Photo Credit: U.S. Army via Compfight

By Ryan Craig, Columnist

Conventional wisdom says – and most analysts agree – that online higher education will continue to grow like a weed, with annual growth exceeding 20%.  But how to square conventional wisdom with increasing signs that the online market is plateauing?

A new report from Eduventures based on a survey of 1,500 U.S. adults found virtually no increase from 2006 to 2012 in the number of adults planning to enroll in online programs.  Eduventures surmises two reasons for this:  (1) the medium isn’t materially more appealing today than it was 6 years ago; and (2) prospective students find it expensive.  According to Eduventures, most adult learners for whom convenience was the major draw have already enrolled in online programs.  A report from Parthenon released last March confirms this:  cumulative starts over the prior 5-year period were nearly 50% of the most addressable market (defined as adults under age 35 with some college but no degree).

So where will online growth come from?  A report last week from Moody’s indicated that massive open online courses (MOOCs) represent a “pivotal development” in higher education and could revolutionize the industry.  Coupled with Coursera’s announcement of 17 new university partners, MOOCs appear to be a likely source of much, if not most of the promised growth.

But of the four potential drivers of growth for online education, MOOCs currently address only two:  the two easy and less powerful ones.

First, there’s price.  Online programs are typically – and typically unjustifiably – priced at the same level as onground programs.  By going free, MOOCs address affordability with a flourish.

Next there’s product.  Have MOOCs made the medium more appealing?  Superficially, yes.  By attracting elite brands to online education, online has moved from low-prestige and ancillary to strategic and core for most universities.  But in terms of the learning experience itself, it cannot be said that MOOCs are a significant step forward.  Most MOOCs are more interactive with frequent quizzes and some have incorporated basic elements of gamification.  Probably the most significant advance is in the area of peer grading.  But accounts of plagiarism accompanied by sub-10% course completion rates signal that MOOCs aren’t matching their revolutionary price with revolutionary product.

Next there’s the question of expanding online learning beyond the U.S.  By solving for price, one would think MOOCs check this box as well.  And so they do.  74% of Coursera’s 1.3M enrollments are from outside the U.S. – 190 countries in total.

Finally, there’s the opportunity we discussed in our last letter:  expanding online learning beyond adult learners to traditional age college students.  While there are no firm reports as to the age of MOOC students, anecdotes in the media suggest that the typical profile is an adult outside the U.S. who is employed in the field and seeking a challenge or refresher from an expert.  There are no indications whatsoever that traditional age students are fleeing college campuses to jump onboard the MOOC-wagon.

So where does that leave us?

Today MOOCs are checking the two easy boxes.  They are not yet Online Learning 2.0.  The hard and important stuff is still to come.

Ryan Craig is a Partner at University Ventures, a venture fund focused on innovation from within higher education.