AI: Likely the gravest long-term threat to HE aggregators

It cannot be much fun being an agent aggregator right now. Once the darling of the edtech world, with eye-watering valuations and record levels of investment, they now face a far less rosy future.

Student caps, more regulation, a number of whistle-blowers and growing anti-immigration rhetoric in three of the major Anglophone study destinations – Australia, Canada and the United Kingdom – mean that making the numbers add up is becoming increasingly problematic. What does this mean in real terms for aggregators and institutions alike? Look before you leap!

Having written extensively about agent aggregators, first in March 2021, in “Risks to universities from the rise of agent aggregators”, followed by “All recruitment agent aggregators are not created equal” in April 2021, then in May 2021 with “Go compare – The emerging threat to higher education” and in August 2021, “There is more to student recruitment than edtechs offer”, we are not surprised at this fall from grace.

For aggregators, an initial concern is that investors will want a return in an evolving market in which a return is looking increasingly hard to deliver.

Aggregator models

Aggregators work on various different models. Some, for instance, are members’ clubs for agents and universities who pay an annual membership fee and are matched up to provide increased student applications and, universities hope, admissions. This model will be hit by increased regulation and scrutiny of agents and their numerous sub-agents.

The other more common model is where the aggregator takes a percentage of the agent’s commission for increasing the lead pool and reducing the administrative burden on the agent and education institution.

For agents it can provide a greater pipeline of prospective students as some of that investment is ploughed into business to consumer marketing worldwide and can also help them achieve their commission payments on time. For universities it can cut down on juggling multiple relationships with numerous agencies.

The issue with the split commission model is that the aggregator only gets a percentage of the agent’s commission, with the agent keeping the majority. Even if the aggregator’s share is as high as 30%, it means that for them to turn a profit they need a significant volume of prospective students to make it work. So if study permits are cut as they were in Canada by 20%, you can say ‘cheerio’ to 20% of your revenue.

Increasingly problematic for many aggregators is their reliance on private sector colleges delivering their own or joint programmes with public institutions. In some places the government net is tightening on private provision and public-private partnerships (PPPs).

In Canada, for instance, PPPs are now restricted to domestic students, with study permits focused almost exclusively on publicly funded higher education institutions, meaning this lucrative PPP market has pretty much dried up overnight.

That said, looking at the various aggregator platforms, they still seem to be promoting PPP courses to international students, even though these colleges have now lost their licences to recruit internationally. This could be due to contractual obligations to the colleges concerned prior to the contracts ending.

Even if this is the case, it is very misleading for prospective international students. If aggregators are really aiming to educate the world through their platforms and partnerships, the information on such platforms should not mislead prospective students into pursuing courses they are no longer eligible for.

Managing regulation

In Australia those working in international education are facing a myriad of changes, with individuals and agents being encouraged to blow the whistle on so-called ‘bogus’ or ‘ghost’ colleges and private education providers given less favourable risk ratings, slowing down visa applications and increasing bureaucracy for the aggregators and students they serve.

Some aggregators have seized on the increased bureaucracy due to growing regulation and have announced that they will help universities to navigate any interest through technology-enabled solutions. One cannot help thinking that the cause of the increased regulations due to a growing number of bogus applications may now be presenting itself as the solution in a poacher turned gamekeeper scenario.

That said, managing administration and regulation may be an option. Aggregators may seek to become full-service providers, taking on board the back-end admissions tasks of lead screening, applications, and offer management and conversion activity.

This is an attractive option as it can be effectively managed through technology. That said, it has been tried before. Australia was the trailblazer with managed international recruitment solutions effectively outsourced by some very high-profile universities for almost a decade before they were brought back in-house.

Warning bells are ringing for anyone already providing enquiry and enrolment management on behalf of universities. Existing service providers should watch out as their market could become far more competitive and if there is any money left the aggregators could see this as their next frontier.

Other opportunities potentially lie in ‘fintech’. Any aggregator that can both place students and provide them with loans to study will prove an exceptionally attractive proposition in key source markets, particularly South Asia.

However, with the precarious state that many aggregators find themselves in right now, will fintech see them as a prudent investment? The jury is out on this one.

Are new markets the answer?

A solution offered by a colleague with extensive experience working in universities and for agents and aggregators was to refocus markets. Aggregators have specifically focused on the major English-speaking markets. As governments are making their lives so much more difficult to operate in these traditional countries, they should look to Europe, the Middle East and North Africa and Asia to safeguard their futures.

The issue with Europe is the lack of lucrative international tuition fees. However, a focus on private institutions could be one way of mitigating this problem and shoring up their finances, plus a focus on the branch campuses of their traditional clients in Australia and the UK that are operating overseas in Dubai and Malaysia, for example.

Asian study destinations are growing in popularity and could be growth markets. China, Hong Kong and Singapore could prove fruitful markets, particularly for students from the wider Asian region who are looking to study closer to home following the pandemic and to stay connected with their home networks with a view to future employment prospects post-graduation.

All options to shift market focus have merit, but, as anyone in business will know, shifting focus from one market to another is not without risk: it can be very expensive and take time to yield results. Do aggregators have that time?

AI: the new frontier

Artificial intelligence (AI) now permeates every facet of modern life, with its impact on education poised to be profound and enduring. The response from educational institutions – whether they advocate its integration, resist it or remain indifferent – is unfolding in real-time. Yet, amidst this dynamic landscape, few are considering the global recruitment prospects and the subsequent winners and losers that will emerge.

For example, ChatGPT renders the conventional confines of aggregator selection categories archaic and confining, akin to the pre-streaming TV, pre-mobile phone and pre-internet era. It promises to overhaul the process of student exploration and selection for universities by offering lightning-fast, highly personalised searches.

Crucially, AI is able to eradicate the frustrating bias of existing platforms, which often prioritise universities based on financial arrangements rather than merit.

For astute universities, these changes present an opportunity to spotlight their unique strengths, armed with comprehensive insights into pricing, academic excellence and post-graduation prospects. The emphasis will shift from relying on rankings as a proxy for quality to genuinely addressing student expectations.

Consequently, there will no longer be a need to rely on intermediaries, such as agents and aggregators, as students can autonomously navigate their search process.

Writing on the wall

The word on the street is that some aggregators are already shedding staff and haemorrhaging clients who are worried about their exposure to sub-agents through the aggregator model as well as increased scrutiny and regulation.

While AI probably represents the gravest long-term threat to aggregators, it is yet to register on many universities’ radar. Some will claim that some aggregators are ‘too big to fail’, but we must remember that is what they said about Enron and Lehman Brothers and look how that turned out.

First published on University World News, by Louise Nicol, at 25 May 2024, AI: Likely the gravest long-term threat to HE aggregators