kenexa Pearson Certiport Market entry: certiﬁcation Non Corporate 43% Datatel SunGard Higher Education Horizontal Pearson EmbanetCompass Market entry: online learning Plato Learning Archipelago Learning Market entry: online learning John Wiley & Sons Deltak edu Market entry: technology Providence Equity Blackboard Private equity Permira Renaissance Learning Private equity Similar Consolidation in LMS: $20B in 3 Years Source: IBS Capital Market "Global E-‐Learning investment review" Driven primary by vertical integration

21. Mobile “First” Lend to New Learning Experiences Content Structured Delivery Aggregation Engagement Evaluation

22. Technology/Service Use Cases Mkt Size (2020, $B) CAGR Content Education apps Aula 365 (Telefonica) Urban Planet Mobile (E-books) Fun, instructional media Language learning 17 31% Structured Delivery Blackboard Mobile Download courses, assignments anywhere 1 10% Open Distribution MIT’s Educational Collaboration Space National College for School Leadership Help under-trained educators Engagement Education games Dreambox Ultranet Gamified learning Share live field results for feedback 16 38% Evaluation DreamBox Learning Wireless Generation* mClass Linkit Compliance assessment before entering mines (mining industry) Benchmark students across locations 1.5 28% Source: McKinsey, BCG Mobile Adds Value Across the Learning Process With most opportunity in new learning experiences

23. 342% 270% 239% 234% 232% 226% 226% 223% 193% 177% 175% 145% News Travel Education Healthcare & Fitness Lifestyle Books & Reference Music Social Networking Business Sports Entertainment Games 221 213 212 208 201 185 180 175 174 171 156 136 Business Healthcare & Fitness Music Social Networking Books & Reference Entertainment Education News Sports Lifestyle Games Travel CAGR of free apps* by category 2010-2012 CAGR of paid apps* by category 2010-2012 Source: Strategy analy=cs 2012 download forecast across Apple, RIM, Android and Windows app stores 3rd Fastest Education Apps is One of the Fastest Growing Segments Across all device platforms

24. 7% 59% 25% 5% 5% 1% 35% 42% 8% 14% 0% 20% 40% 60% 80% Pre- Primary K-12 Higher ed Vocation al Corporat e Expected Mobile Education Spend Relative Overall Spend Corporations and Higher Ed will Spend More on Mobile Relative to Overall Spend % by 2020 Corporate & Vocational •  Caters to segment needs: ﬂexibility, mobility •  New levels of experiential learning Higher Ed •  Underserved markets: international, late entrants •  New forms of social learning Source: McKinsey, BCG Some Segments Beneﬁt More with Shift to Mobile Larger spend in Higher Ed, Corporate, and Vocational Areas

25. Overall Situation in Providers

26. New Sectors Growth Sectors Sector Consolidation Mature Sectors Social and Experiential Learning (e.g. gamiﬁcation, mobile ﬁrst) Aggregation (both selective and open), Mobile Apps Corporate LMS Traditional Content Publishers, Assessment New VC investment Large sums of VC investment; broad adoption Enterprise HR/talent mgmt. vendors buy standalone LMS vendors (M&A) Leveraged buyouts Aggregation is the Growth Sector New opportunities with social and experiential learning

27. Growing Need for Continual Education

28. 65% 68% 52% 60% 76% 78% 80% 83% 0% 20% 40% 60% 80% 100% US India Brazil Germany France Spain Portugal Greece % of youth1 unable to complete postsecondary and/or ﬁnd a job that they want Situation Much Worse in Europe Unemployment rates as high as 60% (e.g. in Greece, Spain) Jobs taken by those with experience: •  18% increase in employment in women aged > 34yrs •  12-14% overall increase for people > 50yrs High % of Youth Are Struggling to Get Jobs Road to employment has obstacles 1Ages 18-‐24 Source: Labor Bureau of Sta=s=cs, Eurostat, McKinsey Research

29. 42% 45% 72% 0% 20% 40% 60% 80% Employers Students Providers Agreement that graduates are prepared for the job market, % Source: McKinsey Research, (8000 respondents in 9 countries, 2012) 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Provider perspective Employer perspective Big gap Employers Perceive College Grads Lack Skills Which is different from what education providers think

30. High % of businesses in most countries are SMB (<50 employees), % 99.50% 41% 45% 63% 69% 73% 0% 20% 40% 60% 80% 100% South Korea Germany France Spain Italy Greece SMBs: <40% happy with level of general skills 60% lack eﬀective training resources Source: Docebo, IDC, BMO Capital Markets, McKinsey Research 62.27 12.93 9.32 5.71 62.44 15.56 11.47 7.38 0 10 20 30 40 50 60 70 500 10K 25K 100K SaaS Local Cost of LMS per learner is much higher for SMB, $ The Skill Shortage is Felt Most by SMBs Who also resources to effectively recruit and train

31. Top 10 job titles used by employees today did not even exist 5 years ago1 •  iOS developer •  social media analyst, •  big data architect, •  cloud services specialist, •  digital marketing specialist Big data + smart machines = 47% of job categories likely automated next 10-15 years2 •  telemarketers •  accountants, •  retail, real estate sales •  technical writers •  health technologists 20% freelance economy3 Average job tenure 4.4 years Technology-assisted access to global pool Increase in New Skills Automation of Existing Skills Changing Labor Mix 3Bersin Deloitte, 20141 Linkedin 2Economist, 2014 Technological Changes Exacerbate Skill Gap Amplified by social and regulatory changes

32. $9,000 $13,950 $14,280 $38,700 $88,120 $0 $50,000 $100,000 3 8 12 18 18 05101520 Stanford University (Masters degree) Santa Clara University (Masters degree) University of Phoenix (Online) Dev Bootcamp (Intense hybrid) * Stanford Continuing Study (Hybrid) * Source: Ins=tu=ons’ websites * Deb Bootcamp and Stanford Con=nuing Study are not accredited programs. But s=ll accepted by many employers Time Required Cost Traditional Options are not Often Optimal May fail to address price and lifestyle needs

33. 65% 68% 80% Creating Need for Education Alternatives For continual education to address skills gaps Source: Edx, Coursera, Deloi[e research, Economist MIT courses On EDX Harvard courses On EDX Upenn courses On EDX % of registrants with at least an undergraduate degree 2013–2014 Average age of online learner: 36 years

34. Stories for Continual Education

35. Michelle’s Continual Education Driven by changing circumstances Conferences, seminars

36. Josh’s Continual Education Driven by desire to learn a new skill to work in

37. Mary’s Continual Education Driven by need to keep up with trends

38. 4 Types of Learners for Continual Education

39. Tool Box Personal Enrichment/ Career Advancement 4 Types of Learners Differing drivers Field Promotion Skill Gap Resume Builder Degree/License/Certiﬁcation Trouble Shooter Project-related issues

40. 2.7 3.4 6.3 10.1 0 2 4 6 8 10 12 14 16 2014 2019 Soj Skills IT Skills 1 TLSA Survey, 2013 2Babson Research, 2013 23% of employees left jobs citing lack of opportunities for professional development1 46% of students of online programs cite career advancement as the primary driver2 Rapid growth of: Life coaching industry3 $2Bn annually Self-help books3 $11Bn annually 4.4% 10% Growth of corporate training content4, $Bn 3Forbes July 2014, “What people are willing to pay for” 4IDC Research Toolbox Learner Drivers and Motivations

41. Experience of Learning For MOOCs 35% of registrants never engaged with the online content, 5% earned certificates of completion 2. 1Edsurge.com 2 Forbes.com 3http://venturebeat.com/2013/03/26/babbel-funding 22-year old company, Rosetta Stone, no longer profitable and loses half its value in 3 years Given new free alternatives e.g. Duolingo, Anki, Memrise3,4 Variability in Options In 2012, over 700 MOOC’s were offered. Top 5 searches on accounted for only 5% of all searches. 1 1 Cost2 3 4 Yahoofinance.com Toolbox Learner Preferential Needs

42. Have to constantly refresh their skills, and are willing to pay for it Beneﬁts from high return of investment in learning 1-2 Bersin / Deloitte 62% of IT professionals report having paid for their learning out of their pocket1 2.5-5 year is the half- life of many professional skills 2 $23,000 average increase in annual income after spending $13,000 on a 10-week bootcamp3 3Generalassemb.ly blog Field Promotion Drivers and Motivations

43. Flexibility in consumption 1 Michaels & Associated Learning Solutions 2 Deloitte University Press 3 Generalassemb.ly blog 1 Quality of content 2 Time sensitive 3 175% increase in the number of graduates from specialized intensive programs, or vocational schools, in the past year. 2 63% of tech bootcamp attendees are full time employees. 3 65% of e-learners start searching for information on a mobile device. Majority of them switch between devices. Mobile learners get 40 min more learning per week in average because of ﬂexibility. 1 Field Promotion Preferential Needs

44. 1 PMI.org 2 2015 Robert Half Salary Guide 3Labor.NY.Gov / AICPA.org 4US News and World Report 2014 Higher Income is Expected CPAs can expect a salary 5%-15% higher than non-CPAs2. CPA’s / PMPs must recertify every 3 years / 60 hours of continuing Ed is required1/2. Need to Attain License / Certiﬁcation ~130 Licensed occupations certiﬁed by 16+ licensing authorities3. Resume Learner Drivers and Motivations

45. Accreditation In 2013 the rise in overall Online enrollment was 10% YoY 4. For profit degree were 22% less likely to get a “callback” than “accredited” applicants5. 1 Washington post http://wapo.st/1uMaoZE 2 Washington Examiner 3 NY Times http://nyti.ms/167tGSV 1 86% of 2011 MBA graduates found employment 4 Millennial unemployment rate is 15.5% at April 2015. (Excludes the ~2M individuals not in) 2. . 2 Need for Continuing Ed 3 ~2/3s of credentials earned at for-profit colleges are certificates1. 6% of 2 & 4 year nonprofit universities award certificates rather than degrees. 3 4 elearninginfogrpahics.com 5 Washington Post Perceived Opportunity Resume Learner Preferential Needs

46. Care about solving project issues 70% of learning is informal and project related1 1 BLS, 1995 Labor survey 2Alexa, 2015 50% of 20 most visited websites in the world are search engines or information portals2 4Poe=ceconomics, 2014 4DBersin, Deloi[e Open access monographs growing 40%+ for both books and publishers.3 80% of workforce learning happens through interactions with peers4 Want options to get answers quickly Trouble Shooter Drivers and Motivations

47. Immediacy of Access 1 Huﬀ Post, 2012 2Mashable, 2014 1 Access to Experts 2 Cost 3 People are identifying learning opportunities everyday for little or no cost5 Leverage subject matter experts at work and online communities3 Experts are becoming networked4 Inventing new ways to engage with knowledge (see Reddit.com; IAMA)1 Millennials trust user- generated content 50% more than other media2 3Social Media Explorer, 2013 4Learning Layers, 2012 5Slate, 2014 Trouble Shooter Preferential Needs

48. Learner type Op?ons Today Opportunity Field promo=on Lynda, LMS •  More skills •  Personaliza=on Tool box MOOCs/OCW LMS •  Soj skills •  Gamiﬁca=on for learning •  Low-‐cost cura=on (algorithmic) Resume builder Cer=ﬁcates, extension schools •  Badges for other skills Troubleshooter Google, YouTube •  Ac=ve community with content (e.g. templates) Opportunity for Learner Types Beyond what current options provide

49. So What?

50. In Summary There is a clear opportunity in continual education Field promotion learners: •  Most motivate to close skill gap •  Willing to pay Aggregation is the most conducive model There is a premium on content quality and curation

51. Diverse Options for Design Content

52. Category Type of Design Content Rating on Completeness UX Visual SW DT Open Distribution Lynda ✔ ✔ Coursera ✔ ✔ General Assembly ✔ ✔ Udemy ✔ ✔ ✔ Pluralsight ✔ ✔ Skillshare ✔ ✔ ✔ CreativeLive ✔ ✔ BLOC ✔ ✔ University Program Parsons ✔ ✔ FullSail ✔ ✔ The Art Insititute ✔ ✔ Industry Program Interaction Design Foundation ✔ A List Apart ✔ HowU ✔ ✔ ✔ Key Takeaway Opportunity for a well- balanced Course of Study Design Thinking education is very limited

53. Category Source of Content Rating on QualityOwn the content Selective Community of Experts Partner e.g. university Open Community Open Distribution Lynda ✔ ✔ Coursera ✔ ✔ ✔ General Assembly ✔ Udemy ✔ Pluralsight ✔ Skillshare ✔ ✔ CreativeLive ✔ ✔ BLOC ✔ University Program Parsons ✔ ✔ ✔ FullSail ✔ The Art Insititute ✔ Industry Program Interaction Design Foundation ✔ A List Apart ✔ ✔ HowU ✔ ✔ ✔ Key Takeaway Quality is all over the map with no clear leader in this space.

54. Category Monetization Adoption Subscription Individual courses Add On Open Distribution Lynda ✔ Coursera ✔ ✔ General Assembly ✔ Udemy ✔ Pluralsight ✔ ✔ Skillshare ✔ CreativeLive ✔ BLOC ✔ University Program Parsons ✔ FullSail ✔ The Art Insititute ✔ Industry Program Interaction Design Foundation ✔ A List Apart FREE HowU ✔

55. Content Quality Evaluation ReputationCategories University Program Peer Grading (Coursera) TA (Coursera) 1:1 Mentoring services (Bloc) Virtual Office Hours (SkillShare) Industry Program True “Experts” (Interaction Design Foundation) Open Distribution Broad Range of Topics (Udemy) Higher Reviews (SkillShare) University partnership (Parsons with New School) Fully Accredited / Degree Options (Parsons) Well Known in Industry (HowU) Diﬀerentiators

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