The Business of Ed-Tech

For anyone starting off in the world Ed-Tech one of the biggest pieces of advice I can offer you is to learn how the company makes its money. Don’t focus on the technology itself or the feature list that comes with it, find out how it makes money as the first port of call.

The reason for this is that is simple – it allows you to understand what it is you’re going to be paying for and what kind of culture you’re buying into. There are a bunch of different ways to make money from technology – you sell a product, a service, access to a community, infrastructure, support or, as is often the case with “free” technology, sell user data and information to another business (or government, spy agency, advertising agency). Understanding the business model is key to understanding how those companies operate, what they prioritise and care about.

In many cases companies will go out of their way to confuse and obscure how it is they actually make money. They’ll hide behind a feature list and a carefully worded press release but these are just opaque windows that hide the inner workings. If you’re going to work in this field part of your job is to dig in, to investigate and ask the right questions in order to find out that information.

If you want to understand ed-tech, really understand it – follow the money.

Changing Business Models

Another challenge for those in the Ed-Tech world is that the business models are changing. For a long time Ed-Tech meant software, a simple product that you bought off the shelf, installed and ran. That’s no longer the case with most offerings. Now there are a plethora of models available – most centre on a subscription model that locks you in to making a yearly payment rather than the one off purchase of yesteryear. On face value it’s great, and the marketing material will certainly tell you now you can have a solution customised to your exact needs. It’s more agile so that features and improvements can roll out much faster.

These selling points also have a number downsides.

  1. Vendor Lock In – Once your a paid up subscriber your more than likely a captive to that vendor. The cost of changing or moving systems goes up considerably, to the point where making that change hardly seems worth the effort.
  2. Top Tier Services – While the documentation clearly shows the various tiers of service, the reality is that most people will end up on the top tier. Why? Because these businesses know that by locking away core services behind the top tier it will force users into paying more. The reality is the lower tiers aren’t for the business, they’re for you to make the justification to your boss that “it’s only X dollars more than the next level down”.
  3. Changing Goal Posts – That new agile model sounds great, until the company decides it wants to pivot, update its terms and conditions, security process or core code because then your stuck. Stuck with a depreciated product that you’ll be forced off in the future you’ll be faced with two options – move or suck it up. (See above for likely outcome)
  4. Faster Bugs– Another “great” thing about this new agile model is that bugs are introduced with a greater frequency and more devastating effect than ever before. No one is safe either, software that works to day can be rendered unusable the next day by an overnight “patch”.

Then there’s the “freemium” model. Up front users actually pay nothing, or very little, for the full product. The catch? Your data is hoovered up and sold as an asset of the company. That’s right all your data, and that of every single student, is assimilated in a Borg like fashion and is then monetised. Sure, there may be privacy provisions in place but the reality is that everything that goes in becomes a resource for the company to exploit – from data mining, research data for 3rd parties, sales database or just plain old surveillance – you are no longer in control. Free sounds like a great thing, but the costs are just hidden by the future – you just can’t see the consequences.

The other model I want to make mention of is the Candy Bar model. Just like the cinema the profit isn’t in the obvious ticket sales, the money is made in at the Candy Bar. Those massively inflated prices for popped grains and sugar water are where the real money is, but they’re hidden in the experience of the cinema. Any why to we pay $15 for popped grains and sugar water? Why don’t we question it? Part of it is that we are a captive audience, drawn there by what on face value seems like an exclusive experience. Big screen, lots of speakers, big names – we seem to forget that the same thing will be out in 3 months to watch at home. The Candy Bar is a model where the “associated costs” are actually the viable part, the rest is just hype and manipulation.

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2 thoughts on “The Business of Ed-Tech

  1. Beware the exit strategy model as well, where EdTech startups are only interested in getting enough VC funding to carry them through until they can sell their business to Google/Apple/Microsoft/. At which point the service might actually be shut down because it was beginning to threaten the larger corporation. And all those privacy terms of service about safeguarding your data will get thrown out the window when a company gets bought out. So, beware the exit strategy business model.

    • Thanks Clint! You’re 100% right, beware the Exit Strategy which can be easy to spot due to the conspicuous absence of an actual business model. There is no revenue stream because the product is free or priced too good to be true. This “model” is looking to scale right from the outset because the only asset they have is the database of users and the data they’ve contributed. Their not looking to the long term, they don’t even have learning at the heart of the mission or promotional material.

      Thanks for spotting that one

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