Making Money Off MOOCs

Having talked about how a sales approach (or at least sales metaphors) might help us improve MOOC effectiveness, it’s probably appropriate to talk about how a sales attitude might answer another nagging question surrounding massive online classes: how to make money off of them.

I’d like to kick off such a discussion with a confession.  In the late 1980s, I started a business, something that would today be called a startup, but during that era was simply called a company.  It was a publishing venture that leveraged new technology (the Macintosh SE + Pagemaker desktop publishing software) and a new entrepreneurial spirit in the air that grew out of the first generation of consumer high-tech.

Our business strategy was to create a book we know lots of people needed, print 10,000 copies and only afterwards find out if anyone would actually pay for them.  Fortunately for us, someone did (although not traditional book buyers, which meant we spent many years working in an industry – employment, as it happens – we originally knew little to nothing about).  And while our company eventually grew into a software and then an Internet business serving that same industry, it probably would have been wiser to figure out who our customer was and what they were interested in buying before mass producing a product for them.

If such an approach seems ludicrous in this era of startup sophistication, consider all of the Internet business modeled on an “eyeballs-first, monetize-later” strategy.  Even within the small world of MOOCs, I’ve met a number of people excitedly working on products they know students and educators could benefit from, tinkering with and perfecting them, with “monetization strategy” relegated to spreadsheets that are dusted off whenever bills come due and new funders need to be sold on a venture’s future money-making potential.

I’m obviously exaggerating to make a point, but I don’t think it’s wide off the mark to say that the “build-the-product-you’re-in-love-with-and-the-money-will-follow” strategy I followed years ago is alive and well (even if product creation does not require finding a home for 200 cartons of books during the Internet age).

One of the MOOCs I learned most from during my One Year BA was Steve Blank’s How to Build a Startup course from Udacity.  And Blank’s reputation as a seer derives from the central premise of all his teaching: figure out who your customer is and what they will pay for before building a company to manufacture and sell it.

While this might seem like a trivial observation, keep in mind that Newton’s laws (which we now teach to Middle Schoolers) were much harder to come by for Newton.  And I think it says something about the mindset of the entrepreneur (many of whom create a business to bring their dream product to market) that there is still a huge need to teach budding CEO’s the importance of interacting with a vital segment of the real world – the people you except to hand their credit cards over to you for your wonderful solution – before bringing in the funders, building a factory and recruiting an executive team and salespeople.

And lest you think this “product-first/customer-second” problem infects only eager-beaver small businesses, let’s talk about how MOOCs got turned into businesses backed by tens of millions of investment dollars when:

(1)    Some Stanford professors opened up a couple of courses to the world and were shocked to discover not hundreds, but hundreds of thousands of people interested in taking them

(2)    Assuming that anything that spontaneously draws a six-figure audience must be worth something, these same professors formed for-profit companies (Udacity and Coursera) that would allow them to do good and convince investors that they would do well by backing their venture

(3)    Institutional players got into the game with their own multi-million dollar investment into a non-profit (edX) that still needs to make money (albeit not necessarily fast-growth profits) to survive

(4)    Everyone signs up millions of users, works morning, noon and night on perfecting their platforms and churning out content (which collectively equals “the product”), and then tries to figure out a how to make some coin (whoops, I mean “develop and implement an effective business model”) based on having drawn a lot of attention and a lot of users who have only demonstrated their willingness to get something for nothing

As I mentioned before, Udacity’s “pivot” consisted of realigning their business once business model experiments implemented after their product was released indicated that the market they hoped existed (college kids or schools looking for alternative credit solutions) failed to materialize.  And Coursera’s Signature Track program (the only MOOC-related anything that’s generated seven figures) and HarvardX’s experiments with delivering paid-MOOCs through Harvard Extension are both post-hoc attempts to see if people who make up the bulk of the MOOC student body (older people who already have a degree) might be willing to pay for anything.

As with so many things related to business, there are no right answers, meaning neither Udacity’s pivot or Coursera and edX’s revenue experiments are wrong approaches in a world of so many “unknown unknowns.”

But if these companies were following Steve Blank’s advice (learned, one hopes, by taking his MOOC), they might want to spend more time asking their enthusiastic customer base what they might want to buy (as opposed to just what and how they want to learn).

I know it probably seems crass for educators to start thinking about students (or other educational entities) as potential paying customers.  But if the alternative is the entire MOOC experiment failing because investment dried up before an effective business model has been discovered, it just might be worth adding some high-end sales talent to the team, even at the expense of “perfecting” a product which (at least with regard to this definition of MOOCs as ongoing experiments) will never be perfect.

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2 Responses to Making Money Off MOOCs

  1. Derek March 3, 2014 at 11:06 pm #

    I’m one of that majority of older degreed potential MOOC students, an avid continuing learner, and delighted at the variety of MOOC course offerings. It’s easy to register for a course, and easy to drop out. I’ve registered in about 10 in the last few months, but not completed any of them. Partly this is because there are no fees, and so there are no financial penalties for me in abandoning a course.

    It also reflects the wide variation in quality of courses, where neither the MOOC agregator nor the institution are reliable indicators. As an example of this, the most-underwhelming course I’ve tried was the edX Harvard Justice course, which assumed that putting up 50 minute videos of lectures and discussions with US college undergraduates would make an interesting or worthwhile course. I doubt that would be successful for US college undergraduates either.

    It also reflects the often limited promotional material about courses. Some courses give little information in advance. I have to budget my time with care, so for me a key indicator is expected work load each week. Sometimes the only way to find out enough about a course to decide if I want to take it is by starting it. The course itself is it’s own promotional brochure, and clumsy for that purpose. Although with free courses I pay no financial penalty for abandoning a course, this does cost more in time than I’d like.

    Of course, both reliable good quality and good promotional information about the products are part of good selling. Until these problems are better solved, the courses are not well designed products, and free is a fair price for experiments, like handing out free food samples at a farmers market.

  2. Elaine July 24, 2014 at 5:19 pm #

    To Derek’s point, without fees, its easy to see why there is a lack of commitment to completion for many who sign up. The issue with higher education is not that it costs, but that it costs so much. The second issue with MOOCs is that, OK, a student completes some line of coursework, how does this help them actually prove to their employer that they gained some proficiency.

    If there is someplace I think MOOCs really could start monetizing their model, its by charging not for the course, but for proficiency exams once a series of courses are completed. If its for work, many employers would be happy to pay more significantly for that than for sending their employees back into the classroom so long as the exams really have some teeth in them and an opportunity to pass / fail.

    The other part of the monetization is also in the data that comes out. What are employers looking for in skill sets? What are students signing up for? Monthly service fees for data reporting and analysis (for both students and employers) is another place that these services may be able to make money (Think LinkedIn Premium accounts)

    Personally, I am excited to see all this movement in this market. Just like on-line music, I think its only a matter of time before some company leaps out in front with an “ah-ha” idea that proves to be a workable model for the masses.

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