10 Reasons Why the Ed Tech Bubble will Continue to Float

Fueled in part by socially-conscious investors and tech entrepreneurs, investment in the educational applications market has exploded to an extent not seen since the dot-com boom more than a decade ago. While some analysts are predicting this is an era of irrational exuberance that could collapse like the bubble burst in 2000, there are at least 10 reasons why this time is different:

  1. Lower Development Costs: Hardware and software tools have improved and costs lowered, and the savings in application development and delivery means reduced prices and higher marginal revenues. Improvements include simpler and more powerful authoring tools, many of them open source, as well as cloud and other hosted models that enable schools and companies to more easily outsource and scale.  
  2. Apps Market Dynamics: The proliferation of Apps on various mobile devices provides a more welcoming market environment for educational technology companies. Among these factors is the reduced cost of development and distribution on the various mobile operating systems such as Android and iOS and their app stores (though some revenue sharing models do challenge the equation).
  3. Increased Hardware Access & Connectivity: While a digital divide still exists and too many classrooms still rely on a single computer station, student and teacher access (at home and school) has grown many fold over the last decade. Reasons for this include the reduced cost of hardware (driven by Moore’s law), growing support for BYOD (student’s Bringing their Own Device), and recent investments in tablets, electronic whiteboards and other devices.
  4. Touch Tablet Ease of Use: Many educators view the touch interface as a game changer for student learning through technology. School (and home) spending bears that out. The platforms provide a simplified user interface for students, a simplified operating system that eases school technical support costs, and a tactile functionality that is both beneficial to younger learners and provides a key pedagogical differentiator from other print and digital mediums. 
  5. Educators Asking How, Not If: Educators have crossed the tipping point from asking “if?” technology to asking “how, how much and what?” While luddites still exist and we are a long way from robust integration and effective use, teachers, administrators and policy makers recognize the upside of technology and digital learning and are focused on how to realize the power and promise.
  6. The New Normal: Our education system is charged with doing more with less in light of the recent recession and enhanced common, college and career readiness standards. Technology has increased productivity in other sectors, and K12 education is finally looking at technology to supplant and transform, rather than simply to supplement. At the same time, many are leveraging technology for data analytics, customized interventions, and blended learning that shift us from mass-production teaching to the more efficient, mass-customization personalized learning model.
  7. Educators as Digital Natives: Interestingly, in the past, it has been more veteran teachers that have gravitated to technology than younger teachers who grew up with technology. This is likely starting to change as the technology use by the young teachers and administrators in their personal (and learning) lives is much more prolific in today’s world of mobile apps, virtual communities and online everything. The education workforce is shifting over rapidly post baby-boom generation, and their technology use will follow.
  8. Digital Native Students: Not much need be said. Students are too often disengaged not by the lack of technology but instead by rote lectures and static text. They understand they must be engaged and challenged, and allowed to explore and personalize their learning. They see how technology supports them outside of school. Educators are responding to their demand to bring that robust learning environment into their curriculum or risk losing too many more students to boredom.
  9. Expanded Distribution: While the proliferation of channels — technology platforms as well as consumer forums — can be a challenge for developers, these will be outweighed by the benefits. Mobile devices and app stores are increasing access and reducing consumer risk. Formal and informal learning are blending as parents and non-school learning providers gain access to new tools. Teachers are no longer reliant on slow, one-size school or district-wide purchasing decisions, but instead can use a debit account to download a product for just one or a few students. And a number of repositories and social networks are providing single points of information (if not yet a point of sales) for all products (and marketing).
  10. Parental Advocacy: Increased parental exposure to learning technologies at home is driving their demand for use at school. While parents were sometimes the road block to school board investments, they are more often now leading the charge.

These differences do not imply that every new product and company will succeed. For better or worse, there are probably too many products on the market relative to the number of average users required for product success. Whether investment is all flowing to the right solutions and the right entrepreneurs is still an open question, but it is undeniable that there is growing demand and opportunity for technology in education.

It is also important to note one related potential market challenge — vendor lock-in of content and data. A dynamic market requires minimized barriers to entry such that (school and individual) users are empowered to seamlessly move among existing and new products with minimal risk. SIIA therefore encourages education decision makers and application developers to invest in interoperability. By creating and demanding applications built on common data, content and API standards, information and resources can be more easily shared and exported among any number of proprietary or open applications, thus reducing the risk to educators of a failed product or company. Such standardization is critical for the maturity, and therefore the growth, of the digital learning market, and will ultimately best serve both education and education providers.

These 10 important developments should encourage today’s developers and investors. While the ed tech bubble may not float ever higher, a burst is not likely this time around.

Mark SchneidermanMark Schneiderman is Senior Director of Education Policy at SIIA. Follow the Education Division on Twitter at @SIIAEducation.