Growth opportunities in the education data sector
September 27, 2016
- Review of the UK education business information landscape
- What makes a good business information company?
- Growth potential of the sector could be attractive to investors
Big data. Information. We’re all told that these are becoming increasingly important for businesses. We at PwC are often asked about the opportunity in education data - everyone knows that there is an opportunity and presumes that it will, one day, be large. The question is, as ever, when will this come to pass?
Education institutions and those that service the education and skills sector can now access more information than before. The trick is converting data into useful information that gives businesses the insight they need to turn a competitive advantage.
The education market is both large and growing. It is the second most significant sector in terms of employment globally and is fourth by contribution to global GDP. In the UK the education and skills market is worth around £100bn and growing.
In our recent review of the UK business information landscape we identified just over 20 companies providing market data on the education sector. This data is mostly being used for marketing to recruit students, for selling to schools or universities and to catalogue research data in journals and monographs.
The nature of business information providers means that they can be slightly monopolistic. This is because data contributors are not that willing to engage with more than one aggregator and providers are able to benefit from the network effect in data, with more data making each component more valuable.
What makes a good business information company?
Good business information companies have strong products that their customers cannot do without. Across the companies we reviewed we saw average volume retention rates of about 80% and value retention rates of around 90%. Education is a friendly environment for renewal rates. That said, there’s a mixed performance when it comes to automation, with many having manual processes to serve customers.
Across those we sampled the exclusivity of the data differed with some collecting or developing unique and proprietary data and others delivering analysed public or customer data. How critical the data is to the end user also varied as a result of the data quality and how quickly it dates. Time-sensitive data tends to have more value associated to it than static data.
Our work in this area has taught us a lot about what can be done to enhance the value of these businesses - including many lessons that can be taken from other sectors. In particular:
- Embedding the customer journey into day-to-day workflow is vital for easy take-up and “stickiness”
- It is hugely advantageous to widen the customer base so that your data is used as a "common language" that wider segments can invest in
- It is important to return value in exchange for data contribution, whether from partners or customers
- Pricing needs to be sophisticated in order to reflect the different ways organisations use your data - but this doesn't need to mean complicated
Compared to business information providers to other sectors, the education data and business information sector is relatively immature. There are many easily-identifiable areas where businesses can expand such as finding new ways to apply data to customers’ challenges, marketing adjacent products and services and becoming better embedded in their customers’ workflow, to name but a few.
We do see education data businesses being bought and sold. Knewton has raised around $150m between 2008 and early 2016. The Key was bought by Isfield Investments in 2014; Starfish was bought by Hobsons in 2015; GL Education was bought by Levine Leichtman Capital Partners this year. There are many more that are on the road to a transaction, and some that are secure in their current ownership structure.
Some companies are already emerging that, given time, may grow into £200m+ enterprises that we see across business information in other sectors. So there’s plenty of potential.
Read my full article in EducationInvestor to get our full review of the UK business information landscape serving the education sector:
Get in touch if you would like to discuss any of the issues I raise here.