Online MBA Students Now Exceed Full-Time On-Campus MBAs in U.S.

Here’s a surprise: the number of online MBA students just surpassed those enrolled in full-time, on-campus programs for the first time in the United States. That’s according to historic new data released by the world’s main business school accrediting board, the Association to Advance Collegiate Schools of Business (AACSB).

The board’s data reveals that 1,298 more U.S. students enrolled in online MBA programs during the 2020-2021 academic year, encompassing 45,038 students in those programs compared with 43,740 attending full-time residential programs. This excess amounts to a sudden reversal of the global trend where online education continues to remain less popular in other nations. Outside America, the 78,061 full-time, on-campus students still exceed the 53,281 students in the online options by a substantial margin of 24,780, or about 19 percent of the 131,342 total enrollment.

Nevertheless, the dominant delivery mode within MBA education for the past several decades remains the part-time, in-person configuration, taught during evenings and weekends either on university campuses or at satellite classrooms in urban and suburban centers.

Globally, about 51 percent of the world’s 250,369 MBA students study in these programs, amounting to a total enrollment of 127,844. The 82,322 such students in the United States make up a slightly higher percentage of about 53 percent.

Incidentally, as we go to press in June 2022, a breakdown of these surprising figures has not yet materialized on the AACSB’s website, or in any of the board’s reports. Instead, so far the AACSB appears to have only leaked a spreadsheet summarizing these totals to Poets and Quants.

“A Watershed Moment” for Online MBAs

Inside Higher Ed’s Liam Knox called this development “a watershed moment for graduate-level business education.” Actually, that’s probably an understatement because the growth in online MBA programs has been phenomenal by any measure during the past decade.

AACSB’s data reveals that the number of fully online degree programs climbed between 2012 and 2016 by 54 percent. Fortune Magazine (April 8, 2022) also points out that in 2021 a record-setting 526 MBA degree programs in the United States were available fully online—and that’s an 85 percent increase over 2017. The publication also notes that within Fortune’s 108-school sample participating in its ranking of 2022’s best online MBA programs, enrollments increased at 60 percent of the schools—and at 19 percent, enrollments more than doubled (Fortune May 20, 2022).

Fortune’s Meghan Malas reports that the Leavey School of Business at Santa Clara University in the heart of California’s Silicon Valley currently offers America’s fastest-growing online MBA program. At Leavey, enrollment exploded by 316 percent during the 2021-2022 academic year over the pre-pandemic 2018-2019 admissions cycle.

But Leavey isn’t by any means the only business school with soaring online enrollments. The University of Maine, which only launched its online program in 2019, also reports enrollments shot up by 314 percent. And at the University of North Carolina’s Cameron School of Business in Wilmington, the number of online students climbed 310 percent to 623, prompting the school to go on a faculty recruiting spree that hired more than a dozen new professors. Online MBA student counts also substantially increased at the University of Tennessee by 168 percent, and at Louisiana State by 124 percent.

Factors Driving Demand for Online MBA Instruction

What’s driving the demand for online MBA admissions? For one thing, the online and part-time options greatly reduce a student’s opportunity costs. That’s because students never need to lose two years of income by foregoing their jobs to enroll in full-time programs.

However, for many MBA students, these opportunity cost reductions aren’t always the decision factors they deem most significant. And recently, two business school deans weighed in with other factors they believe that applicants consider most compelling during 2022.

Dr. Will Geoghegan, a strategic management professor and the chair of the Kelley Direct online MBA program at Indiana University’s Kelley School of Business, told Poets that he believes four other trends have emerged to drive the online programs’ popularity gains:

• Enhanced perceptions of the academic legitimacy of online MBA curricula among employers, university chancellors and provosts, and prospective applicants
• Easier and more impactful learning enabled by new technology
• Additions of brief in-person experiences to online programs, such as immersions and residencies
• Augmented interpersonal and group networking capabilities within learning management platforms

Professor Geoghegan says:

Employers have turned the corner, away from their misperceptions about online learning being inferior to full-time MBA experiences. In a tight hiring landscape such as the one we are in now, employers embrace opportunities to hold onto their stellar employees while encouraging them to professionally develop through graduate coursework.

Online programs are positioned to allow for just such advancement. Our students tell us how their supervisors applauded their decision to remain employed while going back to school through our online MBA. Employers recognize that those who can juggle working full time while earning their MBA highlights an ability to multitask, prioritize, and stay organized—the same traits and behaviors they seek in an employee.

Another recent review of these factors by Fortune (April 8, 2022) boils down the advantages of online programs into a single concept: flexibility. For example, Emory University’s Goizueta Business School recently added an online executive MBA program, and the magazine quotes remarks by Associate Dean Jaclyn Conner about her experience with those students. She says:

The greatest limitation to any executive MBA program, whether it is online or in person, is the students’ time. Students are pressed for time, and their encounters in the program, regardless of format, have to be maximized.

Why Aren’t All MBA Programs Online?

And now, with online MBA enrollments having overtaken the enrollments of the residential programs in the United States, the advantages of online MBA education can seem so compelling that many BSchools readers probably wonder why every business school hasn’t yet added an online option.

Actually, three main reasons for that resistance exist—and they explain why some universities will likely maintain their reluctance for years to come.

1. High Online Startup Costs

To be sure, one factor is that online MBA programs carry extraordinarily high startup costs. For example, a presentation by the online program management (OPM) vendor 2U obtained by Barron’s in 2018 claimed that the firm needs to invest as much as $10 million upfront to develop and market an online program for each new university client.

But in exchange, 2U also requires a revenue-sharing agreement typically lasting from ten to 15 years where universities must pay between 50 and 65 percent of their revenue from partnership programs to the firm. For that reason, it’s no wonder that universities will attempt to backward integrate their online course production efforts as soon as they can come up with the resources so that they can perform these functions in-house. Nevertheless, those capital budgets required can be substantial.

At Kelley, at least 60 percent of courses are synchronous, one of the highest proportions of live instruction within the industry. But to enhance that live broadcasting capability, Kelley needed to raise a $10 million donation that would enable better interactivity within its virtual classrooms. Donors earmarked much of that gift for production equipment and new studio facilities on campus in Bloomington, Indiana.

2. Restricted Branding Opportunities

When compared with in-person instruction, online course delivery still tends to result in somewhat more homogeneous and less differentiated instructional experiences than comparable happenings on campus. That’s a tradeoff that most online MBA students are willing to accept.

However, the problem for universities is that less differentiated experiences also mean fewer opportunities to build value into their brands. And other things equal, that means they will lose potentially lucrative opportunities to charge premium prices in exchange for that brand value.

Consider the most popular business schools in the United States, those that year after year receive more applications than any others across America. These are the super-elite “M7” or “Magnificent Seven” private institutions like the Harvard Business School, Stanford’s Graduate School of Business, the University of Pennsylvania’s Wharton School, the Columbia Business School, Northwestern University’s Kellogg School of Management, the University of Chicago’s Booth School of Business and the MIT Sloan School of Management.

Not one of these private schools—not even MIT—has as yet set up an online MBA program, even though all moved their core MBA courses online during the pandemic in 2020. In fact, the closest they’ve ever come are their online certificate programs. These include some of Wharton’s online courses as well as Harvard Business School Online, an assortment of courses built around three undergraduate pre-MBA core requirements in principles of economics, economic statistics, and financial accounting. Harvard requires all HBS admits to show three similar courses on their college transcripts or complete these HBS Online courses before matriculation.

In fact, the dean of the Harvard Business School, Nihit Nohrita, was once asked in 2010 if HBS might explore degree programs offered through distance education. His brusque rejoinder: “Not in my lifetime.”

And despite the expectation among 89 percent of 80 American business school deans that a top-five school will launch an online MBA degree program before October 2025, 12 years after Nohrita’s remarks, none of these M7 schools appears to be anywhere close to such an announcement.

But why?

Tim Westerbeck is the CEO at Eduvantis, a higher education industry consulting firm based in Chicago. He argues that graduate management education is rapidly changing for the long-term into a primarily online industry. Yet at the same time, his September 2020 analysis entitled “The Coming Brandemic?” also explains why these elite M7 schools lack online initiatives:

Brands are built based on experiences each of us has with a product or service. Business school brands are no exception. Most institutional brands have been built based on stakeholders being on campus on a sunny spring afternoon, bonding with one-of-a-kind faculty, living in a rarified culture, struggling with statistics in the library and tipping a few at the local pub with their classmates. . .

. . .But [the online learning experience] is just not nearly as differentiating, affinity creating, personal, connected and reflective of an institution’s unique culture as the in-person deal. In other words, nearly every institution has lost or had significantly reduced the tools it has historically had to build and differentiate its brand, the basis of its competitive advantage and assigned ROI.

Marketers will tell you, and I am among them, that the website is absolutely key to brand-building and it is time to double down on how we communicate about our differentiation, culture, and brand value through digital means—to revolutionize the user experience. Absolutely, but that will not replace the real deal. Further, you can tell the best story in the world about your enterprise to attract enrollments, but how do you deliver the product online so that deep, lifelong brand affinity can be built?

Here is the punchline. Without the traditional tools to build, grow, maintain and perpetuate a distinctive institutional brand, institutions lose the means to pricing power, authentic differentiation, brand-based competitive advantage and most other things that make most online programs perceived as more or less valuable—and having a greater ROI—than the next institution’s online programs.

The Harvard Business School has during the past 110 years built the most powerful brand in America’s education industry. Today it costs more than $300,000 to attend HBS for two years, including the opportunity cost of typical lost wages.

But it’s still challenging for the leadership of an M7 school like HBS to justify an online version, so long as the university’s administration and deans persist in their belief that most of that brand value continues to accrue from in-person experiences. In other words, they’re reluctant to lose their brand management justifications for charging that premium tuition.

3. Luxury Brands and Scarcity

But there’s a third reason for the reluctance to add online MBA degrees—and this one may be the real, unspoken rationale behind most of that hesitation.

In 2020, Professor Scott Galloway of New York University’s Stern School of Business predicted that elite universities would dramatically expand enrollment by offering affordable hybrid online degrees. But in April 2022, he said that prediction hasn’t materialized because elite universities have positioned their MBA programs as luxury brands—and successful luxury brand marketing depends upon creating perceptions of scarcity:

I think the math they did was, “If we’re online, we’re basically a $60,000 Netflix. So we have to have this kind of Dead Poets Society experience.” I thought they were going to pick up and go hybrid and expand their class size, and I was wrong. The top schools have all doubled down on exclusivity. . .

Let’s be honest, the only way we can support a $62,000 tuition is if we’re perceived as a luxury brand, and the key to a luxury brand is scarcity. So even if NYU or Wharton or MIT could figure out a way to have a first-year MBA of 5,000 people instead of 500, I think they’ve decided that’s not good for their bottom line.

I think, unfortunately, business schools have decided they’re no longer public servants, they’re Birkin bags. To try and go mass and leverage technology would result in an erosion of perceived scarcity which would hit their margins. What I see as a feature, they see as a bug. I thought they were going to leverage their brands and technology to triple the size of their classes and cut the prices in half and still make more money. And that’s just not what they’re doing.

Summing Up: The Future of Online MBAs

So how would one sum up this three-pronged analysis? In short, high startup costs, restricted branding opportunities, and luxury brand positioning are discouraging a comparatively small number of business schools that still lack online MBA programs from launching these options. And in the United States, many of these remaining holdouts are influential elite and super-elite private business schools.

But on balance, as Westerbeck emphasizes, those schools are bucking modern trends that are rapidly transforming management education into an online industry. And as Malas reports, the sustained interest in online MBA programs among a broad range of potential applicants isn’t likely to diminish anytime soon.