Published Online: June 9, 2014
Published in Print: June 11, 2014, as Virtual Education Sees Rapidly Rising Revenues

Virtual Education Seeing Rising Enrollments, Revenues

Much of the recent growth in the online course market has been driven by experiences similar to that of Lisa Andrejko, the superintendent of the Quakertown Community School District in Pennsylvania.

Five years ago, Ms. Andrejko discovered a drain of over 100 district students leaving for a Pennsylvania-based cyber charter school.

It was costly: for each departing student the 5,500-student, suburban Quakertown district had to pay the cyber charter $12,000, or $24,000 for special education students, eventually amounting to $1.2 million lost annually.

"For years, public schools didn't see the need for virtual schooling, but as kids started to leave because we weren't meeting their needs, it was hurting us financially," said Thomas C. Murray, the director of the district's technology and cyber education program.

Motivated by financial concerns, in 2009 Quakertown administrators created Infinity Cyber Academy, a district-run virtual school. Over time the cyber academy went from district-only students taking courses taught and provided by outside vendors, to welcoming students from 12 Pennsylvania school districts with access to a mixture of district-created and taught courses, as well as those provided by outside companies.

The same factors that pushed Quakertown to develop a virtual learning program are also fueling a vibrant marketplace for K-12 online learning. Extrapolated revenue growth for that sector increased from $73 million to $178 million between the 2010-11 and 2011-12 school years, according to a survey conducted by the Washington-based Software & Information Industry Association, or SIIA.

The biggest player in the virtual education market is Herndon, Va.-based K12 Inc., one of the few publicly traded precollegiate education companies, which focuses on selling directly to districts to build blended-learning programs. The list also includes Apex Learning, Connections Academy, and others.

Blended-learning is on the rise. By 2019, half of all high school courses will be in some online form, predicts The Clayton Christensen Institute for Disruptive Innovation, a San Mateo, Calif.-based think tank that studies blended learning.

But these numbers are hard to pin down, particularly when the definition of blended learning can be fluid.

Following the Money

Companies offering online courses to K-12 schools saw revenues increase from $73 million to $178 million between the 2010-11 and 2011-12 school years, according to data extrapolated from the Software a& Information Industry Association.

2010-11
$73 million (extrapolated revenue)

2011-12
$178 million (extrapolated revenue)

Susan D. Patrick, the president and CEO of the International Association for K-12 Online Learning, or iNACOL, cited a 2011 study from the U.S. Department of Education that calculated 1.8 million students were enrolled in "distance education courses." Though Ms. Patrick estimates that number may now be as high as 3 to 4 million, there's "no scientific number out there right now," she said. Still, with around 55 million K-12 students nationwide, online learners represent a small, but growing share. According to Ms. Patrick, about 320,000 students currently participate in full-time online programs.

Bite-Size Courses

Karen Billings, the vice president of the education division for the SIIA, anticipates rapid growth of online learning paralleling the increasing use of mobile devices.

For online learning, the current school year and the one following may be a sort of tipping point, with more students bringing devices to school and able to enroll in bite-sized courses, rather than semester long explorations, Ms. Billings said. She expects the definition of an online course to transform with "education divided into smaller and smaller bits of consumption."

Cheryl Vedoe, the CEO of Seattle-based Apex Learning, has seen steady growth since the company's founding in 1997. Over the past five years, according to Ms. Vedoe, Apex Learning's revenue has increased at a compound annual growth rate of 30 percent, which is the year-over-year growth rate of the company over the past five years. During the 2012-13 school year, Apex served 435,000 students with more than 1.5 million course enrollments.

The growth has been driven by "the use of courses in brick-and-mortar schools, not distance learning programs," said Ms. Vedoe.

Filling Curricular Gaps

Ms. Vedoe and others are seeing a demand for just one or two courses versus a whole virtual load. And in addition to demand for the more traditional credit recovery and AP courses, schools are looking for electives and other courses, like health, to provide individualized learning opportunities and to supplement core academic classes.

Jeffrey A. Elliott, the president and CEO of the Virtual High School Collaborative, a Maynard, Mass.-based nonprofit provider of online courses, anticipates that an emphasis on stem—science, technology, engineering, and mathematics—and AP courses will continue to fuel growth in addition to a growing acceptance of blended learning. Virtual High School, which works with 20,000 students in 700 districts, has seen its highest growth in either AP or STEM offerings. Though the school has some full-time students, the average enrollee takes just one or two courses per semester.

Montana Digital Academy has worked to fill curricular gaps since 2010 and works with 97 percent of public schools in the state. The academy served 4,000 students or nearly 8,000 course enrollments in the 2012-13 school year—an 18 percent increase over the previous year, said Executive Director Robert Currie.

Created and funded by the state legislature and housed at the University of Montana, in Missoula, the virtual school charges no tuition. For rural schools, where resources are scarce, it provides access to a diverse catalog of courses.

In larger districts, Mr. Currie predicts the academy will provide blended learning resources and increased flexibility for personalized learning options.

Related Blog

Darlene Schottle, the superintendent of the 6,000-student Kalispell school system in Montana, said she used to work with several private vendors to provide blended learning options, but "they were not certified teachers, they didn't have the same expectations, and they didn't know the curriculum," she said.

Now, she taps the Montana Digital Academy. Last year, students at Kalispell's two high schools earned 350 credits from online courses, a figure that has doubled over the last five years. Cost savings from using the digital academy allowed Ms. Schottle to hire additional teachers to staff its digital classrooms. She believes the online course market will continue to grow.

"Unless we find ways to provide more options and connect with kids through technology," Ms. Schottle said, "traditional models of education won't continue to be viable."

Vol. 33, Issue 35, Page s23

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