Digital Thoughts - University of Phoenix Does It Again

University of Phoenix Does It Again

by Editor

In February of 2006, University of Phoenix shook up the lead generation space by forming an exclusive partnership with Advertising.com. This meant that any company that produced leads or wanted to produce leads for University of Phoenix had to go through Advertising.com. Most of us first learned of the deal a few days after its closure when parent company Apollo Group's President Brian Mueller announced it as part of a turn around strategy to lower their cost per enrollment. Phoenix wasn't the first for-profit education company to outsource its online marketing. Whole companies exist to offer this service, including Datamark, CUNet, along with agencies such as Avenue A / Razorfish who has for years managed all of Capella's lead buying. Few might have expected University of Phoenix to follow that route given their comfort and early leadership role in the space. Similarly, few would have predicted them to choose Advertising.com or that Advertising.com would even consider such a deal as it required them to stop doing business with all other education companies.

Those inside the lead generation space, namely those generating the leads for institutions such as University of Phoenix, found the deal even more surprising, if not alarming. Some of the larger ones had an idea that Phoenix wanted a unique partnership, but those making the best candidates didn't want to lose 60% to 80% of their existing revenue as Phoenix sought exclusivity; those that could drop everything for Phoenix generally didn't have the technology and expertise to add the value the number one education player wanted. As education wasn't core to Advertising.com's business, they were in a position to make that bet and align themselves with University of Phoenix even at the risk of disappointing their other major spenders such as Career Education Corporations' AIU Online. This explains the logic but not the alarming piece. The deal unsettled those providing the leads because unlike Datamark or the better example, Avenue A / Razorfish, Advertising looked more like a competitor than a vendor management firm.

Unlike Avenue A / Razorfish Advertsing.com had access to inventory, lots of it, along with a skilled media buying team and contacts at every major inventory source. In addition, it had search technology and handled some large clients campaigns, ones that required Advertising.com to maintain certain CPA objectives. If UOP wanted to lower their enrollment costs what better way than to funnel all activity through Advertising.com then allow Advertising.com to purchase media smarter based on the activity of the other lead providers. Fortunately, despite these concerns the past 18 months have hummed along smoothly with no major incidents or breach in trust. They hummed along from an operations perspective but necessarily from a financial perspective. When the two companies announced the deal, Apollo stock traded in the $50's where it had just crash landed after disappointing earnings. At the end of 2005, the stock traded around its all time high in the low $70's, but had retreated into the $60's throughout the beginning of 2006 only to then languish in the aforementioned $50's. That changed in October, when their earnings came in well below expectations. In one day, they lost billions in market cap, going from low $50's to low $30's. Ouch. Had you decided to buy then, good move. By December of 2006, it had made it back to $40, a 30% return in two months. It climbed in spurts into the upper $40's by June 2007 (60% ROI), and then at the end of June 2007, excellent earnings propelled it to $60. In less than a year, you could have doubled your money.

From the beginning of the University of Phoenix / Advertising.com deal, Advertising.com seemed poised to benefit the most. With last months earnings results, you might (finally) call it equally beneficial and worth continuing, but in an even more surprising turn of events than the original March 2006 exclusive partnership comes the announcement this week that Apollo has struck a deal, this time purchasing an internet advertising firm. Sticking with their preference for companies that start with "A", Apollo has agreed to buy Aptimus for around $48 million. That number comes from the $6.25 Apollo will pay for the currently publicly traded Aptimus (APTM). In the press release announcing the deal, Apollo President Brian Muller said, in a statement not all that different from the Advertising.com announcement, "This acquisition is another step to strategically position the company to best monitor, manage and control our marketing investments and brand," and that "Integrating Aptimus' technology and very experienced team into our current marketing initiatives and service center model will take us to the next level in managing student inquiries and achieving further process and cost efficiencies in new-student enrollments." Later he adds, "While the exclusive management contract with Advertising.com expires over the next several months, Apollo believes that the significant investments it has made in personnel and technology, as well as the acquisition of Aptimus, will enable the Company to efficiently and effectively manage Internet marketing internally, without any disruption." Translation, no more Advertising.com after February 2008.

I've re-read Muller's statements a few times, but I'm still a little confused by the purchase. Last year, we hinted that it might make sense for an institution like Apollo to not just partner but to acquire. From that perspective, it makes sense. But, Aptimus? According to their CEO Rob Wrubel, "This is a significant opportunity to deliver our business vision to one of the most important education companies in the market, improving their ability to reach new students." I guess he speaks of new students via-coregistration as that is Aptimus' business to date. And, if I were to buy a company, I might buy one that actually made money. Aptimus lost money last year, and they earned all of last year what Azoogle earns per month. Not only did they lose money, but they saw no top line growth year over year, most likely attributed to their exiting the incentive space. Perhaps in the end, Apollo will pay close to $50 million for people and tracking. They have eighteen months of information and process expertise from Advertising that they can port over to the Aptimus team. We'll see if this move turns out to be penny wise and pound foolish as it looks like a way to avoid paying commission to Advertising.com, which surely equals about $50 million per year.

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Share your Comments

Does anyone know how much UOP pays for thier leads?

Posted by: Erin Date: June 16, 2008

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I'd be interested in what the University of Phoenix pays too as they have a lead generation, CPA program that I'm told works well. The proof is in the pudding, though.

GR
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Posted by: GR Date: December 12, 2008
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I believe larger online colleges tend to spend around $100-$150 per lead. That seems to be the going rate.

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I'm also looking for this program. Any luck? -thanks

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I am also looking for UOP affiliate programs

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how much do they pay per lead?

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I wish we had a marketing budget like that!

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probably a high paying program.

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I can't believe you're not paylnig with me--that was so helpful.

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Any news on affilite program for uop?

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