Microsoft Desperately Chases Google in the Education Market
Microsoft (NASDAQ: MSFT) recently announced its acquisition of Flipgrid, a video discussion platform that's used by over 20 million students and teachers in 180 countries, for undisclosed terms. Microsoft will make the paid service free for all schools.
Flipgrid previously charged annual fees of $40 for educators, $800 for school districts, and $1,000 for schools. Current subscribers will receive a prorated refund from Microsoft. This bold move could complement Microsoft's other education efforts and widen its moat against Alphabet's (NASDAQ: GOOG) (NASDAQ: GOOGL) Google. It could also expand its cross-platform mobile efforts, since Flipgrid also runs on iOS and Android.
Flipgrid's mobile app. Image source: Google Play.
Why the education market matters
Back in 2012, Microsoft devices accounted for 42.6% of all mobile device shipments to U.S. K-12 schools, according to Futuresource Consulting. Apple (NASDAQ: AAPL) controlled 52.2% of the market, and Google held just 5.2%.
But by 2017, Google controlled 59% of the market, Microsoft held 21.6%, and Apple came in last at 19.3%. That massive shift occured for two reasons. First, Google's Chromebooks were significantly cheaper than Microsoft's Windows laptops or Apple's Macs and iPads. Second, Google Classroom -- which bundled together productivity apps like Drive and Docs for schools -- made it easier for students to turn in assignments or collaborate with their peers.
If students grow dependent on Google services during their formative years, they'll likely stay tethered to that ecosystem into adulthood. That would be dire news for Microsoft, which is trying to counter Google with cloud services like OneDrive, OneNote, and Office 365.
Understanding Microsoft's education efforts
To challenge Google's Chromebooks, Microsoft introduced Windows 10 S, a stripped-down operating system that could only run apps from the Microsoft Store. The lighter OS was designed to compete against Chrome OS, and reportedly offers tighter security than the full version of Windows 10. Microsoft also worked with original equipment manufacturers to launch sub-$200 Windows 10 laptops for schools.
Image source: Getty Images.
To counter Google Classroom, Microsoft launched a similar platform in 2016, called Microsoft Classroom, which was based on Office 365. However, Classroom never caught on, and Microsoft retired it and added assignment features to its Teams platform instead. That move was confusing, since Teams -- which bundles together Office 365, Skype, and third-party apps -- is generally an enterprise collaboration platform.
Microsoft has also been adding more student-oriented features to OneNote, providing more updates for Minecraft: Education Edition, and developing new content through partnerships with LEGO and BBC Worldwide. It's also adding six new education apps for its mixed-reality headsets.
Microsoft partnered with Flipgrid about a year ago -- which led to the integration of its video platform with Teams and OneNote. That partnership led to its recent acquisition, but Microsoft stated that it won't fully integrate Flipgrid with Teams. However, Microsoft will likely move Flipgrid over to its own cloud network, Azure, since the education platform currently runs on Azure's biggest competitor, Amazon Web Services (AWS).
Will these efforts pay off?
Microsoft's conversion of Flipgrid into a free service indicates that it's willing to forgo near-term revenues for market-share gains against Google in the education market. But it's unclear if these efforts can prevent Google from tightening its grip on the market.
Microsoft should also watch out for Apple, which lost its early lead in the education market due to the higher price of its devices, touchscreen typing issues, and confusing administrative controls. But today, Apple is trying to win back educators with cheaper iPads, multi-user support, and easier administrative controls. Those efforts could also make it tough for Microsoft to mount a comeback.
The bottom line
The escalating war for the education market is not likely to affect Microsoft, Google, or Apple over the next few quarters. But over the long term, the victor could yield significant influence over an entire generation of young adults -- which could throttle the growth of its rivals.
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Teresa Kersten is an employee of LinkedIn and is a member of The Motley Fool's board of directors. LinkedIn is owned by Microsoft. Leo Sun owns shares of Amazon and Apple. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, and Apple. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.
