Monetizing the Online Education Revolution

I’ve written that online education is going to start looking a lot like the broader consumer internet industry, with an intense focus on product, user growth and, eventually, monetization. The New York Times ran a nice article this morning about some of the ways Coursera, Udacity, et al. are looking to start generating revenue. It’s pretty familiar stuff, including:

  • Charging employers to connect with successful students
  • Licensing content to universities who want to use it to teach credit-earning, tuition-paying, students
  • Asking students to pay for a certificate showing that they’ve completed the program
  • Ads, Amazon’s affiliate program, and other traditional revenue streams for web publishers

The thing that struck me about the article was the numbers. Specifically:

  • 70,000 students are signing up for Coursera’s 200 courses each week
  • The completion rate for these massive open online courses (MOOCs) is less than 10%
  • It costs about $50,000 to create a MOOC

So, each Coursera course is getting about 350 registrations per week, on average. 35 of those students will actually complete the course. A visual scan of Coursera’s website has me ballparking that the average course is about 8 weeks. Assuming that courses run continuously, and signup for the next session starts as soon as the previous session begins, you’re looking at an 8-week signup period, with 350 signups each week, for a total of 2,800 students per course. 280 of those students will finish. Based on those numbers, someone needs to pay about $18 (50000/2800) to license the course for each student, or Coursera needs to find a way to squeeze $180  out of each graduate (either directly from the student, or from an employer).

Of course, I’m playing around with these numbers without having the complete picture available to me. Also, it’s likely that Coursera will not limit itself to one strategy–they could charge $9 to take the course and $90 for a certificate, for example. But, it’s nice to have a few points with which to orient ourselves in the rapidly changing online education world. If you’re a university, $18 in instructional costs per student probably isn’t too bad (note: if I ever find out NYU paid only $18/student in instructional costs for any of my courses, I’m flying to NY and demanding a refund). If you’re a student, paying some (all?) of that $180 in the form of certificate fees is a pretty good deal compared to the cost of traditional education, though the ultimate value will depend on how well Coursera manages its brand and establishes relationships with employers.

The good news for this class of education startups is that their founders profess to have a strong user focus and their venture backers seem content to give them the time they need to figure out how to monetize without compromising their product. We’ve come a long way from “OMG PUT ADS ON THAT SUCKER NOW!!!” Progress.

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