Edtech Companies Hail New Rival LinkedIn As Industry Catalyst
Are online education companies biting their nails now that their competitor Lynda.com is about to become part of Mountain View, CA-based LinkedIn, the dominant social media network for professionals? The big public company, with more than $2 billion in annual revenues, has a new mission to steer its members toward Lynda.com skills classes that might land them better jobs.
LinkedIn’s $1.5 billion purchase of Lynda.com, a 20-year-old company offering courses ranging from Web design to data analysis, puts it in the pole position to take over a sizeable share of the market for online education and professional training, Stifel analysts wrote after LinkedIn (NYSE: LNKD) announced the acquisition April 9.
“We think online education is potentially a multi-billion dollar business, but up until now the challenge had been connecting people with the right courses at scale,” the Stifel report said.
Lynda.com’s competitors in the online education industry, however, are thrilled with the LinkedIn deal, saying it affirms that there’s serious money to be made in selling online courses to adult workers who need to keep up with the rapidly changing pace of technology in all industries.
“I think it’s super positive,” Udemy CEO Dennis Yang says. “It provides a huge stamp of validation.” San Francisco-based Udemy, an online education marketplace, hosts more than 25,000 courses that include job-related technology training.
Much of the attention around online learning has focused on its potentially disruptive impact on traditional academic institutions such as colleges and universities, Yang says. But the college years take up only a fraction of the time people will spend studying over a lifetime to keep their job-related skills current in the 21st century, he says. Consumer demand for lifelong professional training is fueling rapid growth for educational technology companies in that segment of the industry, Yang says. Online learning offers working adults a less expensive option than moving back to campus to earn a new degree, he says.
The heady reaction over the Lynda.com purchase was similar at Pluralsight, a Utah edtech company that focuses on the needs of mid-career tech professionals. CFO Greg Woodward says he wasn’t surprised by Lynda.com’s price tag of about $1.5 billion—he’s seen valuations going up for other consumer-focused edtech businesses as well.
“People in the marketplace are seeing the value of these companies,” Woodward says. “There are a lot of investors focused on the space.”
But how does LinkedIn’s entry into the edtech industry change the competitive landscape for these smaller players? With a membership of 350 million people who’ve posted their resumes for free on the site, LinkedIn has an intimate knowledge of users’ current jobs and the skills gaps they might need to fill to keep succeeding in their fields. Using that data, the company plans to target relevant Lynda.com course recommendations to individual members after the acquisition is completed in mid-2015. As an independent company, Lynda.com earned revenues of $150 million in 2014. On a conference call with investors, LinkedIn CFO Steve Sordello said the acquisition of Lynda.com opens up a $30 billion opportunity for the company.
To encourage members to try online courses, LinkedIn may make a Lynda.com subscription part of the added services that come with a LinkedIn Premium subscription for job seekers. The pricing patterns of the two companies are similar. A LinkedIn Premium membership for an individual is $29.99 per month; Lynda.com offers full access to more than 6,300 courses and 267,000 video tutorials for $25 per month.
Another big tech company, online retailer Amazon, used a similar pricing tactic when it entered a new line of business. Amazon (NASDAQ: AMZN) sweetened the deal for its Amazon Prime memberships—originally a free fast-shipping perk—by adding streaming movies on Prime Instant Video, as well as digital books for its Kindle device and Web-based photo storage, to the Prime membership package.
Well before LinkedIn announced its plan to become an educational technology company, it created space on its site to showcase online education providers. In late 2013, LinkedIn made it easy for its members to list their online course credits in their professional profiles, just as they can include any degrees they’ve earned at colleges and universities.
Lynda.com was part of the pilot project for that new feature, called Direct-to-Profile Certifications, along with other notable providers of online education and training, including Coursera, EdX, Pearson, Skillsoft, Udacity, and Udemy. Since then, other companies have signed on, including Microsoft and Pluralsight.
Both traditional academic institutions and online learning companies can join the Direct-to-Profile program. When students complete a degree or earn a certificate for completing an online class, the school sends an e-mail inviting the students to click a button to post the credential instantly on their LinkedIn resumes. The credit appears with the logo of the school or edtech company.
Now that LinkedIn is getting into the edtech business itself, it has become a competitor with companies it also serves in its online professional marketplace—just as Amazon became a competitor to the publishers whose books it also sells online.
Pluralsight’s Woodward acknowledges that the alliance of LinkedIn and Lynda.com carries “advantages and synergies,” but he sees room for many players in a future professional training market estimated to reach more than $100 billion.
“There’s a lot of space for people to play,” Woodward says. “I don’t think any one organization is going to own the space entirely.”
Woodward says Lynda.com offers quality content over a broad range of topics, but advanced IT professionals are attracted to Pluralsight.
“Lynda.com has cast a wide net but they don’t go very deep,” Woodward says. “Most of our library is focused on deep technical skills in high demand.”
Udemy, meanwhile, aims at a different set of students. Yang says Udemy’s a la carte offerings are a better option for many people than Lynda.com’s all-you-can-learn smorgasboard of courses and videos at a monthly subscription rate. Udemy markets to a global audience, with classes in more than 80 languages at prices that are easier to swallow than a Lynda.com subscription fee, he says.
“Not everyone can afford $29 a month—overseas or in the U.S.,” Yang says.
All online education companies will need to create their own strong brands in the growing market for professional training, Woodward says. They’ll have to appeal to learners and also establish a reputation with employers for helping students achieve mastery of key skills.
That task of creating a quality brand isn’t as simple for edtech companies as it has been in academia, where accrediting agencies set standards for degree curriculums, and long-established publications such as U.S. News & World Report release annual rankings of the top colleges and universities.
But a number of edtech industry players are experimenting with various mechanisms to strengthen or rate the credentials granted by online learning providers, Woodward says. In November, Pluralsight bought Boston-based startup Smarterer, which offers tests based on crowdsourced questions designed to gauge a student’s proficiency in various tech skills. “We’ve got some big plans for that, long-term,” Woodward says.
I asked Woodward whether LinkedIn could play a bigger role in helping online education companies and their students demonstrate the quality of their training by expanding the Direct-to-Profile feature. For example, LinkedIn could include a direct link to the edtech company’s website from its logo on member profile pages, allow students to link to a project they completed as an online course assignment, and even post a skill level grade from Smarterer.
Woodward says he’s thought about such enhanced options, and Pluralsight will be watching to see if LinkedIn offers them to all edtech companies rather than reserving them for Lynda.com.
“It’ll be interesting to see if they do stay neutral over time,” Woodward says. If not, competing players might rise up to try to disrupt LinkedIn itself, he says.
While LinkedIn has been providing what it calls “free brand exposure” to edtech companies through its Direct-to-Profile feature, it has also been adding to its knowledge of the edtech landscape. Recently, LinkedIn published an early ranking of the top 100 providers of online education certificates, based on the number of its members who have posted these credentials to their profiles using Direct-to-Profile buttons. (Microsoft took the number one spot—Lynda.com placed ninth.)
The rankings also show which edtech company’s certificates were cited by the most professionals within various categories, including software developers, computer-aided designers, and IT systems administrators. As this program continues, LinkedIn may amass one of the most extensive databases on the influence of online learning on career outcomes—an approach it has already taken to create its own rankings of colleges and universities.
But LinkedIn listings are not the only route by which online education companies can stake out their reputation for quality, attract students, and help them catch the eye of employers, Pluralsight’s Woodward says.
In the era of social media, word of mouth has a mass scale. Pluralsight has also seen a “Trojan horse” effect: a single individual who profits from a Pluralsight class may persuade his or her employer to buy a group plan for the entire staff, Woodward says. And employers are already hunting for new hires on sites such as GitHub, where programmers collaborate on software and display their coding prowess, he says.
Udemy’s Yang says LinkedIn’s foray into online education may arouse interest in edtech among similarly-sized potential competitors in other sectors. The Lynda.com acquisition will stimulate big companies to consider how their deep databases of consumer contacts might also give them an entry point into the multi-billion dollar edtech industry, he says. Yang says he wasn’t surprised that such a major edtech acquisition came, not from a traditional education player like Pearson, but from a Silicon Valley tech company.
Many other technology companies already have educational components, and some have formed partnerships with edtech companies.
Tech giants such as Microsoft offer online consumer training and certifications for the use of their own technology products, and companies including Google and Intuit have collaborated with Mountain View, CA-based edtech company Udacity to design and endorse “nanodegrees” in tech skills such as app development. Apple runs an app store for educational programs that run on the iPad.
Like Yang, Woodward sees LinkedIn’s purchase of Lynda.com as a possible catalyst for a new class of technology giants looking to acquire small edtech companies. That might open up future opportunities for Pluralsight, though the company is happily independent for now, he says.
“As some of the bigger tech companies look to grow their businesses over time, that makes us kind of an appealing prospect for them as well,” Woodward says.
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