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MOOC Trends in 2015: Big MOOC Providers Find their Business Models

A comprehensive look at what business models the top MOOC providers have chosen, why they’ve done so, and what it might mean for learners.

In July 2012, The Chronicle of Higher Education obtained an agreement between Coursera and the University of Michigan, Ann Arbor, through a Freedom of Information Act request. The contract had a “Possible Company Monetization Strategies” section, which outlined eight different ways that Coursera can make money. But by January 2015, Coursera president Daphne Koller stated in an interview that “Verified Certificates for both courses and specializations are the primary revenue source for us.” Similarly, this year other major MOOC providers seem to have found their business models. Accordingly, they have made revenue their main priority at the moment, and have been making changes to maximize revenue.

“We’re confident [verified certificates] could be a significant revenue source that will make us a sustainable business while still allowing us to continue offering free education.”
Daphne Koller, Coursera Co-founder and President 

The Hype is Dead, but MOOCs Are Marching On

Credentials: Specializations, Nanodegrees, XSeries

In September 2013, edX was the first provider to go beyond issuing single course certificates. They launched their XSeries program, which consists of a certificate gained from completing a sequence of courses. Coursera and Udacity launched similar programs in 2014, which are called Specializations and Nanodegrees respectively. These “Big 3” providers are working to establish brand new credentials using their own brands. The aim of these new credentials is to indicate some level of competence for high-demand skills. They charge for these credentials, of course; and though many doubt the value of these credentials, because their signaling value in the marketplace is still being established, quite a few students are choosing to pursue them. Because of this success, both Udacity and Coursera raised significant new funding in 2015, with the primary aim of creating more of these credentials.

There is one group that is losing out with this trend: those learners who want a free certificate for the MOOCs that they take. Most recently, edX joined Udacity and Coursera in discontinuing free certificates for courses. To maximize revenues, MOOC providers have adapted how their courses work, and Coursera announced that, starting next year, students in some courses will have to buy a verified certificate to get access to graded assignments.

Revenue figures for MOOC providers are scarce, but earlier this year we noted that Johns Hopkins University made at least $3.5 million in less than a year from the sale of verified certificates for its Data Science Specialization (read reviews of the Specialization here). Udacity, meanwhile, reached profitability with Nanodegrees, raised $105 million, and achieved “unicorn” status. Finally, Coursera raised a $61.1 million Series C round funding, based on the projections of its Specializations revenue.

Currently there are 100+ Specializations, Nanodegrees, and XSeries credentials, most of which were created in 2015, and we can expect that number to more than double in 2016. The projections for 2017 and beyond could be exponential. We tracked this trend early, and this enabled us at Class Central to introduce a free credential exploration and rating service called Credentialing the Credentials. Using that feature on Class Central, students can discover certificate programs for high demand skills from top universities and companies, and then read reviews to decide if a given credential is right for them. We believe that, with current trends, this will become an increasingly important resource for learners.

Credits: Online Degrees and One-off Classes

The “Big 3” are also making headway in offering their MOOCs for credit, an area which all acknowledge could open the floodgates to demand, revenue, and the once-promised “disruption” to higher education. However, in reality, the MOOC providers are treading slowly in this area, given they are having to rely on partnerships that represent carefully controlled experiments.

Earlier this month Udacity celebrated the graduation of first cohort of students from the Online Master of Science in Computer Science (OMS CS) that it created with Georgia Tech. Launched two years ago, with a tuition cost of $7,000 (personal note: I paid ~$60,000 for my MS CS degree from Georgia Tech), 2,841 students have enrolled at least in one course. But thus far, only 20 students have earned their degree. It may still be too early to tell whether this is a success, given that individuals are taking courses on their own schedules.

Earlier this year, Coursera partnered with the University of Illinois to launch an online “iMBA” with a tuition of $20,000 — a higher price point, though still much cheaper than the residential program. We know it will take some time to learn about the success of this program — given this, we expect universities to tread slowly in expanding in this direction.

EdX has been experimenting on a slightly different target area: they are reaching out to college and high-school students. Earlier this year in April, edX and Arizona State University (ASU) announced a Global Freshman Academy (GFA). ASU will produce a series of online courses that anyone can take on the edX.org platform. Learners who pass a course can apply for and obtain college credit from ASU, for tuition rates at a discounted rate. EdX is also offering credit-granting courses, targeted at high schoolers.

edX Credit

“It’s taken us three years to arrive at more focused intentions, but learners want credit, and to provide credit we must create quality learning environments that meet the needs of diverse learners, and are recognized by institutions and employers.”
Anant Agrawal, edX CEO 

EdX has announced a few more  partnerships and initiatives so that students can earn credits. The partnerships include the ACE Alternative Credit Project, Charter Oak State College, and MIT Micro-Master’s Credential in Supply Chain Management.

“The new MicroMaster’s is an important modular credential for the digital age, and promises to serve as academic currency in a continuous, lifelong learning world.”
-Anant Agrawal, edX CEO 

Poised for Growth, but Growing with Poise?

Thus, we can see that the major MOOC providers have found their high-potential revenue avenues. With credentials, it will become a race to find out which are in demand and then to offer them, while also keeping the quality and rigor high enough so that the credentials can become recognizable assets for those achieving them. While this represents the present opportunity, the credit avenues represent another longer-term future opportunity, and the “Big 3” are running their experiments now to be in position to expand upon them later, should the experiments prove successful.

Is this a good trend for learners? The answer is “no” for those who are used to free certificates and have neither the inclination nor the funds (though the availability of financial aid is usually publicized) for getting recognition for the MOOCs they complete. But the answer might be “yes” for career-focused individuals who want these credentials, and who will benefit from these MOOC providers staying in business, expanding their catalogues, and investing in new ways to equip people with the new skills they will need in their future careers.

Where will things lead, and how fast? Will some MOOC providers pull ahead, or will new contenders emerge? Will credentials gain greater recognition, or will there be massive digital credential bloat? We don’t know these answers yet, but this is an exciting, dynamic space, and Class Central will be watching.

Dhawal Shah Profile Image

Dhawal Shah

Dhawal is the CEO of Class Central, the most popular search engine and review site for online courses and MOOCs. He has completed over a dozen MOOCs and has written over 200 articles about the MOOC space, including contributions to TechCrunch, EdSurge, Quartz, and VentureBeat.

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