Last year’s sale of the non-profit online course platform edX has left both parties short on value, with buyer 2U still hunting for paying customers, and sellers Harvard University and the Massachusetts Institute of Technology still weighing how the proceeds will boost remote teaching.
Scientists at the two universities created edX in 2012 as a means of making courses freely available on the internet, and for giving other institutions the software to create similar platforms.
2U, founded in 2008, is a private company that creates online courses for universities. It bought most of edX in July 2021 for $800 million (£650 million) in the hope that a fraction of its fee-free learners might find enough value to start paying for it.
But 2U’s stock price has dropped nearly 70 per cent this year, provoking extensive lay-offs and glum assessments by industry analysts who argue that the company was mistaken in betting so heavily on the prospect of profitably converting edX students.
Officials at MIT and Harvard, meanwhile, have yet to find a leader for the non-profit entity created from the sales proceeds, or an overall strategy for how the edX platform software it kept in the deal will be used, as promised, to broadly improve online learning across higher education.
“The primary focus of the non-profit has been the CEO search,” acknowledged Catie Smith, the interim chief operating officer of the year-old organisation, which Harvard and MIT have named the Centre for Reimagining Learning, or tCRIL. As for how it will use the online course sharing software it retained, tCRIL was still “laying the groundwork toward a strategy” for accomplishing that, Ms Smith said.
The transaction drew criticism from many in higher education who argued that edX had a founding mission to serve disadvantaged students around the world, and that the two elite universities were abandoning that commitment by selling edX to a private company charging high fees.
But 2U is not alone in its struggles. Coursera – the online education platform created in 2012 by two Stanford University computer science professors as a rival to edX – announced its own sweeping lay-offs last month. Coursera’s market value has fallen by nearly three-quarters from highs early last year.
The leadership of 2U is projecting an attitude of confidence, despite the mounting challenges to its model – including lay-offs that this year cut 20 per cent of its staff budget. Company officials said that the edX community has added 5 million students since the sale, making a total of 46 million, and 2U now has 230 university and corporate partners delivering its courses. EdX had reported having 194 partner education institutions at the time of the sale.
One financial analyst, Stephen Sheldon at William Blair, expressed confidence that the edX merger was getting past some initial hurdles and headed to long-term success, given that 2U began from a dominant position in online delivery partnerships with major US institutions.
2U came into the edX purchase low on cash, then needed time to examine edX’s books, which were worse than hoped, Mr Sheldon said. “It was burning more cash than most had expected,” he said.
But edX already offered its students fee-for-credit options, meaning 2U had a good pathway for eventually deriving maximum revenue from those able to pay, Mr Sheldon said. With the staff cuts at 2U – as investors urged the company to focus more on profitability than on immediate growth – that profitability goal now seems in sight, he said.
“It did seem initially like it was something where you could plug it in and realise some of those benefits very quickly,” he said, “but I think we’re really just starting to see it.”
