Last year, 2U laid off a significant number of employees as it shifted to a “platform strategy” built around edX, which it acquired for $800 million in mid-2021.

2U’s CEO Chip Paucek contends that this new strategy is proving successful. Last week, he announced that additional layoffs are necessary to realign the company’s operations with its new business model.

Despite the positive spin, there is evidence that the platform strategy is not working well. Here is a quick recap of platform strategy:

• Reduce expenses by reducing personnel and by closing offices.
• Adopt a new marketing framework, using edX’s organic reach and moving away from paid ads.
• Lower tuition costs, leading to an increase in enrollments.

As part of this strategy, 2U would become a “platform company” by unifying all its operations under the edX brand, which 2U valued at $250 million.

2U has cut costs but has seen a decline in degree enrollments with the adoption of the new marketing framework, resulting in a drop of ~10,000 enrollments.

It is unclear whether any existing 2U partners have reduced tuition costs, which was supposed to boost enrollments. Last time I looked, I found 20% of 2U degrees cost more than $100,000.

The stock market is not impressed with 2U’s changes. The company’s stock price has dropped by 60% this year and 97% in the last five years. Its market capitalization is now just $200 million, well below the $800 million it paid for edX.