MOOCs Observatory – Business Models


Will MOOCs Undermine Top Business Schools, or Help Them?

by Steve Kolowich

Massive open online courses are not currently cannibalizing tuition-based programs at top business schools, according to an enthusiastic report from the University of Pennsylvania. Rather, MOOCs could become a recruiting tool for tapping new pools of potential students.

Business schools that offer MOOCs should also figure out how to charge the many students who sign up for the online courses without intending to complete them, write the authors of the report.

The report looks at data and survey responses from students in nine MOOCs offered by Penn’s Wharton School. The researchers found that 78 percent of the students were from outside the United States, and 35 percent of the U.S. residents taking the business MOOCs were foreign-born. Among the Americans, 19 percent were members of underrepresented minority groups, compared with 11 percent among M.B.A. students as a whole.

“Our data suggest that, at least at present, MOOCs run by elite business schools primarily attract students for whom traditional business-school offerings are out of reach,” write the authors.

Rather than undermine the existing business model, MOOCs may help Wharton and other business schools recruit outside the normal pipelines, the researchers speculate. “These three groups—students from outside the United States, especially developing countries, foreign-born Americans, and underrepresented American minorities—are students that business schools are trying to attract,” they write.

The Penn report also reiterates a point that has become a refrain among researchers looking at free online courses: Completion rates are poor metrics for judging the success of a MOOC because the goals of students who register for such courses vary. Indeed, only 5 percent of the registrants in Penn’s business MOOCs finished their courses, and those who completed were “disproportionately male, well-educated, employed,” and from countries in the Organization for Economic Cooperation and Development; also, American students “tend to be white.” But a mere 43 percent of students who were surveyed said that obtaining a certificate of completion was important to them.

Based on the apparently diverse motivations of people who sign up for MOOCs, the Penn researchers offer some business advice to institutions offering them: Find ways to charge students who have no plans to complete their MOOCs.

“Business schools must bear this in mind and move away from a business model of charging for certificates of completion,” the authors advise. “Instead, they must tailor offerings to the goals of these learners, whatever they may be.”

Penn, which has released several reports (not all of them flattering) based on data from its MOOCs, was an early institutional partner with Coursera, the largest MOOC company. The university also owns a stake in the company. Penn’s provost, Vincent Price, is listed as a member of Coursera’s advisory board.

Read the original article:



Two edX partnership models – compared to Coursera

edX offers its partners a choice of 2 partnership models. Both models give universities the opportunity to make money from their edX MOOCs—but only after edX gets paid.

1)”University self-service model,” allows a participating university to use edX’s platform as a free LMS for a course on the condition that part of any revenue from it goes to edX. The courses can be created by any individual professor and branded as “edge” courses . Once a self-service course goes live on the edX Web site, edX will collect the first $50,000 generated by the course, or $10,000 for each recurring course. edX and the contract partner will each get 50% of all revenue beyond that threshold.

2) “edX-supported model”- universities receive “production assistance from edX for their MOOCs. edX charges a base rate of $250,000 for each new course + $50,000 for each time a course is offered for an additional term, according to the standard agreement. Although this model requires cash upfront, the potential returns for the university are high if a course ends up making money: 70 % of course revenue goes to the universityty. However, if the university also has self-service courses with edX, it will not get any revenue from the edX-supported courses until edX has made the equivalent of $50,000 for every new self-service course and $10,000 for every recurring one.

Universities can choose and switch models for every course every 12 months.

Compare to Coursera:

Both edX models offer higher shares to universities than agreements with Coursera do, but only once edX has collected its minimum payment. Coursera offers universities 6-15 % of the gross revenue generated by each of their MOOCs, + 20% of the profits generated by the “aggregate set of courses provided by the university.”There is no minimum payment to Coursera (universities are guaranteed a cut of any revenue for their MOOCs on Coursera).

The market is so crowded that it even spawned its own news outlet, called EdSurge:

The weekly newsletter covers the education-technology sector. Its editors have also rolled out an early version of a database that seeks to track the market’s biggest players.

MOOCs “remain on the mind”.

Video:  MOOCs: Hope or hype? with Joshua Coates, CEO of Instructure.

MOOCS aren´t new and they will not die tomorrow. But in a short time, they might stop being visible. “Don’t get off..this is just part of the natural cicle”. Josh Coates gives a hilarious but informative presentation about MOOCS, the hype and the hopes for education at SXSWedu 2013.

Aside of modest philanthropic and government money and in-kind contributions into MOOCs from universities, in form of intellectual, human and software capital, private funding came up with as min. $ 100 Mln. Higher education of the MOOC-type is touted as the Next Big Profitable Thing, what Forbes calls “The $1-Trillion Opportunity.”
Size isn’t Everything – The Chronicle of Higher Education

For now, it isn´t happening yet. MOOC providers seem to accept that they have a long way to go before they find stable revenue sources. Since the day #1, it had been assumed by the Coursera founders that the business model plans need to wait, the first thing was to put the stake on the new marketplace, and then, with time and experience, they will figure it out. (Very Silicon-Valley-garage-style: innovation first, returns follow):
Students Rush to Web Classes, but Profits May Be Much Later – NYT

                                                                                          Updated 08-07-2013

So far, no one came up with a clear business model but the following aspects of MOOCs are being explored in practice or considered to be marketable:- Licensing the content to universities- Fee-based versions of courses- Splitting the education process into mix & match pieces and outsourcing some services (assessment, enrolment, etc.) to a third party- Certificates, in different forms and cost (charge for ID+proctoring exam, pay-for-credit, pay-for-certificate, etc.)- Student support  and moderation option, fee for tutoring

– Networking and community options fee for students

– Student-employers matching services: fee-based referrals

– Gathering students personal data for future monetizing (fee-based access for companies)

– Random possibilities, i.e. advertising, sponsorship

– etc, etc…                                                                      What else? What’s new? Comments?

On the business front, the discussion is focused on the promise of money: what is marketable in MOOCs and other online college offerings; which business opportunities could be found  and how long is the wait period.
A notable experiment in binding a MOOC to academic credit, with a promise to provide a high-quality learning experience for a very low cost for students and profit for the provider, is reported by Steve Kolowich:
“The deal represents one of the first instances of a third-party institution buying permission to incorporate a MOOC into its curriculum — and awarding credit for the MOOC — in an effort to lower the full cost of a degree for students. It is also a first step for Coursera and its partners toward developing a revenue stream from licensing its courses”
MOOCs for Credit – Inside Higher Ed.

Recently, competition among providers started to build up, and there are first failures visible. In spite of it´s top brand, the public University of California system managed to raise quite insignificant funds, and it made a decision to take a $7 Mln loan to launch online courses. Without solid private investment, insufficient marketing of distinct offerings, and no sound business strategy, there is no growth of revenue stream. And the pay-back time is looming:
UC Online Strives to Compete in an Era of Free Courses

In the meantime, educators are debating these days if education and knowledge should be a commodity; how much compatible, if at all, the “massive” and “open” components of MOOCs:
Business+MOOCs: Hangout recording – Internet Time Blog
Business+MOOCs: Tweetstream


Read more (latest first): UPDATED June 15, 2013

Iversity, a German services provider, is looking at three likely business models:

1) Certification fees for students — these won’t be implemented this year, says Riecke, but will be coming to Iversity in 2014 

2) Licensing fees — where physical universities pay Iversity to license courses to replace some of the classes they conduct (likely for introductory courses, freeing the university’s staff up for more in-depth teaching) 

3) Recruiting fees — generated by providing a “recruiting intelligence” service to employers based on students’ performance in relevant classes

• Berlin-Based iversity Relaunches As MOOCs Platform – Techcrunch

• MOOC with a Business Model: Taking a Look at ALISON – UnCollege
 Coursera Announces Details for Selling Certificates and Verifying Identities – TCHE
• How EdX Plans to Earn, and Share, Revenue From Free Online Course – TCHE
• Public Universities to Offer Free Online Classes for Credit – NYT
• Students Rush to Web Classes, but Profits May Be Much Later – NYT
• The possible business impact of MOOCs – Slideshare
• The business of MOOCs: how to profit from giving away something for nothing
• A new business model for MOOCs: Gateway to degree programs – eCampus News
 As California Goes – Inside Higher Ed
• Coursera Announces Details for Selling Certificates and Verifying Identities – TCHE
• Online Courses Look for a Business Model – WSJ
• The MCDonald’s of Higher Ed – Ian Bogot Blog
• A Dot-Com Entrepreneur’s Wild Ambition: Drive Education Costs to Zero – TCHE
• Daphne Koller – What we are learning from online education- TED
• Finally, a Business Model for MOOCs – The Evolllution
• MOOCs: An Alternative Business Model for Higher Education – Gilg Ed.
• Inside the Coursera Contract: How an Upstart Company Might Profit From Free Courses
 The U. of Michigan’s Contract With Coursera



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