I think article is essentially right on. It's very difficult to succeed in the education space and, at a minimum, it typically takes a long time to succeed. If you have the patience you can definitely make money in the space (witness Wireless Generation as an example) but there are very few quick wins.
Education also really is several separate industries rather than a monolithic one. K-12 has a very different dynamic than higher education and those industries have a much different dynamic than corporate training. Consumer education, which I would consider to be stuff like Kaplan Test Prep, Lynda.com, LiveMocha, etc. is essentially another industry albeit with some overlap with the others. And consumer ed is probably the toughest one to make money in, at least in the U.S.
One of the biggest challenges with education companies in the United States is that I feel we've almost been conditioned not to pay for education. Public K-12 education (which is the vast majority of consumption) is paid for by the state. Higher education is heavily subsidized by the government and when it is paid for by the consumer it typically comes in the form of student loans. And then we you become an adult your employer steps in and pays for the majority of your education/training.
So while people will spend lots of money for clothing, entertainment, food, etc. it's tough to get people to pay out of pocket for education. The industry that is most similar in this respect is health care and end the dynamics in these two industries are much the same. I'd highly recommend that anyone wanting to understand these industries more deeply read Disrupting Class and The Innovator's Prescription, both by Clayton Christensen.
> Education also really is several separate industries rather than a monolithic one.
This is a great point, and something pundits and the author of this article don't explain in sufficient detail. Comparing a company that offers online courses to end consumers and a company selling software a a service to districts and universities is nonsensical. Is it safe to say that the education market on whole is a challenging environment? Sure. But beyond that, without specifying a narrow segment, generalizations are useless.
Hi JByers -- blog author here. I don't think the comparison is non-sensical because the common thread tying all of these different segments together is the end buyer's perception of value. If you as the builder or service provider or technologist think that the value you're offering is higher quality you will have a slow road. If you think it is saving cost/time to get to the same level of quality you will scale quickly. This holds across segments as the examples in the post illustrate -- Chegg, University of Phoenix, TutorVista, etc.
I would say the distinction is most important for considering what the competition will be. There are already plenty of people who consider higher education an investment, but also factor cost and risk for more significantly than the sort of entrepreneur you describe. Many middle-class people value quality but moderate their exposure to risk by choosing State and Community Colleges. They perhaps sacrifice some quality in return for "good enough" and a $20,000 loan instead of a $60,000 loan.
I suspect if you could beat state/community colleges on quality and at least match them on cost I think you could be successful. I just have no idea how a company actually beat them on quality.
Education also really is several separate industries rather than a monolithic one. K-12 has a very different dynamic than higher education and those industries have a much different dynamic than corporate training. Consumer education, which I would consider to be stuff like Kaplan Test Prep, Lynda.com, LiveMocha, etc. is essentially another industry albeit with some overlap with the others. And consumer ed is probably the toughest one to make money in, at least in the U.S.
One of the biggest challenges with education companies in the United States is that I feel we've almost been conditioned not to pay for education. Public K-12 education (which is the vast majority of consumption) is paid for by the state. Higher education is heavily subsidized by the government and when it is paid for by the consumer it typically comes in the form of student loans. And then we you become an adult your employer steps in and pays for the majority of your education/training.
So while people will spend lots of money for clothing, entertainment, food, etc. it's tough to get people to pay out of pocket for education. The industry that is most similar in this respect is health care and end the dynamics in these two industries are much the same. I'd highly recommend that anyone wanting to understand these industries more deeply read Disrupting Class and The Innovator's Prescription, both by Clayton Christensen.