2U– Product Differentiation & International Expansion – 15
October 2021
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Specialist:
Title:
Moderator: Nyree Hinton (NH), Third Bridge Sector Analyst
Ben Paul (BP)
Former VP & General Manager at 2U Inc
Agenda:
1. 2U’s (NASDAQ: TWOU) product offerings and strategy, including partnership dynamics as it broadens
its spectrum
2. Alternative credential competitive landscape and impact to 2U’s business
3. Cost drivers, focusing on content creation dynamics between 2U and universities
4. Partnership and international expansion, highlighting the benefits of 2U’s acquisition of EdX
Contents
Q: Could you give an overview of educational services around e-learning? How has this evolved in post-
secondary education?
Q: Who are the top players driving innovation and growth in the e-learning segment along with 2U?
3
4
Q: How has coronavirus shifted the priorities of edtech players to focus on degrees in enterprise over general
upscaling? You mentioned key characteristics of international and domestic and product offerings and
pricing. How has the pandemic impacted edtech players’ 3-5-year plans?
4
Q: Could you give an overview of 2U’s business and the categories it plays in vs competitors? You mentioned
Guild is more HR focused but only focuses on non-profits. Why is 2U segmenting out non-profit
universities? What is the company offering to consumers in the value proposition to university partnerships?5
Q: You alluded to the fact that the original model was to focus on exclusive partnerships with the best
universities when breaking down degree vs alternate credentials. How might have relationships changed
between 2U and exclusive universities? Did they become more volatile when it decided to broaden its
spectrum and start signing contracts with lower-tier universities? Would UPenn not want to be part of 2U’s
platform if it partnered with Princeton or Rutgers? Do these universities not care about what it does?
6
Q: What makes 2U’s products so scalable? How is it able to provide marketing, HR and facility support
across so many partners efficiently? Every degree, school and company is different, so it would need a
tailored approach to marketing and facility support for each.
7
Q: What is the biggest risk to 2U that would make universities throw out its 2U certificates as you mentioned
and no longer need the platform, given its revenue profile? It seems undergraduate degrees and alternative
credentials such as professional certificates, boot camps and short courses are growing substantially.
7
Q: What factors are driving costs for 2U, given you touched on marketing and sales? What’s the dynamic of
trying to make this business model more sustainable profitably?
8
Q: Is 2U experiencing content creation costs on degrees? Universities take on the content creation in
Coursera partnerships, so why is 2U experiencing degree content creation costs if it’s partnering with a
school such as UPenn?
Q: What are your thoughts on 2U’s June 2021-announced acquisition of EdX? How does it fill gaps in 2U’s
portfolio? What is its strongest area, given its portfolio includes master’s and undergraduate degrees, boot
camps and alternative credentials?
9
9
Q: What’s the point in 2U creating a curriculum or helping develop content with a university if the consumer
is going to buy from the university itself? Why not add a third party that’s an additional marketing channel,
such as Coursera, for consumers to buy products?
9
2U – Product Differentiation & International Expansion
Transcription begins at 00:00:01 of the recorded material
NH: Welcome to Third Bridge Forum’s Interview entitled 2U– Product Differentiation & International
Expansion. I am Nyree Hinton and I will be facilitating today’s Interview with Mr Ben Paul, former VP and
General Manager at 2U Inc.
Ben, before we get started with today’s Interview, please state I agree or I disagree to the following statement:
You understand the definition of material non-public information and agree not to disclose any such
information, or any other information which is confidential, during this Interview.
BP: Agree.
NH: Could you give an introduction to your background and various roles you’ve held in the industry?
BP: Started at 2U in 2009, when it was probably about 40 or 50 people. At the time, there was a single
university relationship and the OPM market, while it existed, was in a different state than it is today. Started
as inside sales, Admissions Counsellor for the master’s and teaching programme with USC there, and then
grew with the company. Moved into regulatory compliance and state authorisation, a little bit of government
affairs, building on a compliance team and then eventually helping to support the GC’s office and then, after
that, into an operational role back inside the business with a couple of university partners. Helped launch and
implement a number of new programmes at new universities as well as new programmes within existing
universities and relationships and structures. Graduated from that Ops Deputy role into a VP General
Manager position, which was my last one at 2U. A little more focused on high-level strategy and execution of
that, owning the P&L and running the business, both executing corporate strategy and then forming that as
well as boots on the ground with our university partners. Through all of that, IPO in 2014, acquisition of first
GetSmarter, the short-course product offering, and then Trilogy Education Services, the boot-camp product
offering. Was employed through end of 2019, so I’m about two years removed.
[00:02:33]
Q: Could you give an overview of educational services around e-learning? How has this evolved in post-
secondary education?
BP: I’m not as familiar with the K12 space, I’ll be frank, but follow closely edtech in general, especially at the
higher ed level, and the energy that is currently around the upskill-reskill market, including the equity and
accessibility and cost concerns that exist in the higher ed space and other places, in addition to innovation
within it, which includes micro-credentialing and stackable credentials and those types of things. When I got
into it in 2009, there was a fairly significant concern over quality because of some bad actors in the space, as
well as some failed experiments, I wasn’t living through it because I didn’t pay much attention then, but with
some high-profile experiments. 2U initially had a pretty significant hurdle to climb over and address in the
perception of quality, and I think that has certainly changed. People understand and appreciate now, and
certainly, in a lot of ways, digital ed has become ubiquitous for certain generations, so the quality issue is not
necessarily there, although it continues to be an expensive thing to develop the right type of content and rely
on the right type of tools.
Certainly can go much deeper on all of those things, but it has evolved to a level, and the pandemic has
accelerated a bunch of adoption, I think, and change both with established players as well as spurned, spurred
some innovation with new entrants who are looking to disrupt a little bit, although one might argue that
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disrupting the higher education system is a difficult challenge. Certainly, the adoption of it of late, the last two
years let’s say, with COVID accelerating so many things, I think even further gets the genie out of the bottle
and has shown people the ability, the value of what digital tools can do, whether it is a solely digital
programme or a digital programme with some on-campus, in-person component or a hybrid model, even at
the undergraduate level, how they can change the way that they operate in terms of flipping the classroom and
delivering some of their content digitally. I think it should be used as a cost control and reduction mechanism.
The UC system is committed to that. There is some federal interest in doing, where that can lead, and there is a
lot of interesting innovation that is yet to occur.
[00:06:42]
Q: Who are the top players driving innovation and growth in the e-learning segment along with 2U?
BP: 2U, and that’s one of the top players, I suppose. I think when we think about accessibility and meeting
learners where they are, and it’s evident in 2U’s evolution as a business, going down the continuum to the
certificates and the boot camps and the short courses, and now with the EdX acquisition, which will be a topic
later probably, it is evident that there is significant opportunity around finding easier ways for people to
consume expensive master’s degree programmes, the original 2U product, and places where Courseras of the
world are going towards and Emeritus and others are still not accessible for everybody, either because of cost
or time or other constraints. The idea that economic mobility be limited to a subset, I think, is understood and
realised and it’s changing the landscape of how these things are delivered and what products are best offered
in order to address some of those challenges, so I think that has been a pretty significant shift over time. I also
think in just observing the market, I mentioned Coursera as a platform. They’ve got a big enterprise business
that seems to have a lot of growth potential in meeting S-1 filing for IPO. They’re investing a lot of money in
that space. The drawback is free-to-use educational tools for employees are not always utilised all that well,
and whether that translates into revenue-generating opportunity up the chain I think remains to be seen and
is probably a challenge that they think about pretty frequently.
Emeritus has a little bit different approach. I know, or I think, at the short-course level and a bit up the chain
from there, a pretty significant competitor to the 2Us of the world and, I suppose, Coursera to some level.
From an international perspective, the question becomes pricing, and the US higher education, the domestic
market supports all of the infrastructure and overhead that needs to go into building many of the, certainly,
master’s degree programmes and other things. That space has always been a challenge, I think, when you
think of delivering master’s degree programmes because of the way that countries outside of the US either
subsidise their education for residents or make it much less costly, so there are some interesting economics
and unit economics questions and issues surrounding that. Certainly, I know there are a lot of people thinking
about that. The Pearson Embanets of the world, they’re either high-volume, low-cost plays in the domestic
market, then there are premium plays that 2U, at least at the master’s degree level, has always played in, and
then there are other questions around rev share vs fee for service. Is one better than the other? I’m not so sure,
but I think as the market continues to evolve, optionality for higher education institutions and people looking
to deliver education and content is a significant strategic question and consideration.
[00:11:31]
Q: How has coronavirus shifted the priorities of edtech players to focus on degrees in enterprise over general
upscaling? You mentioned key characteristics of international and domestic and product offerings and pricing.
How has the pandemic impacted edtech players’ 3-5-year plans?
BP: Yes, it’s an interesting one, and I will say this, I’m not so certain that it has necessarily changed the long-
term vision or strategy other than it has, like I said before, accelerated some of the execution of that strategy
on the business side of things and, considering the hiring challenges that so many enterprises and other
businesses of all sizes are seeing now, the upskill-reskill space has become a much bigger opportunity. If
you’ve got a whole bunch of people on payroll and skillsets that either are threatened by automation, although
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some of that threat is overblown I believe, or you just need some sort of a human-centred perspective to offer
internal tools and options for people to improve their skillset to also improve their earning potential and their
job level, let’s say, that is, I think, a place that everybody recognises as should get a lot of the attention, I
suppose. It doesn’t mean that with 2U’s master’s degree business it is not lucrative or is going away, because
the demand for that, I think, will always exist. I think speaking of a specific example to the EdX acquisition,
there is a thought that getting people in the door on a no-cost, low-cost freemium model, delivering and
offering content that allows them to consume on their own time at little to no cost also then presents an
opportunity to continue delivering paid products to those people.
That’s not necessarily novel, but I think it has been a bigger push within the industry to build a customer and
user base that will allow upsell down the road. That could come in one or two years for some learners, it could
never come for others, but I think, on balance, there is medium to long tail as to whether they continue to
consume offerings that some of these businesses have in their quiver. There is a significant push in the
enterprise space. I see job listings all the time in either building out or expanding upon that effort. Guild is
another player in that space. It’s an HR benefit, if you will, similar but not exactly the same as what a Coursera
is doing I think, what, two years probably effort into building out an enterprise team. Different than the L&D
space and the training space is measurability is important and I think that’s a critical piece to value prop,
exhibiting the value proposition to business out there. I don’t have too much background on what that looks
like in today’s market, but I’m sure that if there isn’t an ability to show what that ROI is for individual
employees within an org at the enterprise level, similar to the old L&D model, it becomes questionable for
executives as to whether to invest. I think that’s probably one of the challenges related to it, but it’s pretty
evident or self-evident as to what the opportunity and potential is for it. It just has to be delivered
appropriately and correctly.
[00:17:07]
Q: Could you give an overview of 2U’s business and the categories it plays in vs competitors? You mentioned
Guild is more HR focused but only focuses on non-profits. Why is 2U segmenting out non-profit universities?
What is the company offering to consumers in the value proposition to university partnerships?
BP: I think the outcomes data probably speaks for itself in that the evolution and Coursera and EdX and
others moved towards to take over the world probably six or eight years ago, I can’t remember the timing, into
2012 and ’14. It’s pretty evident that people are interested in theory, and then because there’s no real
credential other than a certificate of completion, the completion data and rates on those things is abysmal.
That’s advancing through, and then, going into the for-profit model, there are always regulatory
considerations and concerns, more so with democratic administrations I think than with republican ones,
which is significant risk, systemic and otherwise from a GA perspective and a regulatory perspective, but there
have always been questions of quality even if it’s a low-cost play. I think that 2U’s thesis at the inception of the
business was partnership with the best schools across the (audio distorts 19.38) country and, beyond that, the
world, and originally the model was to find the best programme and be exclusive. It couldn’t change in the
realisation that there were many efficiencies to be gained in multi-programme verticals to both reuse
prospects and build upon institutional knowledge and its reuse side. Marketing to the B2B2C model that it
employs, the inexpensive proposition in that space, five years ago but certainly as of late is getting more and
more competitive, with more entrants and more, I think, sophistication.
Even universities can begin to do those things in-house, which is probably one of the reasons that fee for
service has become a more reasonable option and something that I think 2U is exploring, but don’t have
insight there as I’ve been out of it for a while. Moodle was founded on that premise and continues to deliver
that as the value prop vs an entire rev-share agreement, which, on the one hand, deans don’t want to take a
risk of trying to invest themselves USD 6m or USD 8m or USD 10m in developing an online programme,
because it’s either too great a risk just generally or the money isn’t there. Until you can make that investment
upfront, that reduces the risk, but also, because you’re giving up a significant share of the revenue, there are
general concerns about that from a finance perspective on the university side, but when the quality and the
delivery is high, that’s part of the value prop of selling into institutions. That’s primarily relevant at the
master’s degree level. It changes a little bit because of the speed to market and the development time and costs
Private and confidential 5
related to it when you move down the chain. Trilogy is a white label curricula that schools generally are able to
just slap their branding on, so the economics are a bit different there, and short courses even more.
I think that is a place where all of the players are investing more time and energy, and affiliation with a
university for credibility is, some would say, absolutely necessary. I think there are probably disruptors in the
space that don’t necessarily think that is true, but then innovation and change is a difficult thing when you are
trying to break into a system within the higher education space that has existed for 250, 300, 500 years.
Interesting questions about Outlier is, I think founded by a former MasterClass founder, looking to create low-
cost opportunity for people to get general ed requirements out of the way. That is a volume play, but there are
always going to be regulatory questions about and transcripting questions and those types of things. You can’t
just create it out of thin air without the relationships, so those are critically important to the business, in
general, a place where 2U has excelled for as long as it’s been in existence and I assume continues to, and it’s
fairly evident.
[00:24:17]
Q: You alluded to the fact that the original model was to focus on exclusive partnerships with the best
universities when breaking down degree vs alternate credentials. How might have relationships changed
between 2U and exclusive universities? Did they become more volatile when it decided to broaden its
spectrum and start signing contracts with lower-tier universities? Would UPenn not want to be part of 2U’s
platform if it partnered with Princeton or Rutgers? Do these universities not care about what it does?
BP: There are always politics involved, and, initially, it was a significant point of, I don’t know, consternation,
and there were negotiations, I suppose, as to how that changes the relationship with an individual university.
Negotiating an MSA is a highly complex process, especially depending upon the size and potential of the
particular programme or the number of degrees and programmes that might be offered within a partnership
model at a particular university. Without getting too specific, because I shouldn’t, the politics were real. The
concerns were real. Certainly, there is give and take as it relates to exclusivity from a regionality perspective. It
was learned over time that there’s a significant regional aspect. Even though I can live in Siberia if my internet
connection is good and take a USC or UNC Chapel Hill or University of Dayton or Tec Monterrey degree
programme, it’s pretty evident from the data that unless it is a truly international brand, the MITs and the
Harvards and the other super, super high-value domestic, and international players as well, unless it has that
type of international recognition, there’s still a significant regionality component to it. Brings me back to the
exclusivity, the concern that UNC and Duke have rivalries that expand beyond sports, so those come into the
fray as a consideration, but I think that was a point in time as the market and the marketplace was evolving
fairly rapidly.
It’s probably less of a concern today because everybody from the provost down appreciates and understands
that if you’re not moving to digital as a higher education institution in some capacity and putting some chips
in various places, undergraduate, graduate, hybrid modelling and many other places, then you’re going to get
left behind, especially as native digital kids continue to age, I suppose. There’s probably less of a political and
negotiations hurdle or nightmare, depending, today than there was even five years ago. We’ve reached a point
with digital marketing that it becomes easier for schools to, maybe not easier, maybe it becomes harder as a
result of this, but to consider trying to do it alone, because they’re certainly good at admissions and they could,
in theory, pretty easily handle that type of thing. There is a big investment in both money and infrastructure
and human resources and marketing machine that is 2U and other players. That is something that I think
most schools would say that’s the real value in partnering with an OPM and other players, that might not be
necessarily OPMs, but schools, I think it is more reasonable for them to be questioning what they could handle
on their own, whether it’s content development or whether it’s student support and success, faculty support
and success. The tech piece, as tech advances, some of the self-service becomes probably easier, so maybe
there is less of a comfort with the rev-share model, but those are the types of questions that I assume, or I
know, highest-level decision-makers at universities across the country and the world are thinking about, so a
lot of interesting things that remain to shake out, I think.
Private and confidential 6
[00:30:51]
Q: What makes 2U’s products so scalable? How is it able to provide marketing, HR and facility support across
so many partners efficiently? Every degree, school and company is different, so it would need a tailored
approach to marketing and facility support for each.
BP: I would counter to say there are some who would suggest it’s difficult to scale, but that’s part of the moat
that, I suppose, 2U has built and other players are trying to either create themselves or break into, in that, like
I said, marketing cost is high. If one of the goals, which I think it is for everybody, is going to be high-quality
education, that means there will always need to be significant investment in content creation and the tools to
deliver that. Existing university LMSs can help in, perhaps, cost reduction, but not all of them out there are
capable and the maintenance is a real cost consideration. I think that the algorithms and selecting
programmes too, at various levels continue to be refined and get more and more sophisticated as to what is of
interest topically, whether you’re thinking of small short courses all the way through to master’s degree
programmes at the highest cost, and I think players continue to learn about what consumers want. COVID, my
guess, and some of the data suggests this, is that like so many when COVID locked everything down across the
world, there was an influx in interest in self-improvement and education, similar to the recession-era trend.
Will that translate to long-term adoption? I think in some capacity it will, but it may have been a blip.
I’m not necessarily sure here, but, in theory, it could have been a blip where it accelerates the adoption, which
is good on the institutional side from the perspective of the businesses that are operating within it and trying
to sell into those institutions, and more and more learners get turned onto it. It’s increasing the size of the
market and the TAM and all of the things related to that, but efficient scalability will always be a challenge
because you can’t necessarily just take a model that works in the US and drop it into a place like India, for
example. Emeritus has a different approach than 2U, I think, in that capacity, or Australia might be a better
example. Probably more similar, but, again, there are economic considerations because of the cost of
education in a place like that, so I think it remains to be seen. I don’t know if that’s helpful insight or I just
went in circles to get back to the same point, that the drive towards efficiency, there can’t be a race to the
bottom because quality is always important, and I think only time will tell as to what quality means to
outcomes and then what outcomes mean to ROI for the individual learner at an enterprise level and from an
institution’s perspective as well.
[00:35:43]
Q: What is the biggest risk to 2U that would make universities throw out its 2U certificates as you mentioned
and no longer need the platform, given its revenue profile? It seems undergraduate degrees and alternative
credentials such as professional certificates, boot camps and short courses are growing substantially.
BP: It’s a great question. There are risks to each of those offering levels, let’s say. Does the acquisition of
customers and the base via EdX translate, and I think I alluded to this before, into users that will adopt paying
and then higher-paying products and programmes up the continuum? I think that’s a significant challenge
there, but it is a prospect in demand generation, strategic play that could be a great one. Does every learner
who consumes, let’s say, the free content at the bottom of the continuum keep moving up the chain? Of course
not, and I don’t know what the rates will look like from a conversion perspective, but the cost-of-acquisition
play or a TVA play, it’s a lifetime-value play, and if you shift the fundamentals there, I think that was probably
one of the thoughts from a strategic perspective as to why that made sense (audio cuts out 38.28) certainly
challenging. If you go all the way to the top of the spectrum in the higher, in the master’s degree marketplace, I
personally believe that there needs to be a part of the value prop to society, which will trickle down via
government and institution with the maintenance or the reduction of the runaway cost increases that we’ve
seen there. Can 2U and other OPM players be a solution there? Absolutely. Have we seen that occur yet? No,
because the overhead related to supporting a lot of those programmes, or any of those programmes, is fairly
high.
The lever to pull is cost reduction, and there are quality concerns. There are human resources concerns there.
Can things be automated continuously? Sure, and processing improved? Sure, but I think there is a base that
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you get to before it becomes commoditised and then it comes back to the quality issue. I think that is the risk
there, or really turn it into perhaps an opportunity if significant relationships can be established or have
already been established, but then they become PR and comms around how the partnership is working to
reduce cost or increase accessibility, which certainly is a hot topic. I know there is a bunch of effort there in
both partnership signing and the related press around that. That’s all great, but it is probably top of mind on
any operator as to how to be the first to crack that nut, and, while cost is increased, I don’t even know, let’s say
30% and 40% over the last 20 and 30 years, seats available in those same schools has probably only increased
by 2% or 3% or nil. That flies in the face of I think what is a galvanised sentiment that there has to be more
equity and accessibility within the space and allowing for more opportunity across the board.
I think a lot of the revenue opportunity, that’s probably in between those two things, at the short course, boot
camp and certificate space, and then also innovating in a micro-credential way, capacity to allow people to just
stack things as they go. Maybe it takes you two years, it could take me five, somebody else it could take 15, and
that’s all fine because that’s a personal choice or people’s situations dictates that. How do you increase
adoption and return value directly to the learner becomes part of the equation there as to additional adoption
and more quicker consumption of some of the paid products. I’m sure from a strategic perspective, everybody
I know is focused on that. There is plenty to read on the opportunity there and a bunch of innovation
happening around that, so continue to follow it personally and I think where that is headed, I don’t know that
significant disruption in the way that some staff companies operate is exactly how it will work, but who
knows? There is plenty to potentially be surprised by.
[00:43:08]
Q: What factors are driving costs for 2U, given you touched on marketing and sales? What’s the dynamic of
trying to make this business model more sustainable profitably?
BP: Certainly, marketing and student acquisition costs are the most significant ones, but then, beyond that, it
is content creation costs. The more technical or complex the programme is, the higher the content creation
costs associated with it are. Video production and time and the human resources to support those things all
shift with the complexity of a particular topic, where online, law is a good example and I worked in it for a long
time. There are not many courses in law school that change terribly significantly. Certainly, there are some
regulatory shifts and new legal precedent that require updating, but it’s not like contract law has changed over
time. That becomes a fairly easy and set-it-and-forget-it type of course to develop within a particular
programme and there is limited to no technical requirement if you compare it to something like an MD degree
or a physical therapy degree or a physician’s assistant degree. There are all kinds of development costs
associated with those types of things, so that has to be considered as far as complexity and content creation is
concerned and everything that goes into supporting that. Student support costs are incremental, so highly
scalable programmes I think technology probably helps support, but it is pretty evident that certainly at the
master’s degree level, and down the chain as well, without support and coaching and those types of things,
completion rates are threatened or pressured.
From an economics perspective, it’s not enough simply to get a student in to a seat. You’ve got to keep that
student in that seat through graduation, so it becomes a very unit-economics-driven, credit-hour-driven type
of thing at the master’s level or a module, a down the continuum module-level thing, although you’re generally
paying for an entire cost of a short course upfront. There is a bit of a difference there, the economics and the
modelling related to it. Those are the two, development costs and marketing, and it’s your biggest ones,
support and the human resources, that go into it. I think driving down those costs is something that everybody
has done and now, especially with more people more comfortable with reliance on digital tools to distribute
everybody beyond the masses or a region or within a school, etc, there is opportunity for labour arbitrage
across the board. There are offices or businesses that operate globally now for that reason in order to take
advantage of those economic realities, so those are the two biggest ones, is that AI and the advent of machine
learning and those types of things, do they potentially help the economics? I think so, but there’s still a
question of quality and authority, but it’s an interesting place to be, thinking about innovation in the space.
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[00:48:05]
Q: Is 2U experiencing content creation costs on degrees? Universities take on the content creation in Coursera
partnerships, so why is 2U experiencing degree content creation costs if it’s partnering with a school such as
UPenn?
BP: It’s just been part of the value proposition. If I’m understanding the question correctly, I think it’s just a
value proposition reality. We have the infrastructure, the expertise, the knowledge, and the institutional
knowledge but that’s a confusing way to use that term, the knowledge to both mine the minds of the course
creators and deliver it in the most innovative and effective way possible. Certainly, there are a whole bunch of
instructional designers and pedagogical experts and academics out there who are really good at creating on-
campus content. I think their learning curve is long, but I’m sure it’s accelerated pretty significantly in the last
couple of years, both with the pandemic and just the ubiquity and the realisation that digital education, like I
said earlier, is a significant opportunity. I’m not terribly close to it, but I would think it still becomes, “We can
do it better, more quickly and more efficiently than you,” and that justifies whatever the allocation you would
give to the revenue share on the degree side. The flip side of that is pure partnerships, but the risk there is that
you don’t have much control over the quality and the effectiveness of the creation of that, so that’s the trade-
off. I can honestly say I don’t know enough about the outcomes or that quality when somebody like a Coursera
is leaving that to the university side. Probably fine in many cases, great in some and terrible in others, so how
those things translate into satisfaction and medium-to-long-term credibility and NPS and those types of things
probably remains to be seen, or I can say that I’m not close enough to really know what that looks like today.
[00:51:40]
Q: What are your thoughts on 2U’s June 2021-announced acquisition of EdX? How does it fill gaps in 2U’s
portfolio? What is its strongest area, given its portfolio includes master’s and undergraduate degrees, boot
camps and alternative credentials?
BP: From an outsider’s perspective, I touched on it a little bit earlier where it becomes a marketing demand
generation, lead prospect generation play, with the idea that we can start, or the user base, which is significant,
continues to consume EdX content and then becomes potential users of everything up the chain. I’ve said it
too many times, so I apologise if I’m repeating myself there, but I think it probably fills in a gap. There’s some
analysis out there that the acquisition of a non-profit that was built upon the backs of professors and learners
in a way that were devoting and investing time, resources, energy and knowledge leaves a bad taste in some
people’s mouths. I don’t have an opinion one way or the other. From a reputation perspective, I don’t know
that that’s going to be a huge thing, but I think the question becomes whether it can translate into the free to
degree that 2U is marketing around it now, and are there opportunities for other players to do similar things?
Some of them already have that built into their model because they started there, like a Coursera let’s say, or
are there other opportunities and players out there for the same type of partnership or acquisition? Not as big
as EdX, of course. I don’t think it changes. From my perspective, and I could be missing something, of course,
I am, I’m not sure that it changes the degree programmes today or even down the chain necessarily. It is
purely done in the hopes that it will increase the potential customers and the potential market to consume all
of the paid products, which will continue to expand as any player establishes new university relationships and
partnerships and programmes within them throughout the continuum, and yes, I think it remains to be seen,
so I’m not sure I can answer beyond that.
[00:55:23]
Q: What’s the point in 2U creating a curriculum or helping develop content with a university if the consumer
is going to buy from the university itself? Why not add a third party that’s an additional marketing channel,
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such as Coursera, for consumers to buy products?
BP: It’s a fascinating question. To be honest with you, I could take both sides. I could position myself on both
sides of the argument, so I don’t know which is better, and I don’t think that anybody knows which is better,
necessarily, if you’re drawing a line in the sand to say, “Do it this way or do it that way.” If somebody is going
to choose based upon brand affinity or ubiquity or whatever it might be, it might not necessarily matter. I
think, in the short term, that is absolutely true, but, like I said earlier, I think there is medium- to long-term
data and reputation that need to be maintained, I suppose. It’s a pretty significant risk to the businesses that
are operating in the space, or I don’t know how significant it is. Maybe pretty significant is too strong a
descriptor, but that gets back to the point we were talking about earlier as to universities making the decisions
to do it themselves. I think we probably see more and more experiments in that space and people building out
the infrastructure within especially well-resourced institutions and universities to do it themselves. That poses
a market risk to the players within it, but I think the plug-and-play nature of 2U’s business and then the reach
and channel exposure that many of the players will certainly purport is of interest to university who doesn’t
necessarily want to get into the marketing piece of it. I think the content question is probably less important
than all of the rest that goes into it and around it, but it’s a real cost, either way, so that’s why it is high on my
list of the economic considerations.
[01:00:19]
NH: I think that’s a good place to end the Interview. Let me close by saying thank you, Ben, for your time
today. We were able to cover an extensive amount, and thank you, clients, for joining Third Bridge Forum’s
Interview. If you would like to speak to Ben in a private call or meeting, please let your relationship manager
know. Have a good one.
BP: Thanks a lot.
Transcription ends at 01:00:33 of the recorded material
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