It is no secret that the for-profit education vertical is seeing some very nice growth on both the supply and demand side of the lead gen table. A few weeks ago the guys at Sparkroom commented on the excellent growth that DeVry currently realizing and this week the Apollo Group is expected to release their earnings reports as well. If they meet the streets expectations they will post 25.9% YOY growth in enrollments, which would be almost 6% more then DeVry posted just weeks ago.

The growth stems from a number of factors, but there are two that clearly stand out from the rest. The first being the increased access to the Internet. The more people have access to the Internet inside their homes the more likely they are going to use it for continuing education. There is an obvious convenience factor at play. Couple that with the increase in corporate layoffs, increased unemployment rate and fewer jobs, more and more people are going back to school. The for-profit edu space is benefiting from being a counter cyclical to a declining economy. Cleary two very obvious factors.

There is a saying that goes something like this, “You know it is the right time to sell your stock if the Wall Street Journal recommends you buy it”. The other day my neighbor brought up the idea of starting his own online school. He was far from joking too. His comment got me thinking about a very valid question; Are we currently witnessing the early signs of a bubble in the for-profit edu space?

There is no question that new schools have been popping up across the country and equity firms have been pouring their money into the schools. It is also easy to speculate that 2010 is going to be a very strong year for the industry. Schools are already reaping huge benefits from the depressed job market and people looking to further their careers with a degree. Where the early concerns stem from is the huge amounts of dollars being managed by executive teams not completely knowledgeable of the online space, more specifically lead generation. This lack of knowledge can turn a profit machine into a money pit very quickly. As I stated a few weeks ago, I think we will begin seeing smaller schools become affected by their inability to convert leads into sales in late 2010 and possibly go under. The larger schools will continue to see very consistent growth, but begin to slow into 2011 because of their inability to keep students enrolled in their programs. The improved economy and increased job options in 2011 coupled with the high cost of schooling will push many to end their quest for a degree early. The only hope is that more and more high school students choose the online options over the more traditional public campus based option.

One thing that may discourage recent high school grads from choosing the online option is Obama’s American Recovery and Reinvestment Act that plans to pour Billions into public higher education options. Additionally, these same schools are moving online and will give students the same convenience benefits as their higher priced competition. I think it may be fair to speculate that with large number of options available to students that EDU offerings will become commoditized and there little price differentiation between the schools. It is also rumored that the Department of Education is looking at ways to inline the price of the degree with its career opportunity. There are has been an increasing trend of student loan defaults that they are looking to slow down and by setting price standards they believe this may help. Whether or not this actually happens seems unlikely to me, but the bigger point is that the government is taking notice of the big profits being made in the industry and will begin to get more and more involved in protecting the consumer “best interests”.

These are all huge speculations, but I think it is going to be very important for schools to start planning for big changes in late 2010 and 2011.

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