A few years ago, MOOCs–massive open online courses–were all the rage. Publications, Fast Company among them, wrote about new startups like Coursera, EdX, and Udacity that offered the promise of free learning and professional development to anyone in the world who wanted them. However, in 2015, many of these companies and their compatriots in the edutech space as a whole discovered an unfortunate truth: It’s damn hard to make money from MOOCs.
Coursera, one of the biggest of the MOOC providers, pivoted last month to focus on job training rather than general interest education. The company received a mammoth $60 million funding round, which will go toward building what Coursera calls “job-relevant learning opportunities.” Rival EdX, meanwhile, has increasingly shifted toward offering career-oriented courses from a mixture of academic and corporate partners. MOOC providers are depending on the profit model of customers paying money for official certificates they can include in their LinkedIn profile or CV, but it might not be enough.
The Internet is full of learning content–popular sites like Khan Academy and larger repositories like YouTube are chock-full of them. As MOOC providers shift toward paid vocational productions, search engines are increasingly coming in to capitalize on the web’s wealth of educational content. Knewton, a New York-based startup that produces backends for e-textbooks and has attracted over $100 million in venture capital, recently pivoted (an increasingly common move in edutech) to offering an adaptive learning platform for teachers and parents that also catalogs tens of thousands of videos from YouTube and elsewhere. While Knewton says the move was due to “executing a planned progression” rather than pivoting, it is a significant change for how the company makes money.
When I viewed a demo of Knewton’s system shortly before launch this summer, it was pitched to me as a supplement or a replacement for a traditional tutor. Jose Ferreira, the company’s CEO, described it as “A diagnostic tool that points to the percentile point. We know exactly what you know and how you know it best.”
Knewton’s model is an alternate approach to edutech. Instead of the MOOC’s open cloud of learning, Knewton instead offers a data-obsessed model where teachers and tutors know the intricacies of how a student is progressing (or not progressing) through their textbook.
Their adaptive learning platform features more than 100,000 educational videos cataloged from YouTube, along with a large supplemental library of content. This library includes large components of instructional text, as well as assessment content to help evaluate student progress. But what they don’t have at the moment is a monetization strategy. Ferreira told me that for the moment, they are focusing on building a user base among schools and institutes of higher education.
Finding a way to turn e-learning into revenue, it seems, is hard. And methods of monetization have changed over time.
When I contacted Coursera CEO Rick Levin by email, he admitted that the way Coursera makes money has changed over the years. The former president of Yale University, Levin took the helm of Coursera in 2014 as part of a corporate organization that saw cofounder and former CEO Andrew Ng becoming chairman. A few months later; Ng announced he was moving away from day-to-day responsibilities at the edutech company to become Baidu’s chief scientist. Levin joined Coursera in part to help them find their place in the edutech landscape, and monetization is a big part of that.
“When Coursera launched in 2012, we started by providing free access to all of our courses and we had no paid offerings,” he told me. We have tried a couple of different ways to monetize in the last several years […] Today we earn revenue in two ways, the first is when a learner elects to pay us for a certificate in an individual course and the second is with our Specializations.”
Specializations are largely career-oriented programs offered through Coursera in topics like data science, cloud computing, and mobile app development. Coursera offers financial assistance to users as well.
The company has also tried other methods of monetization over the years, including an ambitious attempted product called Coursera Career Services, which would use the e-learning site as a recruitment tool for corporations looking for promising talent; that project appears to have fizzled out.
And Coursera is in an unusual position as far as their learning offerings go. Levin told me that nearly three quarters of his company’s users are outside of the United States, with a large portion coming from developing countries where Coursera access is likely to be through only a smartphone or a tablet. This has led to changes in both their UI and UX–mobile apps are a large area of investment–and a situation where paid users, largely in the United States and other wealthy countries, help subsidize the learning of self-starters in poorer lands.
Coursera declined to provide Fast Company with revenue numbers, but gave access to a report on an area they’re more comfortable discussing: learner outcomes through the service. According to the company’s data, which was released to the public in September 2015, 72% of nearly 52,000 learners surveyed reported career benefits and 61% reported educational benefits from using Coursera. Thirty-three percent of respondees said they experienced what they called “tangible career benefits,” which include raises, promotions, a new job, or starting a new business.
Levin added, “Our long-term intent is to be the place on the web and in mobile to learn across your lifetime, much in the way Facebook has become the place you go to share and Amazon is the place you go to shop and Google is the place you to search.” For Coursera, offering as many courses as possible is simply good business.
Another service, Skillshare, pivoted (though the company’s CEO, again, disputed the assertion on Quora) several years ago from offering paid classes in person to online video learning. That company’s model, which led to a $6 million funding round in 2014, emphasizes online video classes similar to those offered by LinkedIn’s Lynda.com.
All of these companies face a common challenge: The Internet is full of learning materials, and no one really knows how to make sense of them. Materials found by self-learners online can vary wildly in quality, and companies like Coursera, Knewton, and Skillshare promise users they can provide quality content in exchange for money. But much like music or television shows, no one wants to pay for education on the Internet. Unfortunately, running an edutech company means paying for employees, servers, cloud storage, teachers, and all other sorts of expenses. It’s convincing users to pay for education that’s a hard part, and may the best business plan win.