Online education went mainstream in 2020. Stride wants to make it stick.
A market leader for two decades, Stride is looking to capitalize on the virtual learning boom. Educators aren't yet convinced it's the right solution.
"If you give a mouse a cookie, he's going to ask for a glass of milk."
In 2020, a teacher may have read those opening lines to a group of students virtually gathered in an online classroom, asking them to think about what they would do if they were the boy in the story. But as schools reopen in 2021, education technology companies are hoping that students and parents think more like the mouse when it comes to virtual learning.
In the past year, the pandemic has forced millions of students to turn their homes into classrooms. The concept of digital transformation became as ubiquitous for school boards as it has been for their corporate counterparts. But online education isn't new. For the better part of two decades, students and parents have had the option to enroll in full-time virtual schools. What's different now is that nearly every student across the country has had a taste of what that experience is like. And ed tech companies' efforts to make that stick have reignited a clash between tech and educators over whether this type of education even works.
Stride is one of those tech companies that's been operating online schools for some time now. Founded at the tail end of the dot-com bubble in 2000, the company is a for-profit EMO, or education management organization. Until a rebrand in November, Stride was known as K12, a nod to three of its primary businesses: operating online-only public schools on behalf of independent boards, operating Stride private schools, and partnering with school districts to set up infrastructure for online and blended learning.
The name change is indicative of Stride's deeper push into continuing education and the booming corporate re-skilling market, but it's hardly a retreat from the core K-12 business. The company's latest earnings report showed a 35% year-over-year revenue bump and a 51% enrollment increase for its general education business, and also included guidance to raise overall revenue projections for the current fiscal year. Part of that financial success piggybacks on the idea that the broader exposure to online education this past year can help the company capture a larger share of the education market moving forward.
"Before the pandemic, our research suggested that maybe 3[%] or 4% of U.S. families were really open to a full-time online option," Stride's CEO James Rhyu said, noting that even that number was great news for the company, since that equates to 1.5 million students — significantly larger than Stride's current enrollment of about 200,000 students. "With the pandemic, there was a survey that said 70% of families now want online options," Rhyu said. "There's just now essentially been a shift in acceptance."
Previously Stride's CFO and president, Rhyu took the top management position in January, leading the company out of a year that showcased how difficult digital transformation can be, even for a company born on the internet. By early August, Stride's valuation had doubled since the beginning of the pandemic, eclipsing $2 billion. By the end of the month, a DDoS attack against Stride had taken the Miami-Dade school district offline on the first day of classes and led to the high-profile termination of that partnership. Three months later, the company paid a ransom via a cyber insurer following a Ryuk ransomware attack that ended with stolen data.
But security challenges have seemingly been part and parcel of the use of technology in education in 2020, whether an EMO was involved or not. "Zoom-bombing" became such an issue in board rooms and classrooms that Zoom had to bring on cybersecurity veteran Alex Stamos last April to help right the ship. And across the country, schools using Google Classroom have reported unwelcome visitors making appearances during lessons.
Security issues aside, Stride still has the largest enrollment of all for-profit EMOs. Its stock price is still up more than 30% in 2021. And the company has charted a course to continue the growth of its career development offerings in a way that "seamlessly" integrates with its online learning. Those programs, which were responsible for just 10% of Stride's revenue in the second quarter last year, accounted for 17% of its second-quarter revenue this year. Moreover, this new focus allows the company to maintain a relationship with students past their high-school graduations.
"If you complement [basic education] with career skills training, then [students] graduate with not just a high school diploma, but with real career skills and then they can go into the job market," Rhyu said. "We're able to then help kids see a trajectory that, post-high school, [lets them] make some more informed decisions around what [they'd] really like to do in the workforce. They could ladder up from there and have continuing education that's not necessarily college or university-driven, but just adult education."
But even with that roadmap set, Stride still bumps up against the same problem that it's been grappling with for two decades: Many educators say the company's brand of online education simply doesn't work.
Gary Miron, a professor of educational leadership, research and technology at Western Michigan University, is one of those educators. In 2019, Miron co-authored a report on the influence of EMOs on the education system for the National Education Policy Center that found that students enrolled in school through EMOs like Stride underperformed in traditional school efficacy measures like student-teacher ratios and graduation rates.
According to that report, students in virtual schools had a graduation rate of 50.1%, and those in blended schools graduated at a rate of 61.5%, both well short of the national average for in-person schools, 84%. The report also found that the student-teacher ratio of EMOs was nearly three times higher than the national average.
"The reason we're seen as critics is because the findings are absolutely terrible, and the reason for that is the model that's being used doesn't make sense," Miron said. "It's for maximizing profit, not for serving children, not for representing taxpayer interest."
In particular, Miron points to the high student-teacher ratios as a major flaw for a company like Stride, arguing that technology's ability to bring more people into a classroom ultimately limits the amount of critical one-on-one time teachers are able to spend with students, which ultimately leads to dropouts.
"They don't have communication with students, they have algorithms that generate emails when a child hasn't been active for a week or two," Miron said. "They don't see the children, they don't hear the children, and the children exit in masses."
The problem that Miron describes in education is similar to one that social networks began working on years ago, after finding that user numbers alone may not translate into a better product, but that designing for personalization and engagement often do. And Rhyu's vision for Stride's future parallels the language that's now so closely tied to those social media giants.
"The average school just can't compete with us in terms of the engagement, the satisfaction of that digital curriculum and those resources that we bring to bear," Rhyu said. "The benefit of these online, blended or hybrid programs is it allows for a greater degree of individualized learning to the student and customized programs. It gives that flexibility that is really hard to achieve in a full-time brick-and-mortar environment."
But the fact is 2020 put brick-and-mortar schools and EMOs onto the same virtual playing field for the first time, though it's probably more of a home game for Stride. Either way, it represents an opportunity for Stride to show that its teaching mechanisms are, in fact, more effective than traditional brick-and-mortar schools.
To that end, Rhyu points to the company's Net Promoter Score of 74 and a study featured in Stride's investor day last year that found that Stride has an 84% satisfaction rate among families that engaged with its curriculum, positing that traditional schools would fare much worse if they were judged against that standard. He said he sees both as evidence of student engagement that goes beyond "controversial" metrics like state testing.
For Miron, the attempts by EMOs to change the measures of success are at odds with setting up a fair way to evaluate the virtual schooling options against traditional ones, though he does acknowledge the need for a "better authentic assessment" across the board.
"I don't know what they mean by engagement, but that sounds like bullshit because that's the one thing they don't do," Miron said of Stride, again pointing to dropout rates. "They wanted to receive public money and become a public school: The policymakers expect them to be held accountable in the same way."
Still, both types of schools operating on the same playing field presents new opportunities and challenges for each. As brick-and-mortar schools continue to grapple with the digital divide, they'll be forced to play the waiting game until they have enough data to understand the full impact of the pandemic-induced virtual shift. But with that comes a chance for educators to contextualize how online-only learning at scale really impacts students in a way that hasn't been done before.
"The districts will likely have equally poor outcomes [as the EMOs] after we look back at this year," Miron said. "But in the longer run, the districts can do a better job because they have teachers who have a relationship with the students and parents and community."
And on Stride's side, as vaccines are doled out through the summer and schools reopen, the number of parents who opt for virtual education could dwindle. But as the company looks to grow its skills-based education programs for students and adults, it will be presented with new efficacy measures around skill development and workforce readiness that could speak to the model's validity and change the conversation among educators moving forward.
"In most industries, in most sectors of society, technology has proven to be an enabler," Rhyu said. "That education is going to be the one area where technology is not going to be an enabler just defies logic."
After all, the company is betting that, like the mouse, if you give a student an online education during a pandemic, he's going to ask for more of it even after that pandemic subsides.T
This post has been updated to clarify that Stride operates online-only public schools on behalf of independent boards.