The certified course model is explained here and they are offering courses in three certified tracks for now: Data Science, Web Development the Georgia Tech Masters in CS.
Udacity is not trying to compete with universities by offering the equivalent of a college education at a lower price -- they are doing something more subversive -- trying to alter the vocational certification process.
The reason most students go to college is to get a job or get a better job -- what do employers look for in making hiring decisions and will that change in the future?
Consider Google -- here is an excerpt from an interview of Laszlo Bock, senior vice president of people operations at Google:
Q. Other insights from the data you’ve gathered about Google employees?Maybe Udacity is on to something universities should pay attention to. If Udacity is right, what does that imply for undergraduate education? For research universities?
A. One of the things we’ve seen from all our data crunching is that G.P.A.’s are worthless as a criteria for hiring, and test scores are worthless — no correlation at all except for brand-new college grads, where there’s a slight correlation. Google famously used to ask everyone for a transcript and G.P.A.’s and test scores, but we don’t anymore, unless you’re just a few years out of school. We found that they don’t predict anything.
What’s interesting is the proportion of people without any college education at Google has increased over time as well. So we have teams where you have 14 percent of the team made up of people who’ve never gone to college.
Q. Can you elaborate a bit more on the lack of correlation?
A. After two or three years, your ability to perform at Google is completely unrelated to how you performed when you were in school, because the skills you required in college are very different. You’re also fundamentally a different person. You learn and grow, you think about things differently.
Another reason is that I think academic environments are artificial environments. People who succeed there are sort of finely trained, they’re conditioned to succeed in that environment. One of my own frustrations when I was in college and grad school is that you knew the professor was looking for a specific answer. You could figure that out, but it’s much more interesting to solve problems where there isn’t an obvious answer. You want people who like figuring out stuff where there is no obvious answer.
Sal Khan published a book, The One World Schoolhouse on his educational philosophy and strategy. Here is an interview on the book and the future of the Khan Academy. His view of certification -- of signaling competence -- is not unlike that of Udacity.