Data Mining for improved on-line tutoring.

Bruce Upbin, Forbes Staff

TECH | 2/22/2012 @ 10:51AM |10,720 views

Knewton Is Building The World’s Smartest Tutor

Facebook and Google are two of technology’s great data projects. Love them or hate them, they spend all day mining their users’ activity. They harvest a few dozen bits of usable personal information per user per day. All in the interest of serving you ads.

That’s nothing, as data projects go, next to the amount of info students produce when they work online. “Education is the world’s largest data industry, by far,” says Jose Ferreira, who knows this because he runs a firm called Knewton that’s building what could become the world’s most valuable repository of the ways people learn.

Knewton, started four years ago in New York City by the 43-year-old Ferreira, builds its software into online classes that watch students’ every move: scores, speed, accuracy, delays, keystrokes, click-streams and drop-offs. “We’re physically collecting thousands of data points per student per day,” says Ferreira. Students go at their own pace, and the software continuously adapts to challenge and cajole them to learn based on their individual learning style. As individual students are correlated to the behaviors of thousands of other students, Knewton can make between 5 million and 10 million refinements to its data model every day. Psychometricians use similar principles to build standardized exams, but Knewton harvests way more data than testmakers ever will. Someday it will know what kids will get on the SAT, so they won’t have to take it.

“Online education,” says Ferreira, “is on the cusp of massive change, and only 100 cognoscenti know about it.”

A passel of other tech companies, such as Aleks, Grockit, Blackboard, Coursekit and 2tor, are also working to speed up education’s shift online. In higher ed, growth is already apace. The number of college students enrolled in at least one online course has risen from 1.7 million to 6 million since 2002. In the first nine months of 2011 Pearson, the world’s biggest educational publisher, had 8 million U.S. students register for its online homework and assessment programs and almost 5 million enroll in its remedial online college courses. These numbers were up 23% and 33%, respectively, over last year.

Data mining in education can be a far more powerful tool than mining consumer purchasing or social profiles and search because, as this illustration shows, virtually every math concept correlates to all the others. Strong correlations allow a computer to quickly model a student’s performance and adjust an entire online math course based on even a limited data sample. (Click on image to enlarge.)

Five thousand freshmen at Arizona State University enrolled in Knewton-powered Pearson courses for remedial math in August. Half of the students finished four weeks early. Another quarter finished early enough to move into regular freshman math. The portion of students withdrawing from the courses fell from 13% to 6%, and pass rates rose from 66% to 75%. The best part for the school, says ASU executive vice provost Phil Regier, is that teachers now have a dashboard to track who’s falling behind and needs help.

In October Knewton raised $33 million from Pearson and Peter Thiel’s Founders Fund, reportedly at a valuation north of $150 million. The company had already raised $21 million from venture firms such as Accel Partners, Bessemer Venture Partners and First Mark. Says Thiel, an impassioned advocate for shaking up the college model: “We like companies that have breakthrough technologies but not disruptive technologies, which typically don’t work. Knewton tries to make the existing system better with a very powerful tool.”

There are limits. A computer can’t teach that which is up for interpretation, such as the causes of the War of 1812. Nor will it ever replace teachers. What Knewton offers is a way to automate the drudgery of delivering basic skills, the lack of which is epidemic at colleges. Between 10% and 15% of incoming students at ASU are not ready for freshman math. In the University of California system a quarter of 2010’s freshmen were unprepared for college-level writing.

Knewton founder Ferreira was never a big fan of traditional education. His parents moved their three kids from Mozambique to the U.S. to ensure they had a better education. Unlike his two brainy sisters, Ferreira struggled in class but had a particular skill at standardized tests. He scored well enough on his SATs (1540 out of 1600) to get into Carleton College, where he graduated in 1990 with a philosophy degree. He moved to San Francisco without a job and did practice SATs over breakfast the way other people do crossword puzzles. A friend suggested he work as a tutor at Stanley H. Kaplan Educational Centers. Ferreira became a star teacher.

In 1993 he was brought to New York to run Kaplan’s GRE prep service just as the Educational Testing Service was converting to computerized tests. Within a few months, “almost by accident,” says Ferreira, he came up with a foolproof strategy to answer a new type of question on the computer tests. ETS ended up having to destroy hundreds of thousands of test books. The next year Ferreira figured out the GRE scoring algorithm and uncovered duplicate questions across tests, something ETS denied would be a problem. Kaplan went public with the findings, and ETS sued for breach of contract, fraud and copyright infringement. E-mail exchanges dug up during discovery ­labeled Ferreira as the “Antichrist.”

Ferreira left Kaplan for Harvard Business School and did a stint at Goldman and a startup before returning to ­Kaplan in 2001. He badly wanted to launch an online test prep course that would adapt to students. After four years, though, he got frustrated with Kaplan’s delays and left for venture capital. But the idea stuck with him. In 2008 he decided to do it himself.

He raised $2.5 million from Accel, First Round Capital and angels such as Reid Hoffman. That funded the build-out of adaptive GMAT, SAT and LSAT test-prep courses, which proved the technology could succeed. A money-back guarantee to raise scores paid out in only 3% of cases. Test prep led to math-readiness courses for college freshmen, which in turn led to the Pearson deal in 2011. The plan is to convert a whole shelf of Pearson material to the adaptive format. Knewton will share revenue on every product it powers and plans to add more publishers in K–12 and overseas. The company doesn’t release its financial info, but it is estimated to have finished 2011 with $6 million in revenue. Based on expansion of its deal with Pearson and new business growth, rough estimates suggest that within four years Knewton’s revenue could surpass $100 million.

Ferreira’s long-term goal is having a global corpus of educational content fully tagged and loaded in the Knewton ­system. Anyone will be able to make an adaptive course from piece parts. Developed countries could subsidize a free version for underserved education markets in Africa, Asia and Latin America.

“I like it when entrepreneurs have that sort of vision but are focused on what’s need to be done next,” says angel investor Reid Hoffman.

“One billion school-age children will grow up with very minimal reading, writing and math,” says Ferreira. “People should be marching in the streets with pitchforks about this.”

This story appears in the March 12, 2012 edition of Forbes magazine.

This article is available online at:

http://www.forbes.com/sites/bruceupbin/2012/02/22/knewton-is-building-the-worlds-smartest-tutor/

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