The Bubble in Engineering and Management Education

Mr. Sibal is a highly educated man with noble ambitions. He wants to increase the percentage of Indian students opting for Higher Education from the current 11pc to 30pc in the next 10 years. All very well but only if done the right way.

Lack of options, corrupt government education bodies, the IT Boom and 9pc growth for the last five years have led us to build massive capacity in 2 major areas - Engineering and Management. Anyone in India who wants to become an Engineer or an MBA can now become one. We have an estimated 20L(over 4 years) students pursuing Engineering and another 4L(over 2 years) doing Management in over 7000 Engineering and Management Institutes today.

At an average expense of 1L per year for Engineering and 2L per year for Management this amounts to 28000 crores being spent by these 24L students every year. Add another 15000 crores being spent on Higher Education abroad by another 2-3L students every year and you have anywhere between 40000 crores being spent by Indian parents on mostly poor quality educational institutes every year.

Most of these institutes have mushroomed and added a large number of courses and students in the last 3-4 years. Many of them are yet to graduate even a single batch. They dont have good faculty. There are probably 300-400 Management institutes within 50 kms of Delhi and an equivalent number in Pune. Most students who study in these institutes are there not by choice but because they have no other option. Many of them scored less than even 60pc in Class XII and failed to get into a government college to pursue a non science course. Now they are stuck. With IT slowing down most engineers outside the Top 150 Engineering Institutes will struggle to find a job this year. Ditto for Management Students outside the Top 100 Management Institutes.

Does Indian Industry need so many MBAs and Engineers every year ? By some estimates less than 1.5L engineers and 25,000 MBAs are employable. The rest are even less suited for Industry than most BA graduates from Delhi University. Absence of options has however ensured that students end up following the herd. They consider an MBA or an Engineering Degree a ticket to success.

This year is different. Students passing out will realise that there are no employers queuing up to hire them. Many Engineers and MBAs who passed out last year havent found jobs as yet.Suddenly after 4 years of engineering and 2 years of MBA many will be lucky to even get salary offers of 10-15K a month. Some will go back to their family business. But many prospective students applying to these colleges will suddenly start asking serious questions about whether its worth it.

In all likelihood many of these colleges will find it difficult to get student enrolments going forward. Some will shut down, some will be forced to lower their fees, many others will have to start focusing on the hard task of getting good faculty, building brand, improving student quality etc.

Many others will hopefully adapt and start offering courses which are more relevant to industry. Many entry level jobs require little more than basic arithmetic, english communicaton, presentation and computer skills and not the fancy economics and quantitative methods courses taught at these institutes. Many will hopefully start providing vocational training.

In addition to Higher Education, Mr. Sibal needs to reform primary and secondary education and improve the quality of teaching at schools. This should be his top priority. Garbage in, Garbage out. If the government can provide good school education, vocational training and basic graduate college education, parents may not need to spend this 40,000 crores every year in the hope of providing their kids a better future.

Will Portals Make Money from Advertising ?

Life is tough for Portals, Content and Social Networking Sites. The Display Ad Businesses of these sites are struggling to make money. Billions of Page Views, Millions of Users but Profits are still a mirage.

Consider this. The large Indian Portals today have more daily users than the readership of all English Newspapers put together in this country. But revenue is a different ball game. No Portal
makes even 5pc of what the TOI rakes in every year.

So what are the issues here ?

Search is taking everyone's cake. The CPMs on Search according to some estimates are 30 times the CPM on Regular Display advertising. "Intent" is a great targetting tool and gets high clickthroughs. Allow for 2 ads on a Portal Page and you can say 70 Million Search Views = A Billion Portal Page Views. The reality is Google India makes more money through advertising than Rediff, Yahoo India, Indiatimes and Orkut put together.



Most Large Advertisers use google as a benchmark and demand the same rates from Portals. While you can debate that Google Ads are a lead gen tool and not advertising; to advertisers its not very clear that there is a branding element to most display ads.

So how will publishers survive if they dont make money ?

Its a big IF but clearly massive progress needs to be made in the following areas..


1) We need better targeting. Most Portal Display Advertising is largely untargetted. Its at the same stage as advertising in Print. You target by publication/site and not at a user level. There is information available about the person (his age, sex, location, salary etc) on the internet. There is information on his surfing habits, which site he came from, what he is reading on the Portal, his search history etc. Privacy Concerns need to be handled but Adnetworks or 3rd Party Information Providers need to aggregate user data across websites and invest in algoritms to help Portals show more relevant ads.



2) Portals clearly need to get more brand advertisers to bite. They need to be able to clearly differentiate Banner Ads from Google Ad Links. This wont happen with regular display ads. Portals and Content Sites need to create High Quality Rich Display Inventory on the site. Easier said than done in India atleast with BroadBand penetration being what it is.



3) Lastly in India atleast Portals need to do a better job of getting Marketeers on the site. Most traditional marketeers still dont understand CPMs and Clickthroughs the way they understand TRPs and Readership. Some Investment in 3rd Party Research Studies and Education to help Advertisers compare the long term impact of Brand Advertising on the Internet vs Advertising in Print or TV is absolutely critical.