Are online education companies biting their nails now that their competitor Lynda.com is about to become part of Mountain View, CA-based LinkedIn, the dominant social media network for professionals? The big public company, with more than $2 billion in annual revenues, has a new mission to steer its members toward Lynda.com skills classes that might land them better jobs.
LinkedIn’s $1.5 billion purchase of Lynda.com, a 20-year-old company offering courses ranging from Web design to data analysis, puts it in the pole position to take over a sizeable share of the market for online education and professional training, Stifel analysts wrote after LinkedIn (NYSE: [[ticker:LNKD]]) announced the acquisition April 9.
“We think online education is potentially a multi-billion dollar business, but up until now the challenge had been connecting people with the right courses at scale,” the Stifel report said.
Lynda.com’s competitors in the online education industry, however, are thrilled with the LinkedIn deal, saying it affirms that there’s serious money to be made in selling online courses to adult workers who need to keep up with the rapidly changing pace of technology in all industries.
“I think it’s super positive,” Udemy CEO Dennis Yang says. “It provides a huge stamp of validation.” San Francisco-based Udemy, an online education marketplace, hosts more than 25,000 courses that include job-related technology training.
Much of the attention around online learning has focused on its potentially disruptive impact on traditional academic institutions such as colleges and universities, Yang says. But the college years take up only a fraction of the time people will spend studying over a lifetime to keep their job-related skills current in the 21st century, he says. Consumer demand for lifelong professional training is fueling rapid growth for educational technology companies in that segment of the industry, Yang says. Online learning offers working adults a less expensive option than moving back to campus to earn a new degree, he says.
The heady reaction over the Lynda.com purchase was similar at Pluralsight, a Utah edtech company that focuses on the needs of mid-career tech professionals. CFO Greg Woodward says he wasn’t surprised by Lynda.com’s price tag of about $1.5 billion—he’s seen valuations going up for other consumer-focused edtech businesses as well.
“People in the marketplace are seeing the value of these companies,” Woodward says. “There are a lot of investors focused on the space.”
But how does LinkedIn’s entry into the edtech industry change the competitive landscape for these smaller players? With a membership of 350 million people who’ve posted their resumes for free on the site, LinkedIn has an intimate knowledge of users’ current jobs and the skills gaps they might need to fill to keep succeeding in their fields. Using that data, the company plans to target relevant Lynda.com course recommendations to individual members after the acquisition is completed in mid-2015. As an independent company, Lynda.com earned revenues of $150 million in 2014. On a conference call with investors, LinkedIn CFO Steve Sordello said the acquisition of Lynda.com opens up a $30 billion opportunity for the company.
To encourage members to try online courses, LinkedIn may make a Lynda.com subscription part of the added services that come with a LinkedIn Premium subscription for job seekers. The pricing patterns of the two companies are similar. A LinkedIn Premium membership for an individual is $29.99 per month; Lynda.com offers full access to more than 6,300 courses and 267,000 video tutorials for $25 per month.
Another big tech company, online retailer Amazon, used a similar pricing tactic when it entered a new line of business. Amazon (NASDAQ: [[ticker:AMZN]]) sweetened the deal for its Amazon Prime memberships—originally a free fast-shipping perk—by adding streaming movies on Prime Instant Video, as well as digital books for its Kindle device and Web-based photo storage, to the Prime membership package.
Well before LinkedIn announced its plan to become an educational technology company, it created space on its site to showcase online education providers. In late 2013, LinkedIn made it easy for its members to list their online course credits in their professional profiles, just as they can include any degrees they’ve earned at colleges and universities.
Lynda.com was part of the pilot project for that new feature, called Direct-to-Profile Certifications, along with other notable providers of online education and training, including Coursera, EdX, Pearson, Skillsoft, Udacity, and Udemy. Since then, other companies have signed on, including Microsoft and Pluralsight.
Both traditional academic institutions and online learning companies can join the Direct-to-Profile program. When students complete a degree or earn a certificate for completing an online class, the school sends an e-mail inviting the students to click a button to post the credential instantly on their LinkedIn resumes. The credit appears with the logo of the school or edtech company.
Now that LinkedIn is getting into the edtech business itself, it has become a competitor with companies it also serves in its online professional marketplace—just as Amazon became a competitor to the publishers whose books it also sells online.
Pluralsight’s Woodward acknowledges that the alliance of LinkedIn and Lynda.com carries “advantages and synergies,” but
