What’s the Business Model of MOOCs Such As Coursera?

coursera_logo_RGBThe booming popularity of massive open online courses (MOOCs) in 2012 has dramatically changed our ideas about the potential of online education.

The New York Times called them “the revolution that has higher education gasping” and the Chronicle added that MOOCs question “the future of teaching” and even “the value of a degree.”

What exactly is a “MOOC,” anyway?

Many universities have long offered online courses and even entire online programs. But beyond the different delivery method, most of the fundamentals of traditional education–tuition, capped enrollments and the earning of “official” credit–are present.

MOOCs, on the other hand, remove the barriers of cost and limited enrollment, offering an intriguing model for scaling higher education.

The predominant form of content is the video lecture, and students submit assignments and complete quizzes within the course environment. Since anyone with an internet connection can enroll for free, one-on-one attention from the professor is impossible. Instead, students interact in course forums and grading is done either by computer or by teaching assistants.

Some MOOCs also utlilize large-scale crowdsourced methods for discussions and peer evaluation. As of now, students can earn certificates of achievement but not official course credit for their efforts.

There has been some criticism that by relying on video lectures, these MOOCs represent an outdated teacher-centric paradigm and fail to take advantage of more collaborative, interactive pedagogies and increased personalization made possible by new technologies.

The Relationship Between MOOC Providers and Universities

From some accounts, it may sound as though MOOC companies and brick-and-mortar universities are locked in fierce competition over the future of higher learning. But the predominant arrangement is for MOOC platforms to partner with universities in order to deliver free online courses to the world.

The biggest names in the business include Coursera and Udacity, both for-profit companies started by Stanford professors. There is also edX, a nonprofit venture run by three universities. Another name frequently mentioned in this space is Khan Academy, which offers its own huge library of educational videos and automated practice exercises, although it does not partner directly with universities for content.

Coursera currently partners with 62 elite universities from all around the world.

What’s the Business Model of MOOC Providers such as Coursera and Udacity?

Today, a student from anywhere in the world who logs into Coursera or Udacity can choose from hundreds of courses in Chemistry, Engineering, Music, Psychology, Art and much more, all without paying a dime.

But will this free arrangement continue?

One might assume that this educational model is a great way to keep costs low. But running a high-quality MOOC is far different from simply dumping a bunch of videos online.

There are plenty of costs that must somehow be recouped including software engineering, massive bandwidth, and a whole lot of instructor labor (some professors report working for three hours to prepare for every hour of video lectures).

To this point, venture capital has financed the operations of these MOOC providers. Coursera, for example, raised $16 million from the firm Kleiner Perkins Caufield & Byers in early 2012. But for such investment to continue and for MOOCs to be sustainable, they will need a business model that will reward all stakeholders, including investors and universities.

One of the core principles of MOOCs is that they should remain free for the end user. So where is the revenue going to come from?

It turns out that the business model of MOOC providers such as Coursera is still very much up in the air. The mantra of many startups is to “build first, monetize later” and to this point that has been the case.

There are a few small revenue-generating methods already present including Amazon affiliate links for the purchase of recommended course texts. But this alone won’t come close to satisfying investors.

A contract signed between one top university and Coursera was recently made public, and it revealed not one but several potential revenue-generating ideas that MOOCs might use. These strategies include sponsorship of courses (advertisements), university-branded certification, individual tutoring, authentic (physical) assessment, and recruiting services linking MOOC students to potential employers.

More recently, Coursera made a couple of big moves towards monetization that may help explain its future plans.

First, the company launched a “Signature Track” for select courses that gives students the opportunity to earn a “verified certificate” that “securely links your coursework to your identity, allowing you to confidently show the world what you’ve achieved on Coursera.”

The system uses photo IDs and students’ unique typing pattern to link their coursework to their real identity, and Coursera reports that this will cost between $30 and $100 depending on the course. This idea suggests a “freemium” model for MOOCs in which the content itself is free, but students must pay if they want to verify their accomplishment.

In addition, Coursera received approval from the American Council on Education to offer five MOOCs for official college credit. Universities themselves will still have to decide whether or not to accept the credit.

Recognizing the Challenges

Although it’s easy to get excited by the potential of free and open education for the masses, but one recent comment on the Chronicle articulates the challenge well:

“Access to information (data) is relatively easy to scale. Teaching is very hard to scale and not always possible.”

What are your thoughts on the long-term viability of MOOCs? Are they disruptive? All hype?

andrew walshAndrew Walsh is the owner and editor of Social Web Q and A. He is a freelance writer, academic librarian and web entrepreneur. Check out his book Savvy for the Social Web.

 

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Comments

  1. Good job Andrew! As always I love your informative writing. I think there is a revolution and no one can stop it. How education works depends on how the person who has access to that program uses is. I think that online courses and the ‘free for all’ mentality that the internet espouses is like the Renaissance in itself. This is quite interesting and worth observing, just to see how this goes.

  2. If there are millions of peploe doing courses that use to be offered to only a few hundred how is that going to help overall demand for these skills? I work within a profession which had 100% employment rate when I finished university. Since completing my degree I have seen all universities within my country increase class numbers. Now every year I see peploe who have spent three years of their lives studying a specific course unable to get their first professional job. Whilst I am lucky to be employable in the area I have studied I have experienced first hand how non transferable my skills are to other sectors of the labour market. I’m deeply skeptical of the wider social good purported by Coursera’s providers. Why would you want the poor and isolated peploe within our communities being taught law, computer science, economics only for them to be unable to get a job due to excess supply of graduates. To have few opportunities in life is one thing but to be offered an opportunity only for it to amount to nothing is truely heart breaking. With the introduction of MOOC it is worth pondering whether a high school graduate may be better off to become a butcher, baker or candle stick maker. I think MOOC is going to further increase the educational attainment necessary for the most basic of jobs.

  3. A very well written article and one that lays open some real problems. I’ve been in the distance learning “business” in both the public education world with a community college that produced Telecourses starting the the late ’70s and for the last 15 years with my own course program of graduate-level, professional development courses for educators. I love the concept of “knowledge on demand” that places like Coursera are developing. My significant-other has taken two of their courses and loves them. But for a company with such a vision in one eye they seem to be myopic in the other. They still have formal “classes” that start at one date and finish at another, they have lecturing professors (who are excellent from what I’ve seen), peer “gatherings” for one reason or another, and assignments that are dictated by the instructional design to parrot back what has been learned. Where is the critical thinking? The content is excellent — but will be out of date (especially in the technologies/sciences) within months. Why can’t they develop (of seek out providers) who have designed open entry/open exit, independent study courses that can be completed in however long it takes the student to master the assignments? Learning takes place in the brain, not on April 5th through May 15th — or whatever the length of the course. Critical thinking takes place by taking the knowledge and applying it to the students’ unique situation/need. My courses do that so I know if can work and I’ve had thousands over the years. These providers of “knowledge on demand” should be looking at ways to meet the students’ needs, not their out-of-date-pedagogy. Most of these students are adults with jobs, families, community, and a long list of other commitments. Years of research confirms that most take distance learning courses for convenience. So meet that need. (Distance learning is NOT for everyone.) Let them work and learn at their own pace, apply what the learn to their own situation, and walk away with something of value. Tamta makes an important point. The university degrees earned today are flooding the market with graduates who won’t be able to get jobs in their chosen field and won’t provide many transferable skills to other professions. Universities appear not to really care except for the bad press. I won’t go into what’s going on behind the scenes for that topic — but it’s not pretty. The future of higher education will be the “knowledge on demand” where students can gain new knowledge to apply to their current jobs and future careers and update that knowledge as needed — not at the antiquated whim of traditional dinosaur institutions. Coursera et al need a new mind-set — if they survive the financial challenges. It’s one thing to raise millions –it quite another to generate enough revenue to keep the investors happy and pay the utilities and salaries. I sincerely wish them the best — we need new ways and they are one of the bright spots on the horizon.

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