At the end of January, Sparkroom released the results of a survey by we sponsored that asked professionals in higher education marketing questions about where they are focusing their online marketing efforts, what’s working, and what isn’t. The survey offered some interesting benchmarks for schools in 2010 – I’ve pulled out a few of the more interesting numbers below. If you haven’t seen these results yet, as we approach the end of the first quarter, now might be the perfect time to see how you and your school compare.

Earlier this week, I attended CCA’s annual Hill Day and Policy Forum in Washington, DC. It was a great event, with over three times the number of attendees of previous years. This turnout wasn’t entirely surprising, considering the legislative issues unfolding in Congress and the Department of Education right now. Regardless, it was great to see the career college community come together and show such a strong, unified front. It was also great to have a chance to meet up in person with peers and friends from across the country.

When I returned from the event, a colleague asked me to explain the issues and concerns around the Department of Education’s rulemaking on Federal financial aid programs. I thought I’d just send her a link, but I couldn’t find a site that pulled the relevant details together in one place. So, for anyone who is trying to understand these issues, I thought I’d share the summary I pulled together.

A Primer on the Department of Education’s Negotiated Rulemaking for Title IV Programs

1. What is negotiated rulemaking?
   When a government agency (ie. The Department of Education) proposes a change to a regulation, it is usually develops the proposed changes without public input and then publishes them in the Federal Register for comment by the public. In some cases, an agency is required to use a process called “negotiated rulemaking” which allows those parties that will be most affected by the regulation/rule change to participate in the development of the proposed rules before they are published in the Federal Register. The Department of Education is specifically required by law to use negotiated rulemaking for Title IV, Higher Education Act (HEA) programs.

   A complete FAQ on the negotiated rulemaking process is available here: http://www2.ed.gov/policy/highered/reg/hearulemaking/hea08/neg-reg-faq.html

2. Why did the Department of Education establish a negotiated rulemaking committee?
   The Department of Education established two negotiated rulemaking committees for 2009-2010 – one to develop proposed regulations governing foreign schools, and the other (which is the one we are concerned with) was established to develop proposed regulations to maintain or improve “Program Integrity” in the Title IV, HEA programs (Student Assistance programs). The goal of this committee is basically to prevent abuse of the federal financial aid programs. A more complete explanation by Robert Shireman, the Deputy Undersecretary of Education, can be found in the transcript of a call with Career College representatives held on May 29, 2009 ( http://www2.ed.gov/policy/highered/reg/hearulemaking/2009/call-career-colleges.pdf )
   
3. What issues are the “Program Integrity” negotiated rulemaking committee addressing?
   The committee is negotiating on 14 rules/rule changes in the following areas:
   Definition of High School Diploma; Ability to Benefit; Misrepresentation of Information to Students; Incentive Compensation; State Authorization as a Component of Institutional Eligibility; Gainful Employment in a Recognized Occupation; Definition of a Credit Hour; Agreements Between Institutions of Higher Education; Verification of Information Included on Student Aid Applications; Satisfactory Academic Progress; Retaking Coursework; Return of Title IV Funds: Term-based Programs with Modules or Compressed Courses; Return of Title IV Funds: Taking Attendance; Disbursements of Title IV Funds

   A full explanation of each of these issues can be found here: http://www2.ed.gov/policy/highered/reg/hearulemaking/2009/integrity-session3-issues.pdf .

4. What issues are the most contentious and why?
   The two issues causing the most concern for career and community colleges are around the definition of “gainful employment” and the issue of “incentive compensation”. An explanation of each follows.

   Gainful Employment: Most for-profit, career and community colleges & universities are eligible for federal aid based on their ability to “prepare students for gainful employment in a recognized occupation.” The proposed goal of the negotiated rulemaking was to define/create a standard for what is considered “gainful employment”. The final proposal for defining gainful employment involves capping annual debt repayments at no more than 8 percent of a program graduate’s expected salary over 10 years.

   Serious concerns were raised with this approach. First, it singles out students attending proprietary career, technical, and vocational colleges. Many of these programs serve predominantly adult learners, single parents, and low-income students who need the flexibility that for-profit career colleges can provide. These students are also the most in need of Title IV funding. If the real concern is with the high debt burden incurred by some students, any proposed changes should affect students attending non-profit and public institutions as well. Other concerns raised during the negotiations include a potentially “slippery slope” of price controls for all higher education institutions; the significant work/time required to implement this on a program-by-program basis; and concerns with whether the DoE has the necessary authority to regulate on this issue. More details on this issue can be found here in an article in Inside Higher Ed.
   
   Incentive Compensation: In order to receive Title IV funding, institutions are prohibited from providing staff with any commission, bonus, or other incentive payment based directly or indirectly on success in securing enrollments or financial aid. There are 12 “safe harbors” or types of payment and compensation plans that do not violate this statutory prohibition. The proposed rule changes would eliminate those safe harbors. Although the two sides were much closer at the end of negotiations, according to Inside Higher Ed, issues around language remained.

5. Where do things stand now?
   Following months of negotiations between the DoE and the panel of negotiators (representing two- and four-year nonprofit institutions, for-profit colleges, students, consumer advocates and campus administrators), a consensus was reached on nine of the 14 issues being proposed. On the remaining five issues (including, most notably, the definition of gainful employment and incentive compensation), no consensus could be reached. According to Inside Higher Ed, “Without overall consensus, the department is free to revise all 14 rules as it sees fit before releasing them for a final round of public comment.” The lobbying continues and we’ll wait to see how it all works out.

Today, we are excited to announce that we have signed a definitive agreement to be acquired by CUnet, a leading provider of performance media and interactive marketing services for higher education marketers. It is a great opportunity that will bring Sparkroom’s industry leading enrollment marketing automation platform to the hundreds of schools that currently partner with CUnet.

What is going to change for Sparkroom? Our clients should know it starts with “business as usual” with the same great team, same great products, and same commitment to driving innovation in the marketplace. On top of that, we are going to be able to execute against our mission with a lot more resources behind us. Over the coming months, you will see us working closely with CUnet to deliver a broad array of interactive marketing products to the higher education marketplace.

Why does this acquisition make sense? Primarily because CUnet and Sparkroom share a common vision for how marketing will evolve for career colleges. We see increasing investments in interactive marketing together with increasing investments in technology to manage that spend more efficiently. Some schools will want cutting edge technology solutions and we deliver it. Some schools will want performance media and interactive media management solutions and we deliver it. Some will want an integrated suite of products and services delivered on a common platform and we will deliver that as well.

We expect the deal to close in February of this year and the entire Sparkroom team is excited to join the CUnet team. We are looking forward to increasing our investment in our software platform and dramatically scaling our customer base.

Some industry conversations since the QuinStreet S-1 was filed (get it here) got us thinking about market share in the EDU lead generation space. Real revenue numbers on the Top 5 lead providers (CollegeBound, QuinStreet, Vantage, Education Dynamics, All-Star Directories) in the education space are hard to come by but everyone talks about rapid growth in CY 2009. The standard growth number that I hear lead gen folks talk about is 20% YOY revenue growth. But let’s look at QuinStreet in education for a second.

*QuinStreet’s fiscal year ends on June 30th

Two key takeaways

1. DeVry is a huge chunk of QuinStreet’s EDU business and it is likely to decline given Starcom’s AOR relationship

2. Actual growth with clients other than DeVry in the EDU vertical has been anemic compared to the market over the past 24 months. They have grown 4% YOY for the past two years vs. 20% for the market.

This data speaks to the importance of the M&A machine to QuinStreet’s future growth.

DeVry reported on their fall enrollments this morning. Check out the release here.  Key takeaways are 19.4% YOY growth in new student enrollments and total enrollment increased 22.7% YOY. Sparkroom customer US Education grew the new students 21.5% YOY (November data) and total student population increased 14.8%. Results were well above analyst expectations.  Congrats to the DeVry folks on putting up what will be a great quarter when they report in January.

Two weeks ago, I attended Saleforce’s annual customer and partner conference, Dreamforce Global Gathering 2009. It was an impressive event, with over 19,000 attendees crammed into the Moscone Center in San Francisco. Their quarterly numbers, released just before the show, came in at $331M, up 20% YOY, with a total of 67,900 customers, up 31% YOY. This company is a huge success story.

Although the adoption of Salesforce today is not widespread in the for-profit higher education arena, our guess is that their presence will grow over the next couple of years. Today, many schools simply utilize the basic CRM capabilities that are already built into their Student Information Systems – typically this is vendor software which is broadly installed throughout their campuses and which was bought and paid for years ago. The downside is that it is much harder for schools to adopt sales and marketing best practices because their data and processes are hemmed inside a legacy SIS platform.

At Dreamforce, my eyes were opened to a world filled with a rich ecosystem of partners. Salesforce’s AppExchange has been very successful – it is a marketplace where customers can select software from hundreds of third-party vendors offering value-added solutions across a myriad of categories such as integration, data cleansing, marketing automation, analytics, to name a few.

I was also interested to note the steady adoption of Salesforce by the not-for-profits. The Salesforce Foundation offers deep discounts to not-for-profit schools – up to 80% off list price. At one panel session, Northeastern University demonstrated an impressive number applications that they had built out on top of the Force.com platform to manage donors, placements, at-risk students, alumni, enrollments and many other things. With the total cost of ownership so low, building out custom applications on the Force.com platform becomes a compelling option for these schools.

After witnessing the energy and momentum at Dreamforce, we at Sparkroom have concluded that a stronger Salesforce presence in for-profit edu is inevitable and could be of great benefit to the industry. Why? Because if it happens, it will likely lead to:

• Deeper adoption of sales and marketing best practices. Many schools are limited by their current vendor solutions, and unable to fully implement capabilities and best practices that can help maximize their enrollments and reduce their acquisition costs.

• Greater choice and flexibility for schools. Salesforce’s platform is open. Open APIs make it easier to integrate best-of-breed software solutions together. An open platform also makes it easier for schools to extend and augment native functionality. And the AppExchange would provide schools with access to a rich ecosystem of complementary vendor solutions.

• Greater adoption of cloud computing. As a software-as-a-service vendor, Sparkroom is naturally a firm believer in the cloud. Salesforce was the original pioneer of SaaS, and in under 10 years has fundamentally changed the mindset around software and enterprise data living in the cloud.

We will be watching with great interest to see if our prediction becomes true.

Today, ForProfitEdu.com launched their first survey of education marketers and lead providers. See the press release here as well as on our website. Sparkroom is excited to be sponsoring the survey and to be working with the whole team at ForProfitEdu. Take the survey now!

Look for results from the survey in early 2010.

We ran a webinar on May 14 called “How To Take Control of Your Online Lead Generation”. We discussed how marketers in higher education can utilize software to automate lead delivery and gain business intelligence across all of their online and offline marketing channels, and covered best practices for developing media plans, managing vendors, and evaluating performance.

Thanks to all those who participated. If anyone would like to listen to a recording of the webinar, simply email us at events@sparkroom.com and we will reply with a link.

We will be exhibiting at the Career College Association 2009 Annual Convention in Orlando, Florida. The show looks great and we are excited to be part of it this year. Come by and visit us in booth #114 to meet the team and see our products in action. We hope to see you there.

Join us on May 14 at 2pm EST. We’ll be discussing how schools can utilize software to automate lead delivery and gain business intelligence across all of your online and offline marketing channels. Improve your marketing efficiency, boost profitability, and better manage your vendors. Get details and register here. Looking forward to seeing you there.