The business model of MOOCs revisited…

A few weeks ago I wrote about how MOOCs could become profitable while at the same time being free for everyone.  Time for a follow-up, now that we are beginning to see just how much revenue these courses can generate…

moocs update

image from Death to Stock

Beginning in 2013, Coursera started offering a Signature Track option, in which the student earns a Verified Certificate upon successful course completion. Through photo-identification and your individual typing style (yes, really!), Coursera can verify that it is you doing the work. Assuming that you complete all the assignments to a reasonable standard, at the end of the sessions you get a certificate proclaiming that the verified you successfully completed the course.

In September, Coursera announced that they had already received 25,000 Signature Track requests, and earned over $1,000,000 in revenue from this initiative alone, just from the first nine months. Another nine months later, I imagine that the figures are well more than double that. The cost of the certificate varies according to the course, but at an average price of $45, it still seems like a good deal, given the quality of the material, especially if it helps you to change jobs or get a promotion or decorate your study wall. They do offer financial aid to those who cannot pay the fee – according to their blog, about 10% of the applicants requested and were granted free Signature Track status.

It is starting to look like Coursera might justify the $85 million financing from VC firms. While $1 million every nine months would not give a happy return on the investors’ money, there is every reason to believe that this is just the start of a very steep and convex revenue graph. For the first few months, Signature Track was not heavily promoted. I am currently taking two Coursera courses, and I can assure you, they are now actively pushing Signature Track status (effectively so, I am actually thinking of signing up). As if that weren’t enough, some Coursera courses have been approved for “credit equivalency”, which means that they can, if passed with a Verified Certificate (for which the students pay, obviously), count as college credit.

Coursera also now offers “Specialization”, like a mini-degree, in which if you complete a series of courses arranged around a core theme, and you participate in a project in which you show what you’ve learnt, you get a Specialization Certificate, all for between $200 and $500, depending on the length of the program. Not an inconsiderable amount, but it is a mini-degree, from a good institution, and just your improved job prospects make it an interesting investment. And they offer financial aid if you need it. And something that you don’t get when you’re actually at a university: unlimited re-tries for free.

edX has implemented a similar model. I’ve just signed up for Harvard’s Computer Science 50 course (loving it!), and while just auditing the course is free, if I want certification, that will cost $90. That’s actually really cheap for the quality of the course.  And get this: I can even take the course for official Harvard credit, as in, it could count towards my degree. That costs more, $2500 to be exact. Again, cheap when you take into account the cost of an actual Harvard education.

cs50 from edX

screenshot from the CS50 class on edX

I think this is a brilliant idea. $45 or even $90 is quite a lot of money for some, but if we need official certification, perhaps for our jobs or to impress future employers, it’s really not expensive. If all we want is the learning, we don’t have to pay anything. While I’m sure that most of us taking MOOCs will choose the free option, the potential income is still staggering. Even if only 1% of the 7.5 million students enrolled in Coursera courses opt for the certificate option in at least one of their courses, Coursera could generate over $3 million in income. According to the Wall Street Journal, an analysis by Deloitte predicts that by 2020, Coursera will have 10% of the $1.5 trillion post-secondary education market. $150 billion is a lot of revenue.  And I’m sure that will make Coursera’s investors, who have collectively put in $85 million, very happy.

At the same time, Coursera has launched the Global Translator Community, a volunteer initiative, asking for (unpaid) help in translating the courses. Yup, a for-profit organization, with a healthy profit outlook, asking for volunteers. While I’m all for helping out, and while I’m in awe of the motivation and power behind crowdsourcing, and while I’m a huge fan of Coursera, I prefer to donate my time to not-for-profit initiatives.

edX’s philosophy is more refreshing. As a non-profit, it is not too concerned with, well, profit, but it does need to cover its (considerable) costs and allow its participating universities to do the same. Its CEO Anant Argawal said recently: “I can see a path to modest revenue — $50 to 60 million in revenue would be perfectly OK,” Argawal said. “I cannot see a path to revenue in the billions without doing things to upset our partners or selling user data.”

Speaking of user data, edX announced at the end of last year a partnership with Google to develop, an open-source platform to which any instructor, university or business not affiliated with one of the existing platforms can upload courses. The platform will make it easier for instructors to create online courses and to reach a broader audience, and for universities and eventually schools to incorporate the mooc technology into their course management. For Google, this is an extension of their open source Course Builder project, which helps with online course creation. For edX, it’s an extension of their mission to develop open-source online learning platforms (they have been rolling out their own, but Google’s help obviously adds a new dimension to the technology). It opens up online education to any supplier, without diluting edX’s brand. And it might slow down Coursera’s growth.

Apart from the income generated from certificates and bundling, both edX and Coursera will also earn income on licensing its technology, to universities, organizations (such as the International Monetary Fund, the Smithsonian Institution, the Linux Foundation, and the World Economic Forum for which edX administers courses for a fee) or even countries. EdX has reached a deal with the governments of France, China, Rwanda to help them adapt edX’s system to create MOOC platforms in their country. EdX gives away the program, but charges for training and maintenance. Coursera licences its technology to the government of Singapore, Trinidad and Tobago, Turkey’s main mobile telecommunications provider,

That the universities can earn some revenue on their courses is a relief (they get about 15% of the income), as each costs approximately $50,000 to produce. While profit is not the main reason for doing them (brand reinforcement, educational philanthropy), I do feel better knowing that they should at least be able to recover costs, so that they can keep doing more.


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For more on online education, check out my Flipboard “Internet and Education”:

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