MOOC Providers Take Differing Approaches to Profitability

The popularity of massive online open courses is booming. For the first time, the higher education sector is experiencing the same technology-fueled feeling of giddiness that made the dotcom boom years fly so high. However, as the Economist points out, it's one thing to tout a revolution — and it's another to pay for it. In short, do massive online open course providers have what it takes to make themselves profitable?

The two leaders in the MOOC game are undoubtedly Silicon Valley-based startups Coursera and Udacity. Both boast impeccable academic and business pedigrees. Coursera's co-founder Daphne Koller is a former Stanford University professor, while Udacity's CEO Sebastian Thrun is tied to Google's success. In the past year, Coursera has raised close to $80 million in several funding rounds, including $43 million in a venture capital funding round announced earlier this month. Koller says that Coursera's fund-raising ability puts it in contention to become one of the small number of dominant players in the MOOC sector when the field inevitably thins in a few years.

Certainly, there is plenty of experimentation with business models taking place. The MOOCs themselves may be free, but those behind them think there will be plenty of revenue opportunities. Coursera has started charging to provide certificates for those who complete its courses and want proof, perhaps for a future employer. It is also starting to license course materials to universities that want to beef up their existing offering. However, it has abandoned for now attempts to help firms recruit employees from among Coursera's students, because catering to the different needs of each employer was "not a scalable model", says Ms Koller.

Udacity is charting a different path to profitability. While also forming partnerships with colleges and universities, the company feels that its future is in continuing education. It hopes to work with employers to provide training opportunities for its current and future employees. Although details are scarce, Udacity has now formed a business relationship with Google and AT&T.

However, these two approaches aren't the only ones being tried out by MOOC providers. Alison – based in Ireland and in business since 2007 – is going for the tried and true approach that made Google the giant it is today: advertising.

Alison, an Irish provider of free, mostly vocational education founded in 2007, before MOOCs got their name, is generating plenty of revenue by selling advertising on its site. "Ads propelled radio and TV, why not education? There is a lot of misplaced snobbery in education about advertising," says Mike Feerick, Alison's founder.

Another important category of MOOC providers are publishers, says Rob Lytle of the Parthenon Group, a consultancy. He says firms like Pearson (part-owner of The Economist) that run educational businesses such as textbook-publishing may thrive by offering free MOOCs as a way to get people to buy their related paid content.

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