The Economics of Online Education

As more and more universities are opening up to the idea of online proposition, it becomes important to raise the question: “Can online-education be a profitable and sustainable business?” To answer this question, let us explore the various important facets of this model which would decide the feasibility and financial sustenance of the e-idea. Some key parameters to be considered are the demand, ability to supply, technology and delivery process.

The demand for the service is abundant as previously discussed and so is the availability of market players who could cater to this growing demand. Hence, the viability of the proposition rests solely on the issues of effectively delivering the services and choosing or rather designing an appropriate business model. It is critical to analyze the following factors to assess the economics of the idea:

-Virtual university vs. traditional university (in transformation)
-Selling commodity vs. selling experience
-Technology: availability and costs
-Process of delivering quality and differentiation
-Cost analysis: Initial vs. marginal

Virtual University vs. Traditional University
There could be two different versions of an online education: a virtual online model and an existing university expanding its traditional model to accommodate the online proposition. Both models have different economics. A virtual model starts from scratch and has no prior experience with a traditional education model; it prepares curricula either by itself or in conjunction with an existing educational institution; it also has low infrastructure expenses but simultaneously no branding support.

It is relatively easy to start this business, but what matters are the quality of content and the process of delivery. For standard modules or programs, this seems to be a good venture as the content would not be difficult or expensive to produce or distribute. However, care needs to be taken to ensure the target segment for the program is carefully identified, as this model is not only competing with traditional models but also with online propositions of existing reputed educational institutions.

On the other side are the existing schools that would be extending their services to e-learning. These do face a challenge of adopting a business model which may not be compatible with their existing proposition. There is a risk of cannibalizing their existing successful business model. Both models, if to be continued simultaneously, need to be targeting reasonably different markets.

This model has an edge over a new virtual setup in terms of already available content and existing and successful brand; thus the institution could charge a premium. The model does not require huge costs as the content is available, and only needs to be digitized; it is also relatively easier to generate demand for the proposition, riding on the back of the existing traditional model. However, the institution still needs to work towards differentiating the model, not by the content but by the process of delivery.

Selling Commodity vs. Selling Experience
The institution may well decide to sell 10,000 degrees a year or may like a number that is much lower (i.e. < 200). The question is whether the institution is attempting to focus on the quality of the students and education or is merely happy with building the numbers and playing on cost. Online education does provide an opportunity to reach the masses with very low marginal costs but simultaneously could affect its reputation.

Though it is extremely hard to replicate the experience and environment of a traditional model, an attempt to get the program experience as close to the traditional experience would be considered a good differentiating factor. This experience would not stem from the content of the program as it is easily replicable, but from the content delivery process reaching the end user. Again, the type of module and the class of customer segment would decide upon the extent of the “experience” required to be instilled in the program.

Technology: Availability and Costs
The complete business idea of online education is dependent on technology. The base of this technology is the internet which is the fastest growing tool in terms of number of users. According to Lance Secretan, “It took 37 years for TV to reach 50 million homes and it took the web 4 years to do the same.” Though the base technology (the internet) does not seem to be a constraint, the bandwidth available to support the online education is questionable. Technology such as streaming audio and video requires huge bandwidth which may not be a constraint for institutions but for end users.

In most countries, the internet is at a nascent stage. More importantly the bandwidth to support “virtual reality” is not available. Even in developed countries it would be very expensive to have synchronous and interactive video lectures or sessions.

Though the pace of technological advancements is increasingly fast, and thus the bandwidth problem would soon be resolved, it may still be expensive to have a model that provides a similar learning experience to a traditional model. Therefore, the educational institutions would need to strike a balance between the “experience” and the cost depending on their target market segment(s).

Delivering Quality and Differentiation
In order to differentiate itself from others, it would be essential for an institution to focus on the process of delivering value to the end users. Educational institutions, keeping in mind their target market(s) and the available technology, would have to decide on the extent to which they should replicate or rather extend the strengths and benefits of their existing traditional model, if any, to the online proposition.

Aspects such as how to hold online lectures or how to transfer digitalized case material or even how to structure the program to make it more effective, would need to be evaluated.
If the proposition is to sell the program as a commodity, it would be better to conduct it in an asynchronous fashion, focus on delivering standard requirements, and cut down costs rather than add a new “experience” to it. This excludes premium programs with higher fees. These ones would be targeting people who are willing to pay for the technology needed to get a real experience of learning.

Cost Analysis: Initial vs. Marginal
The costs associated with an online proposition are low when compared to the ones of a traditional model which requires much greater infrastructure. The profits would depend upon the economic rent that could be derived from the services offered. This economic rent could only be sustained in the long run if the institution has sufficiently differentiated itself from its competitors.

The online model also has very low marginal costs compared to the initial set-up expenses. Unlike a traditional model which is limited by the size of its buildings (physical infrastructure) or the number of its faculty members, the capacity of an online model can be stretched to a great extent. This would help reduce marginal costs until a further increase in users requires significant investments in technology upgrades.

From the above arguments, there is no doubt that a sustainable online education model is definitely achievable. However, care has to be taken when defining the model that is in appropriate accordance with the targeted customer and service provision. Established universities, no doubt, have an edge over the new virtual universities but at the same time they carry the risk of endangering their established and successful traditional model.

The economics would also significantly vary depending upon the differentiation strategy, if at all, is pursued by the players. Selling a commodity would require a different strategy and would have different implications compared to the proposition when selling “experience”. The availability and costs associated with the technology would vary depending upon the geographical location of the institution and the students.

What You Need To Know About An Internet Home Based Business

Internet home based business is one of the fastest growing segments of business these days. Many future business owners love the idea of a home based business compared to the expenses of an online business. Now not everyone is suited for an Internet business, but a lot of people are and the success they are finding is growing. Here is some information that will help you decide about an Internet home based business.Working on the Internet is a lot different than an offline job, but that does not mean it is not possible. The one thing that Internet does give you is endless possibilities which are something that people tend to like a lot. Starting a business is hard work no matter if you do it online or offline so keep this in mind.When it comes to working online and starting a business find something that you love to do. It can be a hobby or something that you have a lot of knowledge about. The main reason you choose something your passionate about you will tend to stick with it and success is much easier.Look over every option and do not discount any business opportunity. Once you starting looking for an online business many options will exist. Take your time and look over every possible opportunity. Many times people rush into an online business and it takes much longer for them to see success.Probably one of the biggest mistakes people make when starting an internet home based business is expecting too much too fast. No matter what you read or what anyone tells you it takes time to build an online business. Having a proven plan in place is a very good idea to help you keeping reaching your online goals.Look and see what is working well for others online. Many people are afraid to ask or seek help from other online people. Do not make this mistake as there are many online business professionals who are more than willing to lend you a hand. The Internet has plenty of free information as well you will be able to access as well.Running an online business is something that many people are trying these days. It is not easy and it will take some work on your part. By starting an Internet home based business you can control your future and the type of money you want to earn as well.Internet home based business is something that is growing at a very fast rate. With more and more jobs being eliminated going online is a logical choice. Starting your own online business will take some work, but the rewards can be worth it.

Stocks Vs Real Estate – The 4 Ways You Can Multiply Your Money Faster & More Securely in Real Estate

Between stocks and real estate, most investors tend to stick to one type of investment or the other, depending on what they are comfortable with. But the only issues that should matter when considering an investment is what kind of “true” return on investment can I get verses what is my risk to earn that return. Hands down, real estate is far superior to stocks in terms of both high ROI and security.

Before we begin this discussion, it is important that I point out the major mistake made by just about every other writer who has ever written on this subject; in every comparison of stocks to real estate, either the Dow or S&P values are used as the basis of measuring stocks’ performance, however it is rarely mentioned that the Dow is a select sample group of only 30 stocks and that the original companies of the Dow are not the same as the present companies that make up the Dow Jones. Recently General Motors (GM), along with government bailed out Citigroup, were dropped from the Dow because they both fell below $5/share, and they were replaced by Cisco Systems ($20/share) and Travelers ($40/share). The real estate equivalent of this would be to choose a portfolio of properties in the beginning and then removing a poorly-performing shack from the collection and replacing it’s valuation with a stronger performing Trump Tower. Such a practice makes it impossible to truly measure the performance of the stock market, however it is clear that whatever gains can be measured are “slightly” inflated, if not completely overstated.

Now that we understand the shortcomings of prior comparative analyses, we will choose to use the S&P 500, despite the previous discussion, with the understanding that this provides a slight advantage to stocks, for we will show that real estate is still superior, even in a comparison favoring stocks. There is an abundance of circumstantial evidence all around us for this fact. The most significant and lucrative investment most people make is their primary residence. 85 to 90% of the wealthiest individuals in the world built and hold their wealth in real estate.

What specific ways does investing in apartments and rental properties help us multiply our money faster? There are 4 major ways:

Appreciation. This the gross increase in valuation of the asset. When the stock price increases to a higher value or likewise, when a house increases in value, appreciation is the profit from this change in valuation. Of course, a decrease in value is also possible in both types of assets, and the result of this is negative appreciation. This is the aspect that is most often focused on by previous comparisons. However, despite being the most important income with investing in stocks, appreciation is the least important of the ways of making money in real estate. Individuals who focus on appreciation in real estate are not investors, but speculators, many of whom were the hardest hit because of the burst of the housing bubble.
Depreciation. This refers to an estimation of the “loss” of valuation of investment real estate as a result of deterioration or obsolescence. The wear and tear is not tabulated from a list of specific damages, but rather takes the cost of the asset and spreads this cost over the legally estimated useful “lifetime” of the asset, 27.5 years in the case of residential property. When running your real estate investing as a business, this tax deduction can be huge, along with tax-deductable expenses, in offsetting income and legally decreasing your tax liability. There is no equivalent to this in offsetting capital gains from stock income.
Amortization. This refers to the building of equity in a property as the mortgage on it is paid off over time. This is another way of expressing the advantage of leverage in investing in real estate-the ability to buy an asset with only 3 to 25% of the purchase price and pay the rest off over time, preferably using the asset’s own income, is unheard of in the world of stocks.
Cash Flow. This has to be the sweetest money from your real estate investment; after all expenses, this is what is left over to go straight into your hip pocket. This is analogous to stock dividends, however the company in which you hold stock has the ultimate decision as to whether they will offer you a dividend, and they can change this decision without consulting minor stockholders. A properly structured real estate investment will provide positive cash flow FOREVER. And, again, if you run your investment as a business, this passive income will not be subject to self-employment tax.
About the only clear advantage that stocks have demonstrated over real estate is the relatively greater liquidity that is provided by having a ready market of buyers. However, the knowledgeable and experienced real estate investor understands this, and the investor builds a list of buyers and recruits real estate agents and brokers onto his or her team for this very reason. Even in a tough market, as exists today, investors are able to move property and maintain liquidity.
In addition, the clear and widely acknowledged advantage that real estate investments have over stocks-the ability to leverage your money and credit to buy the asset and the tax advantages and other streams of income benefiting owners of rental properties-are often greatly underestimated and understated. The accumulated tax savings and other hidden income streams when added up is a more than significant amount of money; all the annual tax write-offs translates into more money to leverage and reinvest into more income-producing real estate, and this cycle of reinvesting is the process that will multiply your investment money at a rate that the best stock can never hope to keep up with.

S Koonopakarn is the CEO and Cofounder of Saintly Assistance Financing & Equities Group, LLC, an Atlanta-based investing and consulting company that specializes in real estate and retirement investments. He has the investment plan that will get you back on track to an early retirement without depending on Social Security and without sacrificing lifestyle.