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

2 Responses to MOOC Business Models

  1. Me successful uvaffak GOZAYDIN July 17, 2013 at 4:48 pm #

    It is my dream .

    A business plan must be made by MIT, Harvard, Stanford and Yale .

    They can be successfull only due to their brand name .
    That is a must .

    Here is my business model for them .

    1.- Each set up their own DIGITAL UNIVERSITY ( DU )

    2.- Main university would provide wonderful online courses for DU.

    3.- Each DU provide degrees of BA, MA, depending upon their skills. Such as MIT for engineering, Harvard for business etc.

    Students can take courses from the consortium of the DUs.

    4.- I predit students can take cooures 2 in Fall, 2 in spring, 1 in summer ,

    The average is 5 courses per year.

    5.- In third year I would reach 300,000 enrollment each of DUs. I would charge only $ 50 per course.

    6.- Annual income of one DU would be

    $ 50 x 5 courses x 300,000 = $ 75 million per year

    7.- In fifth year I would have 1 million enrollment and income would be

    $ 50 x 5 x 1,000,000 = $ 250 million a year

    8.- In 10th year I would drop the fee to $ 20 per course but enrollment would be
    10 million and annual income Be careful we are GLOBAL

    $ 20 x 5 x 10.000.000 = $ 1 BILLION per year

    9.- But MIT, Harvard, and all would provide the top courses by top professors of the World .

    10.- MITx Harvardx degrees would be very respectable as well .

    11.- If some students are not successful I would transfer them to less competitive schools

    such as Uni of Illinois, Uni of Michigan, Purdue etc. Digital Universities .

    I would expect about 100 DUs will be around by good research universities only .

    I hope Agarwal reads my plans.

  2. Muvaffak GOZAYDIN July 17, 2013 at 4:53 pm #

    TThis is just a dream

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