MOOC Providers in Search of Sustainable Business Models

Millions of students around the world are taking high-quality massive open online course (MOOCs) for free, an education revolution that blossomed in 2012 and has helped deliver higher education to underserved populations worldwide absolutely free. But companies do need revenue to continue their project, so MOOC providers are now looking for a viable business model, according [...]

Millions of students around the world are taking high-quality massive open online course (MOOCs) for free, an education revolution that blossomed in 2012 and has helped deliver higher education to underserved populations worldwide absolutely free.

But companies do need revenue to continue their project, so MOOC providers are now looking for a viable business model, according to David Raths of Campus Technology.

Name a product sold in stores for thousands of dollars that can be obtained for free online. If you’re struggling for an answer, don’t be surprised–no company would last very long under those circumstances. Yet that’s exactly the predicament in which higher education finds itself as MOOCs begin to disrupt the traditional post-secondary model. Schools are giving away what was once their most valued treasure–the intellectual property of their faculty–for nothing.

MOOC providers’ current business models are not reliable, and a sustainable model is required to remain in the market. Many colleges and universities say that the “current environment more closely resembles a high-stakes game of musical chairs — everyone is terrified of being left without a chair when the music stops.”

Its seems that the current MOOC model is based on a Silicon Valley-style venture capitalism philosophy: “build market share and worry about profit later.” Coursera, Udacity, and edX, the three highest-profile MOOC ventures, admit that they are not settled on a revenue model yet.

“Venture capitalists encouraged [Coursera and Udacity] to do a land grab and get as big a footprint as possible, and now they are saying, ‘Go back and figure out how to make it sustainable,’” says Phil Hill, a partner with MindWires Consulting who writes for the e-Literate blog.

MOOC providers Coursera and edX are currently working to test different business models. Coursera Co-Founder Andrew Ng said that the company is already working on a business model task. “Some business models are becoming clear. Some we are confident will work; others we are still experimenting with.”

Coursera, for example, is offering a signature track on which students pay $50 for verification that they completed the coursework.

“You could have a certificate of a course completed at Duke University [NC]–that could be a valuable credential,” adds Ng. “We have projected that this alone will lead us to sustainability. In the first quarter of the signature track, we brought in $220,000, and in the second quarter, which hasn’t ended yet, we roughly doubled that amount. So we project that by itself that will make us sustainable.”

edX, which received $30 million in seed funding from both MIT and Harvard University, does not need the backing of venture capitalists as badly as its competitors. Even so, it needs to work on a business model to generate revenue for the company’s operation and product development.

While MOOCs may be free to students taking the courses, notes Anant Agarwal, president of edX, they are not free to the course developers. “EdX itself and its university partners are spending dollars to create courses,” he says. “We need a way to make that sustainable. We need to meet those stakeholders’ needs, and generating revenue is one of those, but we don’t have to do an IPO like Facebook.”

In addition, Coursera is interested in playing middleman for content adoption. Under the content adoption plan, one university produces a course that other universities want to adopt. Coursera would then provide the advanced technology to wrap around the content — everything from analytics to discussion boards — and receive a licensing fee in return.

EdX also is planning to become a marketplace for course content. The company is looking to extend its self-service model with the goal of becoming a marketplace for course content that universities want to license to one another.

“The higher education market has not yet been disrupted the way newspapers, music, and other industries have,” says Cable Green, director of global learning at Creative Commons. “The cost of higher education is bloated, and the services are aggregated and ripe for disaggregation. Plus, there is a huge population not being served by the current business model, so the venture capital people see that there is money to be made.”

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