How Blackboard took over the education market

In an age when software firms come and go like the seasons, one company has survived and even prospered, and it isn't Google, Yahoo or Ebay. Blackboard Inc., based in Washington D.C., is the leader in software used to connect students to their teachers, textbooks, course materials and one another.

In his column in the Washington Post, Steven Pearlstein reports that Blackboard now has as much as 80 percent of the U.S. market, with sales growing at 20 percent annually, 20 percent operating margins and a stock price that has doubled since its first stock offering two years ago. How did a small start-up maintain profitability in such a volatile market? Aside from having solid backing from investors with deep pockets, it was the Internet which held the company up when the dot-com bubble burst.

Pearlstein wirites:

Notwithstanding its elaborate plans to market directly to tech administrators at universities and school districts, what really worked best was simply making its basic course- management software available for free to any teacher willing to download it from the Web. Many of the teachers who tried Blackboard began talking it up with colleagues, and before long, it was the somewhat perturbed tech administrators who began calling to inquire about the "unauthorized" software their teachers and students were using.

The ubiquitousness of the software was then enhanced when Pearson adopted Blackboard protocols and standards for its interactive course Web sites. Other publishers followed suit, encouraging school administrators to buy Blackboard software.

Pearlstein noted that it is odd that given Blackboard Inc.'s market share of 45 to 50 percent, the Justice Department allowed it to buy its main rival, WebCT, which had 35 to 40 percent.

But the quiet approval of the merger of the top two companies in a market with strong winner-take-all characteristics is the best evidence yet that the Bush administration has abandoned antitrust enforcement.