RC: The vision of 2U was to get great schools to not only go online but to do it with their full product: offer the same degree they do on campus, with the same price. They would be saying to the world that if you do this programme, it would be truly the same as if you came to campus.
“This is not a self-study, ‘it’s your own time, learn if you want’ approach. If the student has not done their homework, the professor knows and the other students know”
And that was a big deal, right? It wasn’t just dabbling, it wasn’t putting your toe in the water; it was making a real commitment to online education.
The PIE: How is teaching delivered?
RC: The teaching in our online classes is not one-way lectures. Instead, classes are seminar-style conversations where there is no back row – all students in the class can be seen and heard by all other class participants. Students are required to meet in these live video sessions led by faculty once a week.
This is not a self-study, ‘it’s your own time, learn if you want’ approach. You need to do the self-study work, but then you go into a classroom that has on average 11.9 students. If the student has not done their homework, the professor knows and the other students know. You are accountable to a live classroom every week, on top of real exams and grades.
Then you have face to face experiences, whether it’s in social work where you’re learning in a clinical setting, or a teaching programme, where you work in a classroom. To date we’ve placed students in more than 20,000 successful field placements.
The PIE: How do you integrate those ‘out-of-classroom’ elements into the course?
RC: In our Rossier Online Master of Arts in Teaching programme, you film yourself in front of the classroom. You upload the video and your faculty and the other students critique your performance. That’s the kind of learning that can’t actually go on on campus. So on campus students do these practicums, but we’ve added filming yourself and sharing your film with your classmates, so you’re actually going to get true feedback.
The PIE: How did you develop the platform?
RC: We build a complete set of services, from helping them to recruit worldwide, to counselling students interested in the programme, to student support, to working with faculty to the develop the content, to the online platform, to identifying placement opportunities in programmes where students need to be placed in hospitals or social work settings.
“I truly believe that the idea that to advance your career you have to quit your job doesn’t make any sense”
We have launched 17 programmes to date with 12 universities. These are great universities – in the top tiers in the United States, all of our universities are considered world class.
The PIE: How is 2U funded and what is its business model?
RC: 2U was founded in 2008, essentially in the middle of the US financial crisis. It wasn’t an easy time to be raising money, but we were able to convince a few investors to believe in our vision of great online education and we secured VC funding. In total we raised $100m through four private rounds and in 2014, we went public on NASDAQ. (NASDAQ:TWOU)
In terms of our business model – we partner with great universities to help them deliver excellent online degree programs. We invest heavily in each of our partner’s programs, with a new program needing between $4-$9m in net negative cash flow, and we and the university share in the revenue as students enroll and register for classes. It’s a true partnership; while the university controls all aspects of admissions and academics including the faculty who teach the program, 2U provides the marketing, technology platform, student and faculty support and content production.
The PIE: What are the advantages of studying online?
RC: We want to change education so that students see great online education as ultimately superior to on campus – not only because the education is equivalent or perhaps better, but it is much more flexible and fits into their lives.
Ultimately, I truly believe that the idea that to advance your career you have to quit your job doesn’t make any sense. That actually ties into the fact that the learning you get when you’re in one of our partner’s Master’s degrees is enhanced by the fact you’re working. In our MBA programme, students don’t have to wait two years to go out and use it.
The PIE: How many students do you teach?
RC: There were around 12,300 students enrolled as of December 31, 2014.
The PIE: Where are they from?
RC: There are 79 countries represented in total. We’ve been international from the very beginning – our first programme was a Master of Teaching degree from the Rossier School of Education at USC, and from day one we recruited worldwide. For that programme 15% are not in the US; our second largest country after the US is South Korea.
“It’s not unusual for the cost of someone quitting their job to do an MBA to be in the multi-hundreds of thousands of dollars”
We have student services and admissions services out of an office in Hong Kong. We have to find students all over the world the same quality placements, so if you’re going to get a Master of Teaching degree you’re going to be in the classroom, so we had to think about the international impact of our student base early on.
The PIE: Do international students pay international student fees?
RC: Students who are abroad pay exactly the same as students who are domestic, there are no additional fees because of it. The tuition is the same worldwide for all of our programmes.
One thing I think is worth pointing out: the largest cost of attending grad school after tuition is quitting your job. This is most acute for an MBA – it’s not unusual for the cost of someone quitting their job to do an MBA to be in the multi-hundreds of thousands of dollars, so your tuition is actually less in that case than the cost of not earning a salary for two years.
The PIE: You’ve said there’s a geographical correlation between where students live and the institutions they study with online. Is this surprising?
RC: We were very surprised about the regionality of brands. We were aware that most institutions didn’t market nationally so it wasn’t terribly surprising that the student base was regional.
When you move to the tier that we were operating under –Berkeley, Georgetown – they have worldwide reputations and it did surprise us that it was still more difficult to recruit students far away from the university.
“Our partner institutions have worldwide reputation and it did surprise us that it was still more difficult to recruit students far away from the university”
The PIE: What is 2U doing to decrease that regionality?
RC: The scale for us is very important. We make a big investment to develop great programmes which requires a decent amount of scale to pay for it.
We’ve made a commitment to market nationally, so we know that in the long run, the efforts of spending on the other side of the country for all of our universities will pay off and for example, we’ve seen branded search away from the university going up, which means more people know about it. We think over the long run, we will decrease the regionality of every brand.
We’ve also made a commitment to not just have a programme in one region. For example, in our social work vertical, we have a programme in California and a programme in Boston. That allows us to take advantage of interest in both sides of the country.
The PIE: How do your completion rates compare with other forms of online education?
RC: When you look at a MOOC, you might have 100,000 start, but you might only have 20% complete the first week and only 4% get through the course. The completion rates are terrible.
“Our partners’ programmes have an inception-to-date retention rate of 83%. That’s comparable to on campus programmes”
Our partners’ programmes have an inception-to-date retention rate of 83%, which is students who are still enrolled or have graduated. That’s comparable to on campus programmes. So we’re delivering retention rates that are terrific, and we’re delivering job outcomes that are terrific – 83% from our first two teacher education and social work programmes are employed in their field of study.
The PIE: Do you have a hard time combating the stigma around online education?
RC: The largest headwind that 2U faces is the perception of online education around the world. For example, I went to an educational technology conference in London, where some of the best informed people in the world are sitting to learn about what’s going on, and it’s not unusual for people there to ask ‘so you’re kind of like a MOOC?’ People don’t ask Ferrari to compare themselves to a bicycle. Everyone knows they’re different, and what we do is nothing like a MOOC.
I see it as something that will get better for us over time as people learn more about 2U and about the success we’re having. So while it is a negative, it is not a negative that has handcuffed us truly in any way.
The PIE: How can you see 2U expanding in the next few years?
“There are more than 100 verticals that could support the kind of education we do. That sets up a vision of 2U being a multi-billion dollar revenue company”
RC: There are three ways we grow the business: continue to add students, add programmes at the universities that we have partnered with, and add more universities.
We set a vision on our last earnings call, and that said easily there are more than 100 verticals that could support the kind of education we do, and there are some verticals that could only be supported online. That sets up a vision of 2U being a multi-billion dollar revenue company.
We’ve got so much growth ahead of us and it is unusual that a company of our size can see so much growth potential by doing exactly what we’re doing today. Over time we’re certainly going to partner with international institutions and over time we’re certainly going to move from mostly graduate education into undergraduate education.