Be True to Your Cyberschool

Some big players in online education are betting that online high schools will pay off

by Alison Damast

Ask a typical teenager what he or she likes about high school and the teen will rattle off a list that includes such quintessential traditions as homecoming, prom, and spirit days. Despite the enduring appeal of these group activities, two major players in online education—Kaplan and the Apollo Group— are betting the students will rally around cyber-high schools.

Recently, Kaplan, a unit of the Washington Post Co. (WPO), and Phoenix-based Apollo Group (APOL) have both acquired companies that run online high schools, allowing them to expand their reach to teenagers seeking a nontraditional education experience. The companies are jumping in on what looks to be the next promising market in online education—online charter and private high schools. Eduventures, a Boston-based research group, estimated the total online higher education market at $8.1 billion in 2006.

Kaplan announced on Apr. 11 it had acquired Sagemont Virtual, a company that runs the private University of Miami Online High School and Virtual Sage, which develops online high school courses. Terms of the deal were not disclosed.

Skipping the Classroom

That deal came just three months after Apollo, which runs the University of Phoenix and is the largest publicly traded for-profit provider of higher education, paid $15 million for Insight Schools, a company that runs an online charter school in Washington state. Both Kaplan and Apollo have used the online education model at their universities for years, but have not reached out to high school students—until now. They will have to convince educators, politicians, and parents that they can deliver a quality education to students who, in many cases, will never step foot in a classroom.

That might not be so hard. About 700,000 public precollegiate students were enrolled in at least one online or blended course, according to a survey released in March by the Sloan Consortium, an education research group that reviewed K-12 online learning. Sixty-three percent of the public school administrators who responded to the survey said their schools offer students the chance to participate in some form of online learning. "I think there is a lot of potential for particularly the high school to really start offering more courses fully online or blended," says Anthony Picciano, a co-author of the Sloan report and a professor at New York's Hunter College. "I could see a lot of the growth following what happened in higher education."

An online course is generally defined as one in which all or most of the content is delivered online, while a blended course is one that mixes online and face-to-face delivery of instruction.

Spurred by State Decisions

Both companies are entering the virtual high school market at an opportune time, says Trace Urdan, a senior research analyst at Signal Hill Capital in San Francisco, who follows the for-profit education industry. "Schools and students and parents are all becoming more comfortable with the online delivery of education, so that this is all kind of gaining steam in real time," Urdan says. Apollo has estimated the online secondary school market at $500 million, according to Signal Hill.

The growth of the online market is spurred by important policy decisions being made by states like Florida and Michigan, Picciano says. Florida Virtual School, which is operated by the state of Florida, was founded in 1997 and now has more than 31,000 students in academic year 2005-06, according to the school's Web site. The school started out as a strictly virtual high school, but now provides online courses to students in traditional schools who supplement their studies with online courses.

Meanwhile, Michigan became the first state in the country last year to require every high school graduate to take one online course in order to graduate, Picciano says. "There are a lot of other states that are following or will be following them," he says.