Category Archives: Reports & Analysis

Reports and Analysis in education.

Pearson Global Scale of English

Will Pearson take the English Certification Crown from ETS?

Earlier this month Pearson launched its new Global Scale of English or short GSE. According to Pearson English

“there has never been a globally recognised standard in English – no single way of recognising and quantifying the level of an individual’s English”

which is, of course, something the company aims to change with its new product.

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Chegg Career Center

The Future is Digital: Chegg Quarter 1 2014 Results

Former textbook rental giant turned student hub Chegg reported its Quarter 1 2014 results, and according to CEO Dan Rosensweig

“The first quarter was a strong start to 2014 with Chegg digital revenue growing 66% year-over-year.”

The combined revenue is up 22% from Q1 2013 and now at $74.4 milllion. Although the company still has around 180,000 titles in its print library available for rent, Chegg has clearly moved on from textbook rentals to being a service provider that aims to cater to student needs in various different areas.

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Class Notes

Class Notes Marketplaces – From Buddy Business to Real Business

Editor’s Note: This post has first been published on edcetera – straight talk on edtech.

Class notes or study notes marketplaces really are a fascinating vertical within the education technology startup space. Of course, most of these ventures are too small to be called a startup. They are more of what is called a buddy business where two or three friends come together with the right skills and create a small business that pays enough for beer and parties. Most of these ventures die as soon as the buddies find a real job or are simply too busy to keep the service up and running.

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LinkedIn Direct-to-Profile Certifications

LinkedIn pilots Direct-to-Profile Certifications with Coursera, edX, Lynda, Udemy

Today LinkedIn adds another piece of the puzzle to its user profiles in order to make them the definite online resume with the Direct-to-Profile Certifications pilot program. As you might remember, back in August the professional network opened itself to students and universities, adding the prelude to your professional resume so to speak.

The partnerships that LinkedIn announced today on its company blog will fill in the blanks that currently exist on the lifelong learning and vocational levels. If you now complete a course on Coursera, edX, Udacity,, Pearson, Skillsoft and Udemy you are going to receive an email that lets you add this accomplishment under your certifications category on LinkedIn.

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Google Helpouts

Coursera, Rosetta Stone, Alliance Française among the first to offer Google Helpouts

On Tuesday Google officially announced the launch of their latest product Google Helpouts. I wrote about it back in August already, but now we can browse the categories and get a feeling of what people and companies are going to charge for their service.

Speaking of companies. Interestingly, language learning companies like Rosetta Stone, Alliance Française and Lingo Live are among the first adopters. So is MOOC behemoth Coursera offering a mix of free and paid tutoring sessions for its Machine Learning course.

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Udemy’s new Commission Structure: 50% or Nothing


Yesterday Udemy’s founder and CEO Eren Bali sent out an email to the instructors using the course marketplace to inform them about upcoming changes in the revenue share structure. From November 1st on the revenue share is going to be based on the source the student comes from. If Udemy brings a student to a course, the revenue share for instructors drops from currently 70% to 50%. If the student comes through the instructor, the revenue share increases from currently 85% to 100% for the instructor.

The reasoning behind these changes are growth. Bali and the team at Udemy believe that through the new structure they are going to be able to invest more resources into marketing, the platform and an affiliate network.

Is 50% commission fair to instructors?

Coming from the instructor’s side of the table I had my fair share of ranting about high commissions on platforms in the past. On the other hand, I totally understand that a platform like Udemy needs to make enough revenue to not only cover cost but to grow, especially when it raised significant venture funding.

And Udemy did something really clever here. I think, it was in the first interview I ever did for EDUKWEST in which Jon Bischke, back then founder & CEO of eduFire, said that marketplaces are a shared effort. The marketplace and its sellers need to work together in order to get customers. And that’s OK as long as the marketplace is actually delivering its promise of promoting the courses / lessons of its instructors in the first place and not relying on their instructors to do all the work themselves.

Attracting top instructors

This led to a killer argument: if you are doing all the work anyway, you can also host and sell your courses on your own. And that’s what top instructors usually did – or they sold their courses to platforms like that offered cash in advance. Udemy’s new revenue structure leaves top instructors who do their own marketing with no good reason not to use Udemy, to the contrary.

Besides getting 100% of the revenue for every student they point to their own courses there is a good chance of winning new customers through the platform and still earning 50%. Instructors also don’t need to care about setting up and maintaining a LMS on their own, don’t need to worry about the payment methods and they get a customer care team for free, as well. Sounds like a pretty compelling offer to me.

The new revenue share also leaves additional percentage points that Udemy can use to attract more affiliates who are generally used to commission between 50% to 75%. But the problem is that at the moment the really interesting courses don’t seem to be on the affiliate list. I dug into the vast back catalog, which is a daunting task in itself due to the huge amount of courses offered on Udemy, yet wasn’t able to find the courses I would be interested to promote.

Issues to solve

Maybe more quality courses will show up in the affiliate section when the new revenue share kicks in but this brings us to the biggest problem Udemy is facing to my mind: quality control. There is a certain waypoint in a marketplace when crappy content outnumbers the good or great one. I feel Udemy is past that point and it gets harder and harder to find good courses via the platform itself. Sure, if the entry point is the website or social profile of an instructor, the way to purchase is pretty straight forward. But if they land on Udemy and have to skim through tons of courses on the same topic, read the ratings and compare the prices it’s a different situation.

But that’s what Udemy needs to achieve, especially under the new revenue share model. Students who buy one course through a lead coming from an instructor need to buy at least one more course from another instructor on the marketplace for Udemy to generate revenue. That’s the advantage of controlled platforms like They have control over the inventory, all courses have a certain standard of quality and there are not dozens of courses about the same topic.

Other marketplaces like eBay had to deal with this problem and came up with intelligent filters that learn about your preferences and only show you relevant content at a glance from which you can dig deeper if you like. I feel Udemy either needs to implement quality guidelines and curation before courses go live or work on filters that trim down the noise and come up with the courses that are most relevant to a student or affiliate.

And then there is still the question whether Udemy will be able to break out of its core market and enter new verticals, another essential step in order to reach their goal of teaching 10 million students, let alone 100 million. I feel, the team needs to go back in the trenches and seed new verticals like they did in the early days of their marketplace, getting in touch with instructors outside of the tech / startup ecosystem.

Tutorspree shutdown

[UPDATED] Sunday Review Special: Lessons from the Tutorspree Shutdown

Tutorspree shutdown

Editor’s Note: Tutorspree co-founder and CEO Aaron Harris reached out to me to point out that PandoDaily’s report of the startup having problems to raise a follow-up round are inaccurate. I inserted Aaron’s comment below.

In today’s Sunday Review I will focus on one story only. Last Sunday we learned through PandoDaily, VentureBeat and others that jumped on the story that tutoring marketplace Tutorspree, a startup we covered on EDUKWEST early on, is shutting down.

Now, startups in the education space are of course in many aspects just like other startups, the vast majority fail. Unlike other news outlets the fact in itself doesn’t make me want to write up their story for EDUKWEST. The Tutorspree case, however, teaches us some lessons about the viability of online marketplaces and the direction tutoring takes in general.

The interesting part about the story is that Tutorspree did not run out of money and was also not lacking business model (as so often in edtech); the reasons seem to be more complex and the main issue probably was scale.

In a post published on the Tutorspree blog especially one paragraph stands out and got quoted in each article about the shutdown.

Ultimately, we learned about the challenges of willing a company into existence, of building an incredible and unique team to tackle constantly shifting challenges. And finally, we learned about how to make the toughest decision of all – to shut Tutorspree down, not because it was not a business, but because we could not make it the company we wanted.

I added the emphasis to mark the two points I want to focus on. Let’s start with the challenges.

Challenge 1: Playing in Google’s Sandbox

This is a lesson another education marketplace startup had to learn the hard way about two years ago. TeachStreet, still one of my favorite edtech startups, was essentially killed by the infamous Panda update. Just before the implementation TeachStreet was pretty close to profitability, but from one day to the other it’s traffic got cut by half. Not long thereafter founder Dave Schappell sold TeachStreet to Amazon.

The problem is that a marketplace needs to be found by its potential users in the first place. And how do you find stuff on the Internet? By looking it up in search engines. As Google is more and more moving into additional verticals that rely on search traffic, like restaurant reviews and other local information for instance, I assume Tutorspree was facing a similar problem like TeachStreet did two years ago.

Google is constantly adapting its search algorithm which can have a huge effect on the amount of traffic a marketplace like Tutorspree gets. Another indicator is Aaron Harris’ blog post “How Google is Killing Organic Search” in which he analyzed how Google is dominating the search pages with its own estate compared to the space it gives for organic search results in which Tutorspree accounts would eventually be displayed. The post got picked up by the major blogs, got some critique but I think it underlines the problems of running such a startup pretty well.

If you don’t get the visitors you won’t be able to scale your marketplace, something Aaron Harris also pointed out to TechCrunch when asked for further information on the decision to shut down Tutorspree.

“We built something we were incredibly proud of, but got to the point where we realized it would not scale in a way that would meet our goals.”

Challenge 2: Student Poaching

This is one of the issues I came across very early on in my career as an online teacher. Back in the days when I was offering language classes on platforms like Myngle, student poaching was a big deal for the startup. Most marketplaces rely on the tutor paying commission for each lesson that gets arranged via the platform.

“Clever” tutors find ways to save on that commission (usually between 15% to 18%) by offering the students a better deal when they book their next lesson directly with the tutor. Most students are open to such a deal as the personal connection has already been established and they don’t really care about the middleman.

As this already was common practice in an online setting with pretty low margins, I imagine in the high-priced tutoring environment of New York City it is even more interesting for parents and tutors to cut deals aside of the platform. And there is basically nothing Tutorspree or any other platform could do to prevent this from happening. The only option is to offer such a good service that no one in the triangle wants to screw the platform over.

Challenge 3: On Demand and Right Now Mentality

Another problem is that we tend to prefer solutions that fix a certain problem the moment it occurs. Tutoring seems to move towards two directions. One the one hand, you have the on demand tutoring provided via video lectures and other asynchronous, self paced content.

The other direction goes towards services like InstaEDU that offer a connection to a live tutor the moment the student needs an answer. According to the site the average waiting time is less than 30 seconds.

No need to arrange a meeting with a tutor a week or two in advance, no delays due to traffic, no cancellations due to illness, no need to buy a big package in advance. You only pay for what you need, when you need it.

Now that we have talked about some challenges, let’s get to the point that Tutorspree shuts down though it was a legit business.

Series A Crunch?

According to CrunchBase Tutorspree raised $1.8 million in total funding. As PandoDaily’s Erin Griffith points out one of the problems the startup ran into was the team’s inability to raise a new round early this year. Only Resulute.VC agreed to invest $800k with the option to add more if Tuturspree managed to get more investors on board. Apparently that did not happen.

Comment from Aaron Harris:

I won’t comment on the majority of it, which is mostly opinion, but did want to correct something factually innacurate – we had no trouble raising money, at any point. Pando got the story wrong, probably because they didn’t actually talk to us or any of our investors.

Now, there is the question whether Tutorspree needed the money to stay afloat or if it was raising money to grow. I think it is pretty telling that none of the excisting investors followed on their previous funding in Tutorspree.

Again, this does not mean that the startup was not generating revenue and not only could have survived but slowly grow based on its revenue. But there sure was no hockey stick growth that investors like to see at this stage of a startup.

I am pretty sure the Tutorspree users, especially the tutors and parents are going to miss the service and got some real value out of it. We saw the same when TeachStreet shut down without a real alternative for tutors and learners to move to.

In the end, we probably have to see marketplaces like Tutorspree and TeachStreet as features of bigger platforms like Google, Bing or Yahoo for instance. Search engines nowadays want to own more than the brief moment a user finds a result for her inquiry, they want to extend the reach to the next step and eventually the sale.

The last thing that I noticed is that there is apparently no acqui-hire for the team and data as this is usually the way “failed” edtech startups go these days. If not even the accumulated data of tutors and learners is worth something then the decision to shut down Tutorspree was probably the right one in the end.

LinkedIn University Pages

LinkedIn University Pages – Are Internships next on the Feature List?

LinkedIn University Pages

When you ask around which social network out there is the most professional, chances are that a majority will answer with LinkedIn. Not long ago there was the notion that we wouldn’t need a specialized network that deals with our professional relationships.

Startups like Branchout or Inigral argued that adding a new layer on top of Facebook would be enough to make the social network safer and more targeted. According to Fast Company colleges pay Inigral between $10k to $50k per year for their closed communities inside of Facebook. Branchout, on the other hand, pivoted into a mobile workplace chat platform and left Facebook.

Today LinkedIn officially introduced LinkedIn University Pages, a new feature that enables colleges and universities to set up a dedicated page for students to connect and explore. This new feature also compete with Facebook’s own product Facebook Groups for Schools which had been (re)launched in April last year. The blog post contains a statement which is pretty telling, promoting University Pages as

“… one cornerstone of our strategy to help students at every critical milestone from campus to fulfilling, successful careers.”

Again, when most people think of a professional network, LinkedIn and maybe Xing or Viadeo will be on the top of their lists. Facebook with all its features, bells and whistles is actually pretty hard to describe these days, it’s just Facebook, you know, the social network.

We essentially had the same discussion with devices. Do we need an extra point and shoot camera, a flip cam and a mp3-player when our smartphone has all the same features? Probably not. At least for me the days when I carried my dumb phone, a point and shoot and a flip cam in my purse are over. My Nexus 4 is doing the trick just fine.

That said, there are situations when I get back to dedicated devices, most likely in a professional setting in which the capabilities of the Nexus 4 or other smartphone are not enough. Professional photographers will always use a professional camera, Peter Jackson won’t shoot his next movie on an iPhone etc. And the same is true for social networks.

We need dedicated networks when it’s getting serious. And what is more serious than your academic and professional career? Adding this piece of the puzzle to LinkedIn makes a ton of sense as your academic network is often a significant part of your work later on. And while Facebook might be great to reconnect with old friends from school and reminisce over an old party picture or get cheers from friends and family over your new job, it is not the place to build on your career.

And if we assume LinkedIn University Pages are going to be well received which is likely to happen in my opinion, then it’s only one small step for LinkedIn to start thinking about internships. Then edtech startups like Internmatch and others might face an increasingly tough overall situation where opportunities become scarce.

Rosetta Stone

Rosetta Stone to evolve from Language to Learning Company

Rosetta Stone

Are the days of high priced language learning software over? With Rosetta Stone’s latest acquisition it surely looks as if one of the leading companies in that sector is looking for greener meadows.

The $22.5 million all cash acquisition of Lexia Learning reported by the Wall Street Journal is one indicator that language learning isn’t enough to survive in the long term; the quote

“We are evolving the company from a language company to a learning company,”

by Rosetta Stone’s CEO Steve Swad a second one.

Also, customers already are under the false impression that Rosetta Stone is offering far more learning products than just languages. According to the WSJ a survey showed that people already relate RS to math, reading and music products. Swad stated “To me, it’s just evidence of brand permission to extend.”

Of course the acquisition of Lexia Learning also strengthens Rosetta Stone’s position in the K-12 and global English learning market yet we have to see it as part of a far broader strategy to transform Rosetta Stone into a learning company. From the press release

“This acquisition is another step in the transformation of Rosetta Stone,” said Swad. “We`re moving beyond language; we`re leveraging technology; we`re growing our business in new and meaningful ways. And we`re positioning this company to change the face of learning as we know it.”

I think it is pretty obvious to Swad and the team at Rosetta Stone that the days of high priced boxed (or downloadable) language software are numbered. The acquisition of Livemocha earlier this year and therefore the transition to a cloud based language learning portal was a first step here to compete with similar players like and busuu.

All three offer language learning products at a fraction of the price customers need to pay for a Rosetta Stone product. Even the current half price offering Rosetta Stone is promoting on Facebook at $395 looks outlandishly expensive compared with the package prices Livemocha, or busuu offer.

Rosetta Stone Promo

And we must not forget Duolingo that is slowly but surely becoming a real threat to the startups that aimed to disrupt Rosetta Stone. Duolingo already offers different languages and mobile applications at no cost to the learner. Duolingo also has studies that show the efficiency of its products and the startup is growing fast. Also, the reviews of people learning with the product I have read so far were fairly positive.

Therefore, it seems to be a good idea to find more lucrative niches as soon as possible. Other verticals are yet pretty much untouched from decreasing prices and Rosetta Stone’s brand and technology might enable the company to build up a new foothold there.

Picture License AttributionNoncommercial Some rights reserved by olivcris

Edtech Startups burn Money

Are Investors Reluctant or do Edtech Startups not need the Money

Edtech Startups burn Money

Yesterday, Frank Catalano pointed me to a report by Ambient Insight titled The 2012 Boom in Learning  Technology Investment. It’s a quick read, only 18 pages, and Ambient did a good job in breaking down the investments into the different verticals between 1999 and 2012.

In my opinion however, Ambient Insight draws the wrong conclusions when stating that

Investors are funding a lot more companies, but are increasingly reluctant to risk large funding amounts.

I think investors don’t need to invest large amounts and many startups don’t even want the money as you cannot compare the investments in education that were done before and after the dotcom bubble with the investments we saw in 2012 as the landscape for launching a startup in e-learning has totally changed.

Let’s break it down.

1) The cost of building a startup is a friction of what it used to be

Back in 1999 and even up to the middle of the past decade building a startup involved huge costs. From licensing software to buying or renting server racks, a web based startup had to invest tons of cash before it even got a service up and running.

Amazon Web Services which today hosts a huge part of web companies was officially launched in 2006 and from then on even the tiniest bootstrapped startup was able to afford scalable hosting. You did not need to invest intro infrastructure beforehand, it now grew with your userbase and hopefully your revenue.

Web technology has also come down in cost, in most cases to $0 as you don’t need to buy licenses for MySQL, Java, php, Ruby on Rails and so on and so forth. Developers don’t need to be hired in New York or San Francisco from the start. Sites like Odesk can get you a development team in Romania or Vietnam at the friction of the cost and instead of hiring a web designer for the looks you can auction your project at 99designs.

All of the points above illustrate that the same idea that cost millions of dollars in venture capital to realize in 1999 now is nearly free and can be financed with credit card debt, a family and friends round or through crowdfunding.

This also means that startups today, if they are clever, have a much lower burn rate than those that launched 1999. Also many startups today follow the lean startup mentality which is exactly about that, preventing a second dotcom burnout for early stage startups.

All in all, most edtech startups won’t ever need more than $500k, many probably much less. For comparison on how it used to be around 2000, I suggest to watch the documentary

2) Most edtech founder teams work on small ideas

Though I don’t want to diminish the efforts of those edtech founders, I assert that many (most) of them are working on projects that solve a very specific problem. This is especially true when we are talking about those in the mobile learning and app space. I often quote Mark Suster here who called these kind of products FNACs, feature not a company.

And that’s probably the plan for most young founders who are often diagnosed with “being on a mission” (if this mission is to flip the startup). Those FNACs are aimed to attract big, or at least bigger, players in the market that will hopefully acquire them like we recently saw with Livemocha being acquired by Rosetta Stone (though that wasn’t the plan, I think) or Lore being acquired by Noodle Education.

Also, we should take into account that many of these founders are in their mid-twenties, they only want to spend a few years working on one idea in a hot and promising market and then move on to the next idea. How big is the chance that you’re working on your biggest idea at age 26? Not very high. At 26 I was about to “disrupt” urban party life with a cocktail delivery service. You get the idea.

Again, the financial infrastructure and ecosystem allow very young founders to get small ideas off the ground. Again, to achieve such a plan and make an interesting exit for the founders and (angel) investors you don’t need to raise a ton of money. For how long this strategy will work is of course disputable.

On the other hand, in every market there is always only a limited number of big ideas to work on. Right now I tend to put startups like 2U, Edmodo or Chegg in this group as all of them are building platforms that could easily create aspects of FNACs on their own and that probably won’t get acquired by a competitor or bigger player in the market. Which means that they need to go the IPO route.

3) The rise of Edtech Incubators

Another aspect which is fueling the growth of edtech startups are dedicated incubators like Imagine K12, NewSchools Venture Seed Fund, Startl, DreamIt Ventures etc. Imagine K12 alone have incubated and funded 19 startups in 2012 during their Winter and Summer cohorts.

And with new incubators like Macmillan Digital Education, Kaplan Edtech Accelerator and Pearson Catalyst 2013 will see even more. Like I wrote in February, we are entering the era of the flipped edtech startup.

4) The concerned Silicon Valley Moms and Dads

Education has become a huge topic in the Valley and beyond among the tech / geek elite. Since the hype around Salman Khan and now MOOCs tech executives and founders who have been around the block once or twice are now pretty open to angel invest into education startups that help create a better world.

Why? Because most of them got children and don’t want them to cope with a broken school and university system. Take Jason Calacanis as an example. The moment he got a daughter his interest has started shifting towards the education space. When I met him in London and Paris we talked a lot about online education and where it is all going. He is now going to host the second edition of the LAUNCH Education & Kids Conference in June and he also interviewed Sebastian Thrun, Anant Agarwal and Salman Khan for his webcast This Week in Startups.

The tech elite essentially took the education matter into their own hands as they strongly believe they can do a better job than anyone else. Well, we are going to see how that goes but it is definitely another part of the puzzle.

5) “(Communications) tools don’t get socially interesting until they get technologically boring.”

Last but not least the above quote from Clay Shirky is also true for what we see in terms of adoption of elearning in the mainstream today. Back in 1999 PCs were still hard to handle and quite expensive, let alone the additional cost of a (somewhat) fast Internet connection.

Like for founders in edtech cost has come down for consumers. And thanks to Apple and the iPhone / iPad we learned about the joys of mobile Internet and consumption. All these things are now technologically boring. Your parents and grandparents are on Facebook, use a smartphone or tablet and so do your children. Therefore, the potential market for elearning products is much bigger than 1999 or even 2005, two years before the launch of the original iPhone.

And with mobile devices being technologically boring we got used to the idea of buying small learning applications for $0.99 or even up to $5. It’s a proven model and though successful startups like Mindsnacks, Voxy, busuu or raised up to $10 million they all created their products at a friction of the cost compared with startups during and after the dotcom years. Also all of them had a working business model and raised money for scale and growth, not for development or infrastructure.

Bottom line: the Ambient Insight report gives you a nice overview about the money that went into each vertical, but I think you need to take the points above into consideration to get a clear picture of the online education market.