MOOC Business Models

Decades ago, I saw a cartoon based on the old Barney Google/Snuffy Smith cartoon strip.  In it, Barney (a city slicker living amidst hillbillies such as Snuffy and his wife Loweezy) excitedly plans a get-rich-quick scheme inspired by a book he had discovered entitled Two Ways to Make a Million Dollars or a Million Ways to Make Two Dollars.

During my career in business, I tended to bring this book title up whenever discussion turned to whether we should invest our sales resources into generating lots of small sales that added up or start “fishing for whales” (i.e., going after the multi-million dollar deals beloved by executives, but despised by those who have to do the work – including the work of keeping seven-figure clients happy).

The Internet has created a new fondness for finding one of those million ways make two dollars (or even fifty cents), so long as those small amounts can be multiplied by “monetizing” the millions of users of a popular site (such as those online learning sites that have attracted so many students and so much attention in recent years).

But this requires a large percentage of those users to choose to do something that has a price tag associated with it.  And given that the only thing all users of a free service (be it Facebook, Google or a MOOC site) have in common is a readiness to sign up to get something for nothing, the challenge becomes finding a different something these same users will pay for.

Udacity’s credit program represents an initial foray into a MOOC business model based on business-to-consumer (or B2C as they say in Business-speak) sales, as does Coursera’s Signature Track program and retail store.  But (so far, at least) those entrepreneurial businesses I talked about earlier this week are too busy creating their products and building their audiences to focus on what (if anything) to sell.

As I learned while exploring the whole blog-to-business model for a different project I worked on last year, a B2C strategy works best if you’re big and dominant (a la Amazon) or small and patient.  For that latter category, a path that’s become popular is to sell low-priced, high-margin products (like your own e-books) to your base, while leveraging your audience and position to create other revenue streams.

While some of these streams can involve consulting, paid speaking or getting a book contract with a traditional publisher, there are also ways to generate so-called “passive income” such as hosting Google ads on your site or selling your subscriber list to a third party.

The problem with those passive income strategies (beyond the fact that they turn your followers into your product) is that they only generate real income if your site is visited by tens of thousands (preferably hundreds of thousands or millions) each week, something difficult to do in a niche market such as MOOCs where the only people generating those kind of numbers are sites like Courera and edX that are not about to post Google ads during course videos or sell their mailing list off to the highest bidder.

Another alternative is for a company to (gasp) charge for what they provide their users, a path that’s been tread successfully by companies such as the Wall Street Journal (that always charged for their online version, avoiding the roller coaster ride papers like The Times went through by starting off free and then installing a pay wall later) or Lynda.COM (a company that successfully sells subscriptions for online training courses that customers could probably obtain for free elsewhere).

If you look at those last two examples, you’ll see they fit a trend I mentioned previously: that people seems to be ready to spend money on things that will help them make money (like quality financial information or training on job-related skills) and spend time on things that have non-financial rewards (such as the edification associated with taking MOOC classes).

With The Journal and Lynda.COM, you also see a trend whereby those who are willing to make a product that’s worth what they charge for it tend to outpace those who have to cut corners in order to continue offering all or most of their products and services for free.  And let’s not forget that Apple became the most successful company in history by not ignoring important considerations (such as design) that the rest of the computer industry considered irrelevant.

The other gag I loved in that Snuffy Smith cartoon (which – like every obscure thing in the universe is available on YouTube) were the two strategies the book recommended for getting a million bucks, which included:

• Find someone with two-million dollars and ask him for half; and
• Enter and win a contest with a million dollar prize

While seemingly obvious to the point of absurdity, these are actually two profound suggestions when it comes to determining a MOOC business model strategy based on that “fishing for whales” option I mentioned previously, a wisdom I plan to unpack tomorrow.

Next – Hunting Big Game