The sudden and widespread advent of Massive Online Open Courses took universities by surprise and could potentially bring in-depth changes in the Higher Education scene. Still, major questions remain unsolved, such as: what business models are adapted to the new educational actors? Have the major American platforms already won the day, or is there still room for outsiders?
Paris Innovation Review – The major American MOOC providers are leading the field and receiving huge amounts of investment. In your opinion, are they mostly focused on taking a position, or have they thought seriously about their business models?
Pierre Dubuc – You are perfectly right in observing the huge investments involved. Coursera raised 85 million dollars, edX had Harvard and MIT each contribute to the tune of 30 million dollars. And last but not least, Udacity must have raised between 15 and 20 million dollars. When you think about it, these amounts are not overstretched given the level of investment needed to launch and run a MOOC platform. The contrast, however, is striking, compared with their revenues to date. Coursera, out front, has only just exceeded the one million dollar mark, whereas its valorization estimate stands at several hundred millions (including the 85 million dollar in the fundraising phase).
We are therefore led to consider that what is at stake today is to gain market positions – a market which everybody is willing to bet that it will soon exist, but where operations are as yet low-key and almost virtual.
This does not imply that the major platforms have not thought about their business models. When they were launched three years ago, the operators were pointing to highly varied sources of revenue: sponsors, licensing rights, recruitment… but in fact none of these formulae had really come to the fore; edX, for example, has abandoned the idea of connecting MOOC students to potential employers. The fan-out originally envisioned is closing and most players are now heading for alternate solutions. Two examples here. First, certification sales: you follow the courses for free, but you pay for your diploma; second, licensing right sales between Universities: an institution purchases the user-rights for a product produced by another HE institution and then integrates it in its own MOOC curriculum.
Are places like the University of California at Stanford, who were pioneers in the emerging MOOC scene, still in the running?
Stanford… is still running everywhere! The founder fathers of Coursera and Udacity are University academics, actively supported by their University. But it should be noted that the platforms are distinct from the universities who indeed are concerned about the new powers of the new players. The universities are still marked by what happened to book and music publishers who have passed under the control of the main digital actors, notably Apple and Amazon. So-called “platform economics,” a characteristic feature of the digital revolution vassalizes or enslaves content suppliers, with the universities and other HE institutions worried at the prospect of becoming simple apps.
For this very reason, Stanford is envisaging the creation of an in-house platform: to be used by the campus students, with possible access offered to other users. Stanford’s President is seriously concerned by the question of branding, with Coursera upstaging his University.
What is at stake is a loss of control. The return on experience from other cultural industries causes the HE institutions to be wary. In more general terms, we can consider that the economic agenda of the major platforms is not aligned with those of the universities and tensions could arise because of this divergence. To give a simple example: contracts are based on ‘revenue sharing’ which, at face value, suggests that the interests and profits will be shared. The university gets about 15% revenue (from sig track) and 20% of gross profits (total - rev share - operational costs). This percentage reflects a typical emergent business situation: Coursera was the very first player in the MOOC field and could claim this much, all the more so that the real revenues were (and still are) small compared with the university budgets.
Success of the MOOC approach to education, plus growing competition among platforms should invite the universities to renegotiate; if the course completion added value comes with the certification process (diploma awards), they will be in a strong position to do so. Admittedly, migrating from one platform to another carries a non-negligible cost tab, each platforms having its own characteristics. However, MOOC programmes are not ‘made to last forever’ – indeed, after 3 years they call for ‘rehab’ work, for all sorts of reasons, running from advancement of knowledge to technical functionalities and possibilities coming on-line.
We have heard of pay-as-you-go courses. Is this serious, or should we, on the contrary, consider that since a MOOC by definition is “open,” it can only be acceptable in this category by being totally free?
Curiously enough, there is no standardized definition for a MOOC; it is a variable geometry education formula, i.e., it is not yet stabilized and will undoubtedly continue to evolve. Nonetheless, there is a consensus on the point that a MOOC must be both Massive and Open, which entails necessarily a free access.
A 100% pay course is possible, of course, but it would no longer qualify as a MOOC, but a form of e-learning, with 50 customers and not 10 000 registered followers. Unless, naturally, some large scale corporation (an announcer or a sponsor) pays for 10,000 consumers!
This is a possibility that must be envisioned along with the other business models associated with MOOCs. All such models are based on the existence of a free access education base, to which are attached a range of services, all of which can generate revenues. With this distinction in mind, a characteristic of a digital economy, that the clients and the users are not necessarily always the same persons.
Can you explain the OpenClassrooms business model for our readers?
Yes, and it will serve to illustrate the point I made earlier. The Site du Zero, renamed recently Openclassrooms, was launched in 1999, long before the major platforms. At the time, the technical functionalities and more generally the market conditions were very different. Our main source of revenue was via publicity advertising – the users had free access and our clients were the ad. announcers. The site developed and the audience grew (today we measure 2.6 million unique visitors a month) but the Internet publicity market has also changed and we ourselves are beginning to professionalize our products and services when we had, in fact; started our business as a hobby. From 2009 forward, we began to publish our courses in other, commercialized formats such as books or e-books. The contents were exactly the same as those we were offering feely on line, but our registered users accepted to purchase the paper supports, i.e., they became clients for various reasons – the pleasure of possessing a book, the possibility of going to the next page with being connected to Internet…
Selling paper books and e-books has become a business of its own: products are mainly for sale online via our site, as an alternative to free courses accessible on line, but also via other channels. This constitutes one of our main sources of revenue today.
The e-books can either be bought singly or integrated in a wider offer and this is where we come to the core of our business model, which I would define as a freemium; you pay an annual subscription of 9.99 euros, enabling your access to a bouquet of services inclusive of the possibility to download the e-book contents, likewise to an ad-free site, participation in master classes and a guaranteed certification once the course has been successfully completed.
The offer here is different from practice observed on edX or Coursera, who have priced certification on a unit sale basis. The reasons for the different approaches lie essentially in then relationships we enjoy with our users and also because the main part of our courses is devoted to computer sciences: the spirit that underpins the way we and the course managers work is our belief in the concept of lifelong learning. We are attentive to the need to rehabilitate and update our products. Moreover, we also renew the catalogue of courses so as to retain our long term attractiveness. We have a fairly low churn rate (attrition): our subscribers tend to stay with us.
Last point here – we have the possibility to offer the premium option in a B2B mode.
Yes, we can imagine that some models are oriented more to major corporate accounts and the world of continuous education and professional training. Can you expand on possible targets?
We could have envisaged selling client companies small, purchasable bricks chosen from among our MOOC products, all the more so that 50-60% of the users hold active job positions. It is effectively a target area we are not neglecting and, generally speaking, we can see that the other players in the field are also looking in this direction. But we must not ignore the associate administrative and regulatory issues that make professional training a specific economic activity, different from the case of private individuals signing up for our courses. This is not just due to the difference in nature of the clients (local authorities, institutions, HR departments…) but also to the meanders of finance. Of course, legislation might also evolve too and we can be assured that the actors will try to bring this about. But to the best of my knowledge, this market segment is still virtual.
Major corporate accounts also can be seen real opportunities, but they too carry specific problems. The contracts would be quite considerable, with globalized companies and this requires you to have a well-heeled extensive catalogue, available in several languages. In terms of offer, we clearly would have to make a special effort to make inroads to this market area.
But there are some interesting initiatives: the COOCs (Corporate Open Online Courses). For example, it could take the form of a course for fourth generation 4G mobile phone practice and networks for an account like Orange. This COOC would serve both for in-house training and also corporate communication (in-house and public), to talent scouting operations (inside and external)… and even lobbying actions. Such a course would help train the parties concerned over and above Orange personnel, including the public at large, and – why not – might lead on to stimulating new vocations. The courses of course could be leading edge and target only a small number of persons, but it is the “open” feature that could prove attractive to the company.
Among the business models possible, maybe you are thinking too about the social networks and user data. What are the openings here? And who is involved?
Today there are two main ways to cash-in on data: one is via publicity (even if this calls for huge numbers of pages visited to reach significant levels and even our principal media are finding it hard to make a living from this); recruitment campaigns and intermediation.
Recruitment policies representing definite issues. Imagine a search for a match between your desire to make a profit and our identification of potential business among our clients such that we put you in contact. If this appears relevant in theory, it is another story in practice. Recruitment managers use variable criteria… and if we want the matching to be efficient, via large user bases, then we must have an automated process. There is a self-evident contradiction and obstacle between tailor made matching and using standardized protocols. Moreover, one of the cornerstones of our profession is to be transparent vis-à-vis our clientele. Our clients give us their personal data and we promise not to use them without their consent. Several legal texts protect the clients’ interests, on the same model as the “opt out” clause in the USA or its “opt in” equivalent in France. It is primordial to build up a trust-based relationship with our users, beyond the strictly legal considerations.
Alongside today’s players, who do you see as the next MOOC market members: e-learning operators, Google maybe?
So called learning management systems (LMS), used mainly for vocational training courses, are more sophisticated than MOOCs which do not present any particular technological breakthroughs. Some functionalities, such as black (or white) boards will be rapidly adapted: in the next two to three years we should witness a convergence in terms of technical equipment. LMS operators like ‘BlackBoard’ are thinking about moving in to the MOOC market and even if this s nit their core business they have the means to join the MOOC market scene. Let us bear in mind that all the platforms mentioned here are young and that the market itself is only just emerging, with as yet unconsolidated positions of the players and their clienteles. There is still room for new players and this opportunity will remain valid for a few years to come. After that horizon, it could become increasingly difficult… except for media giants such as Google Inc.
Google, now that we have mentioned them, have expressed their interest and set up CourseBuilder. But it will be noted that the corporation has not massively invested here from which we conclude that MOOCS is not among their strategic priorities. But the scene is maybe changing, given that 8 months back Google signed an agreement with edX that in essence not only officially disbanded CourseBuilder, but also the seconding of dozens of qualified engineers. The challenge now is to launch mooc.org, viz., the YouTube for MOOCs.
This does not necessarily represent a threat for the instructional players in the field already, because the latter have an educational reputation and offer certification of users, but also because a ‘good’ MOOC requires enormous efforts before going on line: hours and hours of pedagogical video recording and a really solid course content.
Alongside the giant Google we shall see individuals coming on stage… and they will bring other business models in their wake. The game therefore is totally open. There are plenty of initiatives but few business models and even less tried and tested business models and no clearly dominant cash register. The next few years will be decisive, as I see it.