Future Could Be Bright For Education Technology As Fewer Opt for Traditional College
Education Tech Rises During Pandemic
Throughout 2020 the number of web searches for “online courses” hit new heights as in-person classes were disrupted and traditional colleges shut down campuses nationwide. Educational technology companies have had a high level of success converting these web searches into paying customers. Chegg (CHGG), which sells study-pack subscriptions, posted revenue growth of 55% in 2020, followed by a 20% uptick last year.
Chegg’s competitors including Udemy (UDMY) and Coursera (COUR) experienced a similar rise throughout the pandemic. Udemy’s most recent earnings report shows revenue growth of 21% in 2021. Analysts are predicting sales increased by 40% for Coursera over the same period.
Higher Learning’s Loss Could Be Educational Tech’s Gain
Even prior to the pandemic, students began leaving higher education in favor of other opportunities. College enrollment has been declining year-over-year since 2011. As traditional colleges and universities fall out of favor due to costs and other factors, analysts say educational stocks may stand to benefit.
Declining enrollment in traditional higher education institutions could boost companies like Coursera, for example, as it offers a selection of both bachelor’s and master’s degrees for under $20,000. Market observers note Udemy is expanding into worker training programs, which employers may prefer amid the tight jobs market and difficulty hiring qualified candidates. In that same vein, Chegg bought Thinkful in 2019, which provides computer coding training.
Traditional College Has a Role to Play, Especially for Chegg
Chegg’s revenue grew by 28% in 2019, indicating its rise predated the pandemic. Some analysts say Chegg is unique among education tech companies, in that it relies on college students to pay for its services, such as study packs. Others note colleges continue to cut funding and student resources, making study tools and homework help that much more important.
In some ways, Chegg is also falling prey to its own success. There have been complaints its study packs and online tutor help allow students to cheat, and investors have expressed concerns colleges or universities could ban the company’s products. Chegg responded with its “Honor Shield” system which aims to overcome these objections. Higher learning is clearly experiencing changes, and education technology is hoping to get ahead of the curve.
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