The Rule of the Marketplace

The critics of e-learning seem especially gleeful these days, as one after another of the dot-coms and virtual universities announces layoffs (eCollege, UNext), buyouts (Hungry Minds), bankruptcies (Pensare, ecampus.com), or closure (U.S. Open University, Fathom). What interests most of us is, why the failures? Did these organizations make mistakes that we can (and should) learn from? Or did their troubles result from failures in judgment based on unquestioned beliefs? By any measure, the number of new companies formed in the past few years has been phenomenal, and the amount of money invested in many of these privately financed enterprises is enough to make anyone in higher education envious. They had media attention and were founded with much fanfare and high expectations. Supporters included entrepreneurs, governors, and university presidents. And, they had capital, seemingly millions of it. Why, then, did so many of them fail? Is it because, as the critics would like to think, that e-learning has failed and distance education will soon fade from the higher education scene? Or did the declining economy make it unusually tough to succeed in a post-9/11 marketplace? Clearly, many virtual universities—state consortia, individual institutions with virtual components, and some e-learning dot-coms—have survived and are growing. Still, to the extent that even successful organizations are based on flawed beliefs, they might face challenges in the future. Three false assumptions may explain what went wrong for the dot-coms: ■ the cost of product development, ■ the number and behavior of potential customers, and ■ the value of traditional higher education institutions.