Online varsities look for profits
In August, four months after Daphne Koller and Andrew Ng started the online education company Coursera, its free college courses had drawn in a million users, a faster launching than either Facebook or Twitter.Updated: Jan 08, 2013 01:47 IST
In August, four months after Daphne Koller and Andrew Ng started the online education company Coursera, its free college courses had drawn in a million users, a faster launching than either Facebook or Twitter.
The co-founders, computer professors at Stanford University, watched with amazement as enrollment passed 2 million last month, with 70,000 new students a week signing up for over 200 courses, including Human-Computer Interaction, Songwriting and Gamification, taught by faculty members at the company's partners, 33 elite universities.
In less than a year, Coursera has attracted $22 million in venture capital and has created so much buzz that some universities sound a bit defensive about not leaping onto the bandwagon.
Other approaches to online courses are emerging as well. Universities nationwide are increasing their online offerings, hoping to attract students around the world. New ventures like Udemy help individual professors put their courses online. Harvard and the Massachusetts Institute of Technology have each provided $30 million to create edX. Another Stanford spinoff, Udacity, has attracted more than a million students to its menu of massive open online courses, or MOOCs, along with $15 million in financing.
All of this could well add up to the future of higher education - if anyone can figure out how to make money.
Coursera has grown at warp speed to emerge as the current leader of the pack, striving to support its business by creating revenue streams through licensing, certification fees and recruitment data provided to employers, among other efforts. But there is no guarantee that it will keep its position in the exploding education technology marketplace.
"No one's got the model that's going to work yet," said James Grimmelmann, a New York Law School professor who specializes in computer and Internet law. "I expect all the current ventures to fail, because the expectations are too high. People think something will catch on like wildfire. But more likely, it's maybe a decade later that somebody figures out how to do it and make money."
For their part, Koller and Ng proclaim a desire to keep courses freely available to poor students worldwide. Education, they have said repeatedly, should be a right, not a privilege. And even their venture backers say profits can wait.
Says Scott Sandell, a Coursera financier who is a general partner at New Enterprise Associates: "What is important is that Coursera is rapidly accumulating a body of high-quality content that could be very attractive to universities that want to license it for their own use. We invest with a very long mindset, and the gestation period of the very best companies is at least 10 years."
But with the first trickles of revenue now coming in, Coursera's partners expect to see some revenue sooner.
"We'll make money when Coursera makes money," said Peter Lange, the provost of Duke University, one of Coursera's partners. "I don't think it will be too long down the road. We don't want to make the mistake the newspaper industry did, of giving our product away free online for too long."
Right now, the most promising source of revenue for Coursera is the payment of licensing fees from other educational institutions that want to use the Coursera classes, either as a ready-made "course in a box" or as video lectures students can watch before going to class to work with a faculty member.
Koller has plenty of other ideas, as well. She is planning to charge $20, or maybe $50, for certificates of completion. And her company, like Udacity, has begun to charge corporate employers, including Facebook and Twitter, for access to high-performing students, starting with those studying software engineering.
This fall, Koller was excited about news she was about to announce: Antioch University's Los Angeles campus had agreed to offer its students credit for successfully completing two Coursera courses, Modern and Contemporary American Poetry and Greek and Roman Mythology, both taught by professors from the University of Pennsylvania. Antioch would be the first college to pay a licensing fee - Koller would not say how much - to offer the courses to its students at a tuition lower than any four-year public campus in the state.
Under Coursera's contracts, the company gets most of the revenue; the universities keep 6 percent to 15% of the revenue, and 20 % of gross profits.
One tiny revenue stream has begun flowing into the nondescript Silicon Valley office building where Coursera's 35 employees work to keep up with the demand for their courses: The company is an Amazon affiliate, getting a sliver of the money each time Coursera students click through the site to buy recommended textbooks or any other products on Amazon.
Other possibilities around the edges include charging a subscription fee, after a class is over, to continue the discussion forum as a Web community, or perhaps offering follow-up courses, again for a fee.