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Are Online Education Institutions Profitable? If so, Why?

Online education is taking the world by storm. Online programs are not constrained by geographic borders, they don't recognize skin color or class, and they are all about inclusion. That said-it is also apparent that online education institutions have to make money in order to be successful. Because online education institutions are technology dependent relying on extensive information and technology infrastructure and platforms, the cost associated with establishing them can be prohibitive. However, once in place and the economies of scale come into play, they can be phenomenally profitable while offering a meaningful and valuable learning experience to students on a global scale.

There are numerous examples of students who have taken online courses all over the world, all by virtue of the most well-known online education institutions in the United States. These informal assessments of the effectiveness and utility of online education formats accurately reflect the profitability of them as well because they demonstrate how effective the online education model scales. During the first part of this decade five of the top 25 growth companies in the United States were education firms that all indicated their online education programs as one of the primary growth drivers both in terms of getting them listed in the top 25 and in terms of future growth prospects.

The list of online education institutions performing well financially and enrollment wise is growing exponentially. Corinthian Colleges, which offers both on-ground and online formats has experienced triple the enrollment rates in its online program versus those of its on-ground formats. Datamonitor reports that during 2005, the Apollo Group, which owns The University of Phoenix, exhibited record revenue of $1.8 billion with its University of Phoenix Online division being responsible for as much as 40% of the company's total revenues. The university also had more than 118,000 students enrolled online with enrollment on a growth arc. While the fortunes of individual online institutions might waver periodically due to market conditions as well as management concerns, what is patently obvious to even the casual observer is that students from all walks of life are demanding options for their educational needs and, even more importantly, are adamant about cost-benefit factors.

Online education is certainly a growth industry as well as a profitable one and most of the significant online education institutions are for-profit schools. However, if these institutions were in the education business merely to make a quick return on investment they would lose students and thus sacrifice both revenues and profits because students recognize the need for quality educational material and institutional reputation. Recent industry data indicates that approximately 700,000 of the almost 17 million individuals enrolled in degree granting institutions in the United States are registered in for-profit institutions with most of these offering or relying on the online delivery format.

The industry is expected to grow substantially over the next few years as well because, as the New York Times reported in 2006, Congress has eliminated the 50% rule which dictated that for-profit institutions needed to offer more than 50% of their courses or programs in an on-ground format. The implications for the education industry and particularly for the online education industry are huge. Expect to see these institutions become even more popular and profitable but also expect to see the diversity of programs offered explode and the quality of these programs improve even more as these institutions continue to reinvest in their educational services.












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