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eCollege Seeks to Sell Datamark

October 20, 2006

Citing slower than projected growth, eCollege, a company that provides online educational learning services,  announced a plan to potentially sell its enrollment marketing division, Datamark, Inc. Wednesday – a move, one analyst said, caused by a cool(er) front descending upon the once white-hot for-profit education market.

 “We believe that long term, Datamark can achieve solid revenue growth and attractive earnings growth,” Oakleigh Thorne, chairman and CEO of eCollege, said in a statement. “However, those growth rates are slower than we anticipated when we acquired the business in 2003.”

The majority of Datamark’s clients come from the for-profit education sector, said Reid Simpson, chief financial officer for eCollege. But while the overall for-profit market has cooled, Simpson said that the primary reason for Datamark’s slower than anticipated growth is the decision by one major client to freeze its marketing spending. Simpson declined to identify the client or its reasons, but said that it is a for-profit university.  

“The growth rates have not grown as fast as they had been growing previously,” Simpson said of for-profit educational institutions. “But I think that depends to a certain degree on  the individual school.” Simpson said he believes that enrollment marketing is still a growth business, but that eCollege does not anticipate Datamark’s growth to meet its corporate growth threshold.

Datamark’s model of recruiting and retaining students is based in part upon “lead generation” and “lead conversion” -- that is, attracting students, or “leads,” via direct-mail, e-marketing, television and advertising campaigns, and boosting enrollment by “converting” those leads into students. While that strategy has worked well in the for-profit markets where Datamark has thrived, many nonprofit institutions think viewing and interacting with students as “leads” is antithetical to their purposes, said Trace Urdan, an analyst of for-profit education for Signal Hill Capital Group.

“I think the hope for Datamark has been that they would be able to crack the code and penetrate the traditional, not-for-profit university world, but I think that the process has proven more difficult than they thought it would be when they bought Datamark,” Urdan said.

 “The whole language of how the for-profit world looks at this is antithetical to how the traditional world does,” Urdan said, noting that not-for-profit adult education is  a significant, and growing, exception.

Simpson said that while there have been some successful attempts to make inroads in traditional not-for-profit  institutions, the focus of Datamark has consistently been on the more lucrative for-profit sector. “The for-profit schools are frankly the schools that have dollars available to spend on sales and marketing,” he said.

“The demand for those services we think is fairly solid.”

eCollege did not commit to selling Datamark, but has contracted another group to assist in identifying and pursuing the option. Several potential buyers have expressed interest, said Simpson, who added that eCollege received several inquires on Thursday.

 

 

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