Free Isn't Always Free – Why don’t we look gift horses in the mouth?

When I worked in a K-12 district nearly 20 years ago, I first encountered a so-called “free” solution to benefit schools. Although I was very suspicious and avoided these “free solutions” many of my peers did not. Their results, while perhaps enjoying short-term benefits from these technology tools, resulted in lackluster long-term issues and disastrous consequences for others.

Yet decades later, schools are again availing themselves of “free” technology solutions to advance education, only to become prey to a new generation of venture capitalists, whose motives and long-range business models are not always clear.

Either by exploiting information, generating page views, hoping for upsell opportunities beyond “freemium” offers or redirecting cost burdens, these issues have remained constant for several decades. History has shown us these business models have unstable futures, resulting in an abuse of the relationship or a company that suddenly folds.

So why are K-12 schools today still allowing themselves to be duped when history has taught us to be wary of such models?

 

My first “free” encounter

It was the mid to late 1990s and I was learning to code in order to create my school district’s first web site. Coding in nothing more than Notepad and using Netscape Navigator, I colleague told me there was a much easier way. Their school was using a free service, and tools like American School Directory and Family Education Network were being using by a growing number of schools.

At the time, their business model focused on advertising and generating page views. School web content was limited to the bottom right on the page, but the web host maintained their content along the top and left sides of the page, insuring prime web page space was used for their brand and paid advertisers.

Some, at the time, took the liberty of creating web sites for schools and districts, with or without the permission of the local schools. I recall ASD referring to my district as “Home of the Lions” where we were actually “Home of the Golden Tornadoes.” Yet many schools and districts would use ASD or FEN at the time to build the online communication channel, ultimately surrendering the greatest value to the vendors (contact lists, prime web space positioning).

In the years following, web sites focusing on “free fundraising” for schools would do the same – marketing under the guise of raising money for a school with or without the consent of that very school (SchoolPop, SchoolCash, etc). But at the dot.com bubble burst in 2000, these companies folded left and right, leaving schools to quickly scramble to replace a lost web site….overnight without warning for some schools.

I must admit. I was guilty too of being part of this model 15 years ago. I was recruited to be Chief Communication Officer for rSchool.com. Owned by one of the leading school fundraising companies and a top grade book software company, they offered a portal solution that not only let teachers post information, but allowed parents to access their child’s attendance and grades….all for free. The owners and venture firms believed that they could do enough online fundraising to make enough profit for the site.

They were wrong. And when new rounds began, the board began discussing charging parents a fee to access their child’s information – something I believed only further emphasized the digital divide. I left along with other executives, and the company folded not too long afterwards.

Rocket to Today

Free school web sites and free computer labs of the 1990s have been replaced with their modern-day counterparts. Today, the new rage is around free classroom web sites, social networking, single sign-on, student performance dashboards and grade books. The business models follow quite identical patterns to their predecessors from two decades ago, and even though past experience would be a valuable lesson, schools are signing up in droves for these services.

What could possibly go wrong? Let’s examine some of the business models for these companies, and pinpoint where they might be in trouble. I've opted not to cite specific companies by name out of consideration for their employees, several of whom I have great respect for.

  • Business Model #1 – Give it away to schools but charge other vendors – On the surface this seems like a win-win for schools. Of course for-profit companies should pay instead of schools. But when a service charges a fee to a vendor, there is a likelihood that not only have they passed that cost onto the school customers, they've even attached a margin above that cost to turn it into an additional revenue-generating source. So while schools may think they’re getting a service for free, valued at $5 per student, in actuality, the school may be paying $20-30 per student once every vendor charges their markup and profit.
  • Business Model #2 – Give away the freemium edition for life, but hope they pay for upgrades – We’re seeing companies across several niche areas attempting to leverage this one, and current track record doesn't look promising. A basic platform for their solution is offered completely free to schools, but the company keeps trying to sway you to fee-based premium features, or thinking parents will be willing to pay for extra features. For the moment, you think you’re getting the best end of the deal, with good enough solutions without spending a penny. But the moment the venture capitalists get upset by a missed quarterly revenue target, how likely will it be that every school – especially the ones using just the free service – will be required to pay? When the similar bubble burst years ago, fewer than 5% of schools were willing to actually pay money for these services….not the sort of statistics that these start-ups wanted to hear.
  • Business Model #3 – Excessive reliance on eRate Funds – While not so much a “free” offering, these were pretty close in concept. Starting back in the late 1990s, several of these companies offering web sites and email continued to thrive, claiming 85-90% of their cost was eRate eligible. By targeting high poverty schools, nearly 90 cents of every dollar was paid using outside funds. But with 2015-2016 changes to eRate, these companies have hit a wall. They’re quickly trying to reinvent themselves or drastically reducing their prices and profits, while many schools have ended their contracts and are struggling to find replacement solutions their budgets can afford.

Now some companies have offered “pilot” programs or special up-front incentives to get schools to try new solutions. Using a low or no-cost model here is a legitimate, risk-free way to allow schools to test the products and see if educators feel they will have a positive impact. Right from the beginning, there’s a clear expectation of cost, and a reputable start to a vendor-LEA relationship.

So before your district accepts the newest gift horse, or perhaps as you reconsider what gift horses you’re currently using, maybe now would be a great time to evaluate whether or not they truly offer a stable ride or an opportunity to get “bucked” to the ground.


Elliott Levine is Americas Education Strategist for HP. A former K-12 official and regular public speaker, he has worked for and launched start-ups in the education and marketing industries. He is featured as one of three HP employees making a difference atwww.hp.com/go/jobsAll opinions expressed are personal and may not represent those of HP. You can learn more about him atwww.linkedin.com/in/elliottlevine/.

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