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Blackboard buys Student Advantage’s SA Cash unit for $4.5 million impacting 24 higher education customers

Student Advantage has sold its SA Cash division to Blackboard for 4.5 million dollars. Reactions are mixed on what this really means to the campus card market but CR80News has talked with the CEOs of both companies and other key individuals in an attempt to put this further market consolidation into perspective.

What is SA Cash?
The campus card market has had a tough time getting its hands around the Student Advantage product line–likely because it combines both administrative components and end-user/student components. Student Advantage–unlike most campus card vendors–markets both to the campus and directly to the student. SA Cash was one of a series of offerings that Student Advantage marketed to colleges and universities.

SA Cash is, in essence, an extension of a campus’ card program that facilitates the card’s acceptance at off-campus and online merchants. The program was developed in such a way that it could be used by any campus regardless if its card system vendor be Blackboard, Diebold, CBORD, or any other.

When a campus contracts for SA Cash, Student Advantage provided the point-of-sale units, merchant acquisition and marketing services, transaction processing, and cardholder marketing and education.

At the time of this acquisition, 24 schools were using the SA Cash program. The deal anticipates that all of these campuses will now become clients of Blackboard’s SA Cash offering. According to Michael Stanton, Blackboard’s Senior Director of Corporate Communications, 18 of the 24 schools were existing Blackboard Card Transaction System clients as well as Student Advantage SA Cash clients.

A brief history
of Student Advantage
Student Advantage began as a merchant discount program, selling memberships to students across the country and signing merchants to provide discounts to the members. The company began acquiring other campus-related companies in the mid-90s, including the U-Wire news service, previous student membership competitor CollegeClub.com, and others.

In 1997, the company acquired a small group that had been providing an off-campus dining program to Dartmouth University students. That company’s efforts at Dartmouth were the foundations of the SA Cash program and its founders, Mitch Jacobs and Taran Lent, became key players in the SA Cash program.

Like Student Advantage, Blackboard has utilized acquisition to build client base, product offerings, and revenues. In January 2002, the E-learning software provider Promethius was purchased adding 60 learning system clients to Blackboards ranks. In November of 2000, Blackboard joined the campus card market when it purchased AT&T Campuswide and CEI/Special Teams bringing a combined 400 campuses to Blackboard’s Transaction Systems division.

While competitors have long speculated that the company would grow weary of the campus card market and return to a focus on its original products in the E-Learning space, the acquisition of Student Advantage seems to indicate a continued commitment. According to Blackboard CEO, Michael Chasen, “(we are) very committed to the commerce and access needs of the higher education market. Although we are historically known for our teaching and learning software solutions, the Blackboard Transaction System is a significant portion of our overall business and long-term development strategy. We have spent more than two years and tens of millions of dollars investing in the Blackboard Transaction System product line and we will continue to do so.”

Adds Mr. Chasen, “We will strive to deliver innovative solutions that not only lead the industry in terms of quality, but also leverage an institution’s investment in other technologies that touch the daily experience of students, faculty and administrators.”

Specifics of the acquisition
As a part of the deal, Student Advantage retains the right to market the SA Cash product to a “set of designated college and universities.” CR80News has learned that this designated set is actually the Diebold card system customers. According to Ray Sozzi, CEO of Student Advantage, his company will continue to build and strengthen the SA Cash product for their new partner Blackboard as well as for other clients. This transition, he says, will enable Student Advantage to focus on building the SA Cash product and strengthening the company’s efforts with Diebold and the Diebold campuses.

When asked what the residual Student Advantage looks like following the deal, Mr. Sozzi said, “we look very much the same as before the deal—the only difference is we no longer market our SA Cash product to Blackboard schools.” He described Student Advantages three main business lines: the OCM division that provides products from dorm linens to diplomas to more than 1000 campuses, the OCSN which operates the affinity web sites and e-commerce activities for more than 100 major college athletic programs, and the card services division that includes the Student Advantage membership program, SA Cash, and the campus consulting unit.

Additionally, Student Advantage will be the exclusive provider of membership and rewards programs to Blackboard’s client base. What will this mean? To date, Blackboard has not marketed such an offering to its clients. Will the company actually add this to its product portfolio or brand its deployed cards with the Student Advantage membership offering? Or is it simply a bit of contract language that makes the acquisition appear more like a partnership than an acquisition? Only time will tell.

It is clear that Student Advantage still faces financial uncertainty. Though they were given an extension on repayment of major loan from Reservoir Capital Investors, they must make a $4 million dollar payment by the close of March–just weeks away.

The company, once heralded as a promising dotcom stock, has seen its share price plummet in recent years. At the close of last year, the stock was delisted by the NASDAQ due to 30-plus consecutive sessions in which its price per share remained below $1.00. At its height at the close of 1999, it traded at more than $20 pershare. On the day the SA Cash deal was announced, it was trading at less than $0.25 per share–and this after a reverse split in which 10 shares became 1 share in July of last year.

A group of investors and stockholders led by Student Advantage founder and current CEO Ray Sozzi is continuing discussions in an attempt to purchase the company or its remaining assets. In September of last year, CR80News reported that Mr. Sozzi’s group was attempting to structure a buyout of the shares not currently owned at a price between $1.50 and $1.75 per share. Mr. Sozzi said that his team continues to see great value in the Student Advantage concept and its assets and they are continuing with their attempts to structure a buyout.

For current SA Cash schools, the Blackboard deal will likely be a positive transition. The future of the product is likely more certain within Blackboard and its continued development and growth is more likely to be funded—be it within Blackboard or by Student Advantage on behalf of Blackboard.

According to Mr. Sozzi, Student Advantage will continue to provide services to campus administrators through all three of its divisions. His vision for SA Cash closely parallels the major bank association products, Visa and Mastercard. He sees SA Cash, under the continued development of Student Advantage, as a strong add-on payment product or network that card issuers—be it Blackboard, Diebold, or others—can implement for their clients.

With a potential public stock offering in their future, Blackboard is certainly looking at potential revenue growth areas. The SA Cash product could bring additional dollars from off campus point-of-sale transaction fees and a growing base of funds on deposit as new spending opportunities are opened up for student card holders. Additionally, Blackboard could use the vendor-agnostic nature of the SA Cash product to gain a foothold at some of their competitor’s customer sites.

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