Thursday, April 04, 2013

MOOC monetization -- a free sample strategy

The high cost of education has been one of the drivers of interest in MOOCs, and nearly all MOOCs have been free up to this point. We are in the "invest to get users" stage.

I've heard speculation on ways to monetize MOOCs, and would like suggest one I've not encountered -- the free sample model.

We are starting to get some data on MOOCs. For example, Katy Jordan pulled together completion rate data on 26 of the MOOCs that have been offered by Coursera, EDx and Udacity:

MOOC critics point to these low completion rates as evidence that MOOCs are a Bad Idea, but those large enrollment numbers are still encouraging, so let's look further. Here is a plot of the number of views of the first and last videos each week in the Bioelectricity course at Duke University:

As you see, it is long-tail, y=1/x type graph. One way to look at the long tail is to conclude that the majority of enrollees were dissatisfied and the course was a failure. But an alternative explanation is that the folks were not really enrollees, they were browsers, and, like shoppers in any situation, most decide not to buy.

We can also think of their motivation. Maybe some were not interested in "completing" the course and getting "credit" -- they wanted something less complete, less formal. We have data on that from the Duke course as well. As shown here, fun and enjoyment was the strongest motivator.

Similar motivation was reported by students in a programming class. Sixty four percent of the students said they were interested in the course out of personal interest and curiosity, 33% for professional advancement and only 3 percent for university studies.

These three studies are small and limited, but perhaps we should be thinking about MOOCs as entertainment and lifelong learning as well as for formal education and vocational training, which brings us to free sample pricing. We can view enrollment over time as follows:

The spike in the first few weeks is mostly browsers -- people who want to see what the course is like and what the workload is. They would be getting a free sample.

After a few weeks, the enrollment decline slows and we are left with the students who are interested in completing the course. As we have seen, some are seeking formal credit and others entertainment and the joy of lifelong learning. Those people would presumably be willing to pay for the course. How much?

San Jose State University is currently running a trial in which students will get credit for Udacity courses for $150. The results of that pilot study are not yet in, but $150 is less than the University price.

How about the non-credit students? Let's say a typical MOOC runs 10 weeks and the first three weeks are free. What would people pay for seven weeks of entertainment or lifelong learning? Would it be as much as a movie? A hardback book? A steak dinner?

We can noodle around with a simple spreadsheet and get some napkin-sketch revenue estimates. For example, let's assume a for-credit price of $50 for a certificate of completion and a non-credit price of $20. The median number of students completing the MOOCs shown above was 2,777. Assuming that ten percent of those are for-credit students and the MOOC can be offered four times a year, we get annual revenue of $214,000. If we use the mean completion rate of 4,447, the revenue estimate increases to $343,000.

Note that under these assumptions, the bulk of the projected revenue is from the entertainment students, not for credit students.

If an organization offers several courses, are numbers like that sufficient to cover the overhead of management and administration, production, software refinement, community facilitation, hosting and bandwidth, etc. and pay a teacher who is full time on a single course?

A question for any good teacher reading this -- how effective a teacher would you be if you only taught one course and spent full time delivering and improving it?


Update, 4/17/2013

Coursera revealed that they had revenue of $220,000 in the first quarter after starting to charge for verified completion certificates (  The income was from students paying between $30 and $100 per certificate.  Coursera co-founder Daphne Koller said prices were "around" $50.

This gives us a first cut estimate of what someone hoping to get job or school credit for a course might be willing to pay.  No doubt, the going price for certified completion will be higher than the price for un-certified completion for entertainment and curiosity.

(Coursera uers who pay for certification have to submit a photo ID of themselves to the company and are also tracked based on their “unique typing pattern” to ensure that people who take tests or turn in assignments are who they say they are).

Update 5/23/2013

I posited a simple characterization of people signing up for MOOCs as either "browsing" or "enrolling." Phil Hill presents a more nuanced characterization in his blog post on blog student types, classifying students as no-shows, observers, drop-ins, passive participants and active participants. Details are presented in the paper called Deconstructing Disengagement: Analyzing Learner Subpopulations in Massive Open Online Courses.

Update 11/27/2013

This post in the Chronicle of Higher Education argues that MOOCs have failed in higher education, and are better suited to vocational training and lifelong learning.

Update 12/1/2013

Prominent MOOC provider Udacity has shifted emphasis from college credit courses toward vocational training and lifelong learning.

Update 12/9/2013

A University of Pennsylvania study of a million enrollees in 16 MOOCs shows they have relatively few active users and low completion rates.

  • Course completion rates are very low, averaging 4% across all courses and ranging from 2% to 14% depending on the course and measurement of completion.
  • Across the 16 courses, completion rates are somewhat higher, on average, for courses with lower workloads for students and fewer homework assignments (about 6% versus 2.5%).
  • Variations in completion rates based on other course characteristics (e.g., course length, availability of live chat) were not statistically significant.
  • The total number of individuals accessing a course varied considerably across courses, ranging from more than 110,000 for “Introduction to Operations Management” to about 13,000 for “Rationing and Allocating Scarce Medical Resources.”
  • Across all courses, about half of those who registered viewed at least one lecture within their selected course. The share of registrants viewing at least one lecture ranged from a low of 27% for “Rationing and Allocating Scarce Medical Resources” to a high of 68% for “Fundamentals of Pharmacology.”