How Demand for online education is growing. Are providers ready?

Interest and participation in online learning continues to grow: 2020 saw record enrollment,1 and universities have launched new online programs to meet this increased demand.2 From doctoral students to lifelong learners, people are increasingly accessing online tools to learn and acquire new skills. Though the increase in demand is undeniable, creating compelling offerings that appeal to prospective students is an ongoing challenge for many providers. Many players are vying for a piece of the online education market, from local and national universities to emerging online education giants and newer nondegree providers. The magnitude of these market shifts and the increasing competition they herald suggest that online education providers may be compelled to go beyond incremental improvements and initiate big, bold moves to survive, grow, and thrive. Major market forces Four core market forces are reshaping the online education space, including increased competition, consolidation by a handful of big players, an influx of investments, and rising standards for quality (Exhibit 1). As demand for online education has grown, the market has become increasingly competitive, with providers vying for attention from a broad set of prospective students. From 2011 to 2021, the number of learners reached by massive open online courses (Moors) increased from 300,000 to 220 million.3 Between 2012 and 2019, the number of hybrid and distance-only students4 at traditional universities increased by 36 percent, while the circumstances of the COVID-19 pandemic in 2020 rapidly accelerated that growth by an additional 92 percent.5 Against this backdrop of growing student interest, the market for online education has consolidated around a handful of dominant online-degree players. A recent analysis of Integrated Postsecondary Education Data System (BIPEDS) total enrollment data showed that while the overall market for degree programs decreased approximately 3 percent from 2019 to 2020, four of the largest open access online education providers—Southern New Hampshire University (SNHU), Liberty University, Western Governors University (WGU), and Grand Canyon University (GCU)—grew their total enrollment by 11 percent on average.6 by competitors.
Google’s Grow with Google program, in partnership with Coursera,9 offers courses in high-demand areas such as user experience design and data analytics and has made significant gains in enrollment. These programs give prospective learners cost-effective, expeditious options beyond a degree program. Traditional digital-education providers that are primarily degree-focused may want to consider including such offerings in their strategies to compete and grow in the online education space. Exhibit 1 Core market forces are shaping the online education space. 9 The Keyword, “Opportunity for everyone,” blog entry by Sundar Pichai, Google, October 12, 2017. Greater demand and rising quality standards also suggest that students are growing savvier about the returns of their educational investments. For some prospective students, especially those moving into high-paying fields such as IT, the opportunity to learn high-demand skills is more important than a program or institution’s brand. Nearly half of respondents to our learner segmentation survey said they would only consider paying for education programs that have an expected positive return on career outcomes, while 21 percent indicated that online degree-granting universities have newer, digital-native entrants nipping at their heels and targeting the same student segments. Numerous digital-education start-ups are disrupting the space, driven by a rise in venture capital funding. US venture funding for education technology (edtech) grew from $1 billion to $8 billion between 2017 and 2021.7 In 2021, the public appetite for these investments was evident in the successful IPOs of multiple edtech companies, including that of Coursera (valuation of more than $4 billion).8 Edtech investment could be poised for more growth as online offerings surge and as institutions continue to shift toward blended learning grounded in cutting edge digital technologies. The forces propelling demand have been accompanied by rising standards for online education quality. For example, new offerings are blurring the lines between degree and nondegree learning, creating a new category of educational.