Higher Education Strategy Associates

The Future of MOOCs: Coursera and EdX

We saw yesterday that Udacity is leaving the higher education field in order to focus more on contract training.  In some ways, this is no surprise.  Udacity was always the weakest of the Big Three MOOC providers because, in addition to being a private platform, it was also trying to develop much of its own programming, which is quite costly.

Coursera, on the other hand, outsources course production to big prestigious institutions – 70-odd of them at last count, including Canada’s Big 3 – and sticks to its knitting as a platform for other people’s content.  That’s a heck of an implicit subsidy: Coursera partners tell me that their costs run in the $50K/course range.  And yet, Coursera seems to be blowing through money relatively quickly.  In mid-2012, it picked up about $22 million in venture-capital (VC) funding; this summer it picked up another $40 million or so from a different set of bankers.  Since, generally speaking, people don’t dilute their own shares unless they really need the money, my best guess is that Coursera’s burn rate is in the neighbourhood of $1.5-$2 million/month.

Revenue?  Well, as I pointed out back here, despite having a whole bunch of ideas about how to earn revenue in theory, Coursera in fact seems to only have a single source; namely, having people sign up for its Signature Track service.  Total revenue from that source was $1 million in the first 3 quarters of this year.

Think about that: $2M/month burn rate, $100K per month income.  How long can this realistically last?  At the time of the last funding round, CEO Daphne Koller, in a moment of Rob Ford-esque unreality, commented that most internet start-ups “don’t even think about making money for 5 or 6 years”.  Amazing, huh?  And she’s the CEO.  In reality, though, the denouement is much more imminent: unless Signature Track enrolments jump 20-fold, or burn rates fall significantly, or unicorns arrive with magic revenue streams, I figure Coursera has got maybe 15 months before the VCs pull the plug.

That would leave just the Harvard/MIT-owned EdX, which doesn’t face these kinds of pressures because, rather than being run with VC-cash, it’s being run off those two institutions’ combined $43-billion endowment.  And you can bet they will be around to pick up any spare MOOCs that need a home when Coursera implodes, leaving EdX in a near-monopoly position.

This, of course, is worrisome, but still in some ways to the good.  Once we clear the VCs out of the MOOC discussion, we can ask clearer questions about the uses of MOOCs, without getting tied up in ideological debates about whether they are neo-liberal whatsit, and yadda yadda.  And that’s important, because the potential benefits of these tools are worth examining.

More tomorrow.

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6 Responses to The Future of MOOCs: Coursera and EdX

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