Is Online Higher Education a Real Business Opportunity?

Moneybox
A blog about business and economics.
Jan. 7 2013 11:02 AM

Is Online Higher Education a Real Business Opportunity?

It's very clear that "learning things on the Internet" is something that happens today and will play a more prominent role in the future of humanity as more people become comfortable with digital media, more people get smartphones, and broadband speeds increase. But as Tamar Lewin writes, it's much less clear that this means Massive Open Online Courses (MOOCs) are really the great business opportunity that some people see them as.

For a skeptical comparison, I would look to cooking. There's no doubt at all in my mind that the Web has changed how people cook. It is much cheaper and easier than ever before to look up a recipe for just about anything. Digital technology is also very helpful with weight and measure conversions. And I'm sure I'm not the only one who's learning cooking techniques in part by watching videos. So online learning with regards to cooking is a huge success.

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But it's not a huge business success. The returns here, if they exist, all go to complementary goods. If it's easier to learn recipes, maybe people are more willing and eager to buy new or unusual ingredients. People may actually eat out more as a result of a higher overall level of interest in food-related matters. Presumably by reading online about cooking and cooking techniques there's greater demand for certain kinds of kitchen gadgets. It even seems to me that there's more demand for "traditional" (except that there's no tradition of actually doing this) in-person cooking classes, since people get the taste for learning and want to delve deeper.

Maybe that's wrong. But not everything that's cool and useful is a great business opportunity. I think people are better informed than ever thanks to Internet journalism, but as Slate has learned from bitter experience, it's not necessarily a hugely profitable one. It's hard to obtain margins when barriers to entry are so low and competition is so fierce. The Web brought disruptive change to the newspaper industry, but a big part of that process has simply been massive shrinking of overall revenue and profit in the news sector. In principle at least you could see the same thing in education—disruption without huge new economic success stories, just a realm of lower costs to customers and much fiercer competition to provide value.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

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