The past year of education has been tough for Natalie. The 15-year-old was bullied at her London state school but, even after lockdown kept pupils at home, what she regarded as her school’s poor standard of remote learning left her miserable. In January, she switched — to a fully online private school.
Natalie, who asked for her real name not to be used, is now studying for her GCSEs at King’s College Online, an international virtual school launched in January by UK-based Inspired Education. Her new school day consists of recorded lectures and video classes, not with other local teenagers but with pupils in Asia or Europe, as well as walks listening to educational podcasts.
Inspired, which is backed by private equity firms TA Associates and Warburg Pincus, is one of several companies including Pearson that are expanding their online schooling operations. Although schools in Europe and the US are now reopening after a period of closures, these groups are betting that the mass home-schooling experiment of the pandemic could be a lucrative opportunity to make virtual education mainstream.
“When there’s digital transformation that happens to an industry it’s really hard to revert back to the norm . . . education, I’m hoping, is no different,” said James Rhyu, chief executive of Stride, a Virginia-based group that runs virtual schools for almost 160,000 children in more than 30 US states. Revenue in its general education division, which includes online schools, jumped 38 per cent year on year to $322m in the three months to March.
Rhyu predicted up to 30 per cent of children could eventually be in a virtual school setting. “Overwhelmingly, customers do want choice and a big part of that choice is online education,” he added.
Stride’s expansion plans include launching in more states and partnering with school districts to provide full and part-time virtual options for students. It aims to enrol at least another 100,000 pupils over the next five years.
Before the pandemic, the biggest barrier to growth was awareness, said Tom ap Simon, managing director at Pearson Online, which runs 45 US government-funded and three international fee-paying virtual schools — including the online version of Harrow School, one of the UK’s most famous boarding schools.
That changed in 2020. Enrolment increased 43 per cent, with 15 schools doubling or tripling their intake. Revenue from virtual schools grew 29 per cent to £413m last year and Pearson, a FTSE 100 group, hopes to tap more of a market it estimates is worth £1.5bn in the US alone.
“It was a staggering increase in market size and awareness,” ap Simon said. Pearson, which has a 17 per cent global market share, has emphasised the importance of virtual learning in its new consumer-focused strategy.
As schools reopen, ap Simon concedes the appeal of online-only education is likely to be limited to a relatively small minority. But, he said, some families — such as those with special educational needs or demanding sports training schedules — were now aware of a more flexible option and would want to continue. In a recent poll conducted by NPR and Ipsos, 29 per cent of US parents said they were likely to continue with remote learning.
Because the current market is so small, virtual schools could be attractive to investors even if the number of children enrolled rises to just 2 or 3 per cent, said Citi analyst Thomas Singlehurst.
Online chains also offer a private education at a fraction of the cost of the physical equivalent. Schools such as King’s College Online, which is not affiliated with the university, target a middle-income international audience, with virtual options priced at 30 to 50 per cent of bricks-and-mortar names.
For example, Harrow School Online, which is run by Pearson, charges £5,250 per term compared with the £14,200 fee for boarder pupils at its physical namesake.
“[Competing on cost] is the one area where I see online schools doing really well,” said Hiral Patel, an analyst at Barclays.
Inspired’s founder and chief executive Nadim Nsouli said the appeal of schools like King’s College Online was boosted by the group’s physical institutions, which provide experienced teachers, a record of exam success and the opportunity to attend in-person summer schools and social events.
“They can come to a real school for a semester to complement their online education,” Nsouli added.
But the sector remains a niche. Some education experts also warn the spread of virtual classrooms will mean poorer outcomes for children and will harm public education.
A 2019 study by the National Education Policy Center at the University of Colorado Boulder found graduation rates at virtual schools were 50.1 per cent, compared with 84 per cent across the US. “Their big attraction is they approach a school district and say ‘you don’t have time to do this, we’ll do it for you’,” said Alex Molnar, research lead of the NEPC study.
Other problems include screen fatigue, fewer social opportunities, poorer oversight, larger class sizes and not enough time with teachers. In China, the regulator has encouraged online education companies to introduce time limits and mandatory breaks.
“The concerns at this stage outweigh the benefits,” Patel said.
Some groups are addressing concerns by offering a hybrid option. Alpha Plus Group, a UK private school chain backed by real estate investor Delancey, has 15 pupils at its 180-strong Portland Place school enrolled in an online option, with one day a week for in-person classes. These pupils pay 40 per cent of the typical £7,470 termly fee.
“We prefer hybrid to purely online provision because we want the children to meet and socialise with one another and to engage with their teachers face to face,” Alpha Plus chief executive Mark Hanley-Browne said.
Singlehurst said a desire for face-to-face education would limit the growth of virtual schools, meaning they were unlikely to become a mainstream option soon. “The thing we can be fairly sure of in the long term is that disproportionately the school market will involve kids going to real life schools,” he added.
Stride’s share price is about 70 per cent higher than it was on the eve of the US lockdowns in March 2020. But it has also fallen back to about half of the $50 peak it hit last August.
Rhyu pointed to the availability of online activities such as an esports league and an online art competition at his academies. For young people, he said, the transition to virtual education hastened by the pandemic would be easy. “They don’t often know anything besides the digital world.”