May 21, 2018

Free School Software: Promises and Pitfalls

If you make decisions about software in school—if you are a technology director, a director of instructional technology, a principal, or an administrator in charge of directing instruction—when do you allow teachers to explore and use free software, and when do you set policy and provide a solution for everyone? 

There are an extraordinary number of free resources available for teachers. Try Googling “free classroom software” or “free teacher tools,” and you’ll get articles like: “321 Free Tools for Teachers,” “50+ Free Tech Tools for Your Classroom,” and “The 90 Hottest EdTech Tools According to Education Experts (Updated For 2018).” Some of these are excellent. But sometimes there’s a catch.

The Freemium Game: A Cautionary Tale from Edmodo

A look from the business perspective may help. Edmodo provides a good example. Edmodo was founded on September 2, 2008. Over the next few years, they raised more than $85 million from a number of famous venture capital firms. Their free social network (sometimes called “Facebook for schools”) quickly grew to 15 million users in 2012 and 75 million users in 2017. 

In 2012, Edmodo began to look for a way to earn revenue off of its user base, releasing Spotlight, a digital marketplace for apps, lesson plans, and worksheets. In 2014, they released Snapshot, an assessment tool for which Edmodo charged a premium fee. Edmodo also offered an enterprise version of their application, with a custom subdomain, single sign-on, automatic rostering, and analytics. Finally, they offered professional development: in-district workshops for $2,500 to $7,500. 

But none of these efforts bore fruit. On April 6thof this year, Edmodo’s owners sold the company to NetDragon. As part of the transaction, Edmodo disclosed their financials: in 2017 the company had just $1 million in revenues, with more than $20 million in expenses. 

NetDragon is a Chinese company whose primary product has been MMORPGs (Massively Multiplayer Online Role-Playing Games) like Eudemons Online and Heroes Evolved. It is not clear what Edmodo’s future is within NetDragon. In its filings related to the acquisition, NetDragon says, vaguely, that it plans “to develop a game-changing learning ecosystem.”

But NetDragon’s games business turns a $105M profit, and its existing education business produces a $66M loss. What will it do with its education assets to make them productive? Edmodo users have raised questions about the safety of their personal information on the platform and also about NetDragon’s commitment to maintain and continue to improve the software.

Edmodo has followed a common pattern for well-funded Ed-tech startups. They raise money, offer an attractive free service, gain a significant user base, raise more money, and then try to find a viable revenue model. When that fails, they close or sell. This “land grab” strategy that has been so successful for many consumer online services (like Facebook or LinkedIn) doesn’t work well in K12 education, because the most obvious source of revenue from a large user base—advertising—is not appropriate when your user base is K12 students.

Does This Remind You of Anything? 

Another well-known free K12 service seems to be on the same trajectory. Remind was founded in 2011—three years after Edmodo. It has also raised a significant amount of money: $60 million so far. They have now surpassed 35 million users. In 2016, they replaced the founder with a new CEO, Brian Grey. They then hired Dan Trepanier, an experienced software sales leader. In order to generate revenue, they released a new offering called “Activities,” a way for teachers and administrators to collect fees from parents for field trips and other events, for which Remind charged a 5% transaction-based fee. In 2017, Remind began offering a premium version of its service—with SIS integration, an administrator dashboard, and the capacity for longer messages—at $4 per user per year. 

The Activities offering wasn’t successful and was shut down in 2017. It remains to be seen whether Remind can convert teachers used to the free version into paying school and district customers. I can find no evidence or announcement that Remind’s “premium” effort has been successful to date. If it isn’t, Remind may end up in same position that Edmodo is in.

Where Does Google Classroom Fit?

Google’s Classroom seems to be an exception to the boom and bust pattern described above.  With $13B in net income and over $100B in cash in the bank, Google is unlikely to run out of resources to support Classroom anytime soon.  And because Classroom is strategically significant for Google (as I explored in this posting earlier), it is unlikely to lose interest in Classroom, as other large technology corporations have done with their education efforts in the past.  The question for educators with respect to Google Classroom is different from Edmodo or Remind – it is whether educators are comfortable helping Google induct kids into the Google environment.  I thought this post was a good exploration of that question: Google's Got Our Kids

When to Go Freemium—And When Not To

From an educator’s point of view, does it matter if/when these services disappear or change business model? Sometimes yes and sometimes no. Let’s take two extreme examples: a small math application that a few math teachers use for a few days a year to get some specific points across, and on the other hand the school’s student information system (SIS). If the math application disappears or starts using advertising to generate revenue or begins to charge for its service, those teachers can easily move on. On the other hand, the disappearance or change in the business model of a free student information system might upset critical school processes and risk the security of student information. 

With the examples above in mind, we can construct a rubric for separating the kinds of applications that are appropriate for experimentation with free versions, and those that should be purchased, controlled, and managed by the school.

RUBRIC: FREE VS. CONTRACTED SOFTWARE

Category

Note

1

2

3

4

5

Reason

A few or all students

What portion of the student body will use the service?

The greater the portion of the population using the service, the greater the impact of its change/disappearance.

Short term or long term

Is the service likely to be used for a short period of time (less than one year)? Or likely to be used for longer – four to eight or more years?

Longer expected time horizon calls for greater need for product/company stability.

Ancillary or critical

Is the service fundamental to the school’s processes?

Disappearance/change of a core service is damaging to a school, while changes in ancillary services are less important.

Network benefits

Are there significant benefits to having all students (and teachers and parents) on the same system?

If a service works best when everyone has it (like a messaging system), this argues for school-wide adoption.

Sensitive data

Will the system house personally identifiable information?

School-wide contract with strict privacy policy is a must.

Support required

Will the service require support (either from the company or from the school/district technology staff)?

Free services can place a burden on school tech personnel time (a real cost).

If a contemplated software service scores mainly 4’s or 5’s in the rubric above, it is probably more appropriate for the school or district to contract for the service. If it scores 1’s and 2’s, it’s reasonable to allow teachers to experiment with free offerings. 

Freemium and the Free Rider Problem

Edmodo and Remind are interesting examples. When they were first released, I believe most educators would have put them on the left-hand side of the scale. As teachers and schools have come to rely more heavily on online communication, Edmodo and Remind have moved to the right—they have become more critical, the data stored more sensitive, support requirements have increased, and there is a greater benefit to having everyone on the same platform.

As they try to move their users from their free platforms to their premium, paid platforms, Edmodo and Remind face a difficult problem, sometimes called a “free rider” problem. Since most users will prefer to stick with the free version (it’s good enough…), the few schools that do decide to upgrade will pay a higher fee to cover the cost of all of those millions of users who aren’t paying. Edmodo’s CEO admitted that if he could get each one of his users to pay just $0.40, he would break even. Since only a small portion of users are expected to pay, these companies need to charge more. Remind’s enterprise service, for example, is reported to cost $4 per user. The high price makes crossing the chasm from free service to real business even more difficult.

At eChalk, perhaps through sheer stubbornness, we have always charged a reasonable fee for our services and have never offered a free product. We have been in business for nineteen years now. We have never experienced the world-dominating growth that would please a Silicon Valley venture capitalist, but we have delivered a very high-quality service steadily since the last millennium. We have just released a mobile notification system which lets teachers and administrators send notes to an app on students’ and parents’ and community members’ mobile devices —similar, in some ways, to Remind. And what do we charge? $0.75 to $1.75 per user.