Moocs Strategize To Generate Revenue

What does it take for a for-profit Massive Open Online Course (MOOC) — like Coursera or Udacity — to become profitable? Or for a not-for-profit MOOC — like edX — to become sustainable?

And how important is that, really?

That’s what Daphne Koller wants to know. Koller is both a CS professor at Stanford University and a co-founder of Coursera, the online education company that launched in mid-April of last year and whose enrollment surpassed two million by year-end. Over 70,000 new students sign up each week for over 300 different courses taught by educators at Coursera’s 62 university partners.

But, despite its success at attracting students, what everyone wants to know is "when will it be profitable?" And that irks Koller.

"Can you think of any other Internet enterprise that is questioned to this extent about its profitability just a year after it began?" she asks. "Most Internet companies — even the ones that are extremely profitable today — had effectively zero revenue a year after they started. And that includes Google, Facebook, LinkedIn, Zynga, Instagram, Dropbox, and pretty much everyone else. So why is everyone so dubious that we will have a revenue model?"

Not that that’s so important to the backers who initially funded Coursera with a $16-million venture-capital grant, she adds. She maintains that they feel quite strongly that any enterprise that gains users and retains them — "and is changing the lives of literally millions of people" — will find a way to become sustainable.

Nevertheless, the constant prodding is one of the reasons that, in mid-January, she and co-founder Andrew Ng, also a Stanford CS professor, started three revenue-producing models they hope will contribute to Coursera’s sustainability. They are:

• Signature "identity-verified" track. Students can elect to scan a government-issued picture ID that can be compared to their webcam photo and used to confirm that they are indeed the person participating in a course. If they successfully complete the course, they earn an identity-verified credential with the university’s brand that is stored on the Coursera platform. The fee is $30-$70, depending on the course.

"A good number of students have opted in, realizing the benefits of earning credentials that can be presented to a current or prospective employer," observes Koller.

• ACE Credit track. Students interested in eventually earning a degree must first opt into the "signature track" and then take courses that have been approved by the American Council for Education (ACE). So far, five courses have been assessed and approved for their "credit equivalency." At the end of the course, there is a proctored final exam which, if passed, gives the student the option of getting credit towards a degree if they subsequently enroll in an academic institution that accepts those equivalencies. The fee is $30-$70 for the identity verification plus $80-$100 for the proctored final exam.

• University licensing. Beginning this September, academic institutions can take any of Coursera’s courses and offer it to their own students, usually adding additional interaction with one of their own local instructors. Coursera has not yet released information about fees.

Nor will Koller speculate on how much revenue these three programs will generate — or on how long it will take for Coursera to become profitable.

But Christopher Sessums suggests that sustainability isn’t a top priority for MOOCs and their execs are probably scrambling for revenue models "mainly because they are being pressed pretty hard by observers to come up with some," he says. Sessums is the chief learning officer at xlm design, a collective agency that promotes scalable learning design.

"I’ve heard what Daphne and Andrew are saying about Coursera, and I really don’t think they are interested in the business side of things," he says. "They are really interested in providing a bang-up platform to engage learners all over the world who have Internet connections. And they’re giving answers to people just to keep them happy."

He believes the interests of Coursera’s investors are "long tail" and they aren’t looking for an immediate return. Which, he expects, will be the case. Sessums predicts MOOCs will become sustainable in no less than five years — and probably more like 10.

But president Anant Agarwal predicts sustainability for edX in just two to five years. In the meantime, the not-for-profit MOOC founded by MIT and Harvard is mainly living off of a $60-million grant from the two universities.

He reports that he is running edX like a "not-for-profit startup company, which means we’re doing what startups do — trying out a number of ideas to see what works and
what doesn’t."

His pilot programs — some of which are not unlike Coursera’s — include:

• Small Private Online Course (SPOC). edX intends to license its courses to other universities but hasn’t yet decided what to charge — perhaps a flat fee per course or a fee based on the number of students in the class. It is already testing the waters with universities including San Jose State University and the National University of Mongolia.

• "Honor code" certificate. Students would get a certificate of mastery with a unique digital signature from the university that offers the edX course. Employers or admissions officers can enter the UUID into any browser and check the certificate’s authenticity. The fee has not yet been determined.

• Proctored certificates. After going to a proctoring center and passing an exam, students would receive a "proctored edX certificate" which authenticates the fact that they took and passed the exam. Currently the pilot fee is $95 per certificate which includes the proctoring service fee.

• Open-sourcing the edX platform. Universities can access the code for edX’s platform and host it themselves with their own courses. edX would only charge for offering support in what Agarwal calls the "Linux for learning" model. And those universities that prefer not to build their courses themselves might pay edX to create the online course for them.

Should all these programs be successful, does Agarwal believe they will bring in enough to make edX self-sustaining?

Not even close, he says. But they will give him "more runway" before the time comes where self-sustenance is necessary.

"And that time will come," he says. "The last thing I want to do is go back to our donors and ask for more. There’s something called ‘donor fatigue,’ you know."

Paul Hyman is a science and technology writer based in Great Neck, N.Y.