By Derek Newton
Reposted from Forbes, with permission
It has been widely reported that India-based education company upGrad is considering, or perhaps is in the process of, acquiring online credential marketplace Udacity.
For the passing observer, the deal looks noteworthy – even impressive. The reported acquisition price is in the neighborhood of $80 million. It’s the kind of eight-figure deal that education market cheerleaders haven’t seen recently. They are understandably excited by it.
Conventional market thinkers are also no doubt excited by the rumored deal because it confirms their outlook that online degrees and online career certifications are the future of education. Eighty million dollars may lead you to see it that way.
But for me, should the acquisition happen, it will be sad.
Sad because it represents the eventual and inevitable freefall that has become common in online markets where efficiency is king and cost rules – where access and attainment crowd out quality. Online affords an easy race to the bottom. Not always. But often. That’s unfortunate.
Like so many online marketplaces before it, upGrad has some big names in its educational inventory – kinda. Its website lists partnerships with, among others, the University of Pennsylvania, Wharton (online) and Duke University (corporate education). It reminds me of that scene from Despicable Me, where Gru enthusiastically reminds his minions that they stole the Statue of Liberty. The small one. From Las Vegas. And they stole the Eiffel Tower. Also Vegas.
Moreover, reading between the lines of the reporting on the Udacity deal, it’s not as though upGrad has been so successful that it is sitting on the cash. Multiple reports say that leaders at upGrad are seeking financing to do the deed.
That’s against a troubling backdrop of India’s education market. International education darling and one-time unicorn Byju recently cut its valuation by a staggering 99% and is trying to raise capital to stay in business. The American unit of Byju has filed for bankruptcy.
There’s also the fact that in March, upGrad named Dan Rosenweig to its Board of Directors. Rosenweig is the CEO of Chegg, which itself has lost more than 90% of its value, from trading at $113 a share to about $10 today. The company is facing investor lawsuits and has earned its reputation as the nation’s top provider of cheating.
upGrad apparently als0 has a feature in its learning management system that allows students to check their work for plagiarism before they submit it. The provider of the pre-check service for upGrad says that with it, “[students] are alerted if the similarity percentage is too high and can update their assignment accordingly.” There’s really only one reason a student would want to update an assignment to bring down a plagiarism score, or even need to check in the first place.
Let’s just say that upGrad has not been a beacon of academic rigor, integrity, or quality. And it may be the future home of Udacity, which itself has a story.
If you don’t know or don’t remember, Udacity was founded by Sebastian Thrun, the media star and “godfather” of the MOOC – the massive, open, online courses that were supposed to revolutionize global learning. Only they didn’t. Although they initially attracted massive audiences, retention and completion rates were in the low single digits. They were theater, not education. And not even their colossal failure rivaled the colossal hype.
Riding the notoriety, Thurn started Udacity – one of a few open-access shopping malls for name-brand education courses and credentials. They do good business. But like MOOCs, have been nowhere near the education game-changers some promoted them to be.
One outlet reporting on the potential sale, and perhaps unaware of the irony, observed about Udacity that, “retention has been a challenge.” If you were on an education quiz show and the question was, “describe MOOCs in five words,” you would win.
And while $80 million is the headline sale price for Udacity, the reporting on the deal pegged the initial pricepoint at closer to $100 million. Whether Udacity was over-valued at that price, or whether upGrad can’t afford that much, is unclear.
Either way, not too long ago, Udacity was a unicorn, earning a $1 billion valuation in 2018. It was eyeing an IPO. Then, not six years ago, it had reportedly raised more than $160 million in venture capital despite not being profitable. If it sells for $80 million, that would be some 92% in lost value.
In that context, being sold to an overseas sub-prime online education provider for less than 8% of its high valuation, for less than half what investors put into it, is sad – not celebratory.
Some would argue that Udacity being sold for pennies on the dollar is the whimper of an ending that MOOCs deserve. If the deal goes, it will be a punctuation mark to a bad idea. And yet another warning about education hype, which never seems to end – despite the underwhelming realities. Again. That’s sad too.
