Tech’s Lessons

By Matthew Flamm
January 22, 2012

Last Thursday morning outside Apple’s press conference at the Guggenheim Museum, news-team sound trucks stretched an entire block, possibly setting a record for the amount of coverage for an announcement about textbooks.

But the introduction of interactive, instructional e-books for the iPad was also a signal of larger changes taking place in the classroom. In the midst of its Internet moment, education is going through a digital disruption similar to the ones that have shaken up the music industry, newspapers and trade-book publishing.

Apple’s event was also symbolic of New York’s role in that transformation. Executives from the Cupertino, Calif.-based company came all the way to Fifth Avenue because, by and large, this is where the academic publishers are.

Partly spurred by its concentration of intellectual talent, New York is also becoming a hotbed of innovation in educational technology. Venture capital investment in education-related startups in the metro area totaled $95 million in 2011—an 84% spike over the prior year, according to PricewaterhouseCoopers/National Venture Capital Association. The number of startups receiving investment money rose to 14, up from eight in 2010.

In the long run, newfangled interactive textbooks like the ones Apple and its publishing partners previewed last Thursday are likely to be a minor aspect of education’s digital revolution. But Apple’s entry is certainly helping the revolution along.

“It gets people to pay attention to the work we and other folks have done over the last three years to shift the industrial production model of education to more of a GPS-driven, personalized learning [model],” said Vineet Madan, senior vice president of strategic services at McGraw-Hill Education. The publisher has five titles available on the new iBook platform, including high-school texts Algebra 2012 and Biology 2012. “It gets them to think other things are possible in teaching and learning.”

Online learning updated

Those other things include the online learning system developed by 2tor Inc., a company launched in New York four years ago by John Katzman, the founder of test-prep company The Princeton Review. With the help of broadband connections and mobile technology, the startup has revamped the old distance-learning model, which has long been considered a second-class form of education prized mainly for its convenience.

The 2tor iteration creates a kind of intimate global classroom that allows for real-time interaction between students and their professor, and has been picked up by four elite institutions, including the nursing school at Georgetown and the M.B.A. program at the University of North Carolina at Chapel Hill.

Company executives say their classes are just as good as those offered on campus and that, more and more, online learning will be a way that universities expand—and survive.

“The high end of the academic world is a very large market, and one that is going to see significant disruption over the next 10 years,” said 2tor Chief Marketing Officer Jeremy Johnson. “Many schools will go out of business, and you will see far larger programs online.”

Investors also see a growing market in digital education companies. In 2011, deals in the ed-tech sphere totaled $10 billion, which was flat compared with the prior year, but up from $5.4 billion in 2009, according to figures just released by investment banking firm Berkery Noyes.

The rush to a digital future has plenty of critics, however. They see direct student-teacher contact as indispensable, fear a push toward technology for its own sake and worry that digital tools will be used primarily as cheaper alternatives to teachers.

But educational experts say that digital tools are needed to reach students who have grown up in a digital world. And educational innovators insist that technology can provide new paths to learning.

“Until now, we haven’t had the ability to capture, process, synthesize and use these enormous amounts of information and data,” said David Liu, chief operating officer of Knewton, a New York-based adaptive-learning company that uses algorithms to figure out how different students absorb information. The firm recently began a partnership with academic publishing giant Pearson. “This is a one-time-in-history moment for education.”

Funding slows down

Despite what may be a historic moment, it’s not clear that New York startups will continue to get financing at the rate they have been, as venture capital firms grow wary of where the economy is headed. In the fourth quarter, VC financing in the New York area plunged 40%, compared with the prior quarter, to $545.1 million.

But experts say the tech-education industry is just getting started. The U.S. business for e-learning products and services in the pre-K to 12-and-higher education markets will grow to $11 billion in 2015, from $7.6 billion in 2011, according to research firm Ambient Insight.

“We are just in the beginning stages of disrupting everything, from textbooks to learning applications,” said Jalak Jobanputra, an investor who has been looking at tech-education firms in New York since the late 1990s. “The market should be able to support multiple players in each segment, and those players have not yet been established.”

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