Blackboard acquiring Wimba and Elluminate is probably the biggest education news of the summer. Blackboard is already dominant in postsecondary learning management systems, so why did they do it?
It certainly wasn't because the financial terms of the deals were too good to pass up.
From a financial standpoint, Blackboard is paying $116 million for the two companies. They expect $6 million in revenue for the last third of the year, which would point to annual revenues of $18 million combined. According to the release, renewals of current contracts can be expected to yield $27 million of revenue. In any case, Blackboard is paying 4 to 6 times current revenues. This is a very high multiple, and would require extraordinary sales growth to justify. Since Wimba and Elluminate combined dominate the education sector's use of video conferencing, webinars, and remote video collaboration, it is very questionable whether Blackboard will be able to grow this sector of the business so that sales of Wimba/Elluminate services economically justify the purchase price.
Michael Chasen and Ray Henderson are anything but stupid or naïve, so why did they do this deal, then?
The role of Learning Management Systems has changed dramatically over the last ten years. The first higher education learning management systems were places for professors to place materials and students to submit assignments. These were different from Content Management Systems, which allowed learners to follow a learning path through a course, grading systems, which kept track of grades, enrollment systems, which allowed students to enroll in classes, student accounting systems, which tracked payments and expenses, data warehouses, which allow analysts to mine the various systems for actionable trends, and all the other myriad systems that schools use to run their academics and operations.
Today, in both K12 and postsecondary, there is a growing need to integrate these systems. In higher education, schools have tried to patch together brittle middleware applications to bridge the various systems. This has not been an issue yet for K12, because of low penetration of the LMS into public schools. But federal calls for increased use of data, and the need to handle more students and show better results, with decreased resources will likely hasten the introduction of the LMS in elementary and secondary schools.
Blackboard may be looking back 20 years to what Microsoft may have been thinking in the late 1980's and early 1990's. Microsoft Word was the third or fourth place word processor. Excel was the second most popular spreadsheet. Forefront was selling the second most popular presentation program, called PowerPoint. Microsoft bought Forefront, and then integrated the three applications into one bundle, MS Office, which has controlled the desktop word processing, spreadsheet, and presentation market for over 15 years.
Perhaps Blackboard has a similar vision for defining and dominating the school platform market.
