Udemy and the Market

Robert McGuire, the man behind MOOC News and Reviews, has a new gig running the blog for SkilledUp, one of the MOOC aggregators trying to bring order to the growing and increasingly chaotic field of online education (free or otherwise).

In a recent feature-length story, McGuire takes a look at some of the controversies surrounding new pricing policies implemented at Udemy, an online learning marketplace that allows anyone to create a course and charge what they like for it (including nothing).

A couple of courses for my One Year BA came from Udemy, and you can read some thoughts on this provider here and listen to an interview with Archie Abrahams, Udemy’s Director of Growth, on the Degree of Freedom podcast.

Revisiting their site recently, it looks like they’ve retained their focus on courses providing practical instruction on job-related skills or lifestyle subjects. So if you’re looking for a course on Java, digital photography, or yoga, you will find a wealth of choices (although not so much if you want to study Kant.)

That is probably as it should be, given the segmentation of the market where the major MOOC providers (such as edX and Coursera) and a handful of overseas startups (such as iVersity and FutureLearn) are tapping universities for content while companies like Udemy focus on those subjects people have demonstrated a willingness to pay to learn.

Despite my focus on free learning, I’ve actually paid to learn a number of subjects over the years, many taken through the Lynda.Com learning portal that, like Udemy, focuses on job-related skills. Lynda began by providing video lessons for Adobe applications but has since expanded to offer a comprehensive range of courses on computer applications, programming languages and business skills.

The mindset I’ve described a number of times on this site: one where people who invest huge amounts of time in improving their minds by studying Homer or Einstein will only spend their money to learn things that will help them earn or save money, is something I understand from personal experience. For when I had to learn how to create and host a WordPress site, use Adobe’s Creative Suite, create and distribute podcast files and other technical skills, I was comparing Lynda’s $39.95 monthly fee to the thousands I would have to pay to study these subjects by taking a classroom-based training course.

In contrast, my choice of which academic subjects to study (before, during and after my One Year BA) has been based on which free learning resources I can find via a MOOC provider, iTunes U, an educational podcast, or my local library.

Lynda’s business model is a fusion of traditional publishing and community blogging with the company choosing subjects (the equivalent of books) and teachers (the equivalent of authors) and then being responsible for generating revenue by marketing their program as a whole. But as with commercial blogging, the talent makes their money when a monthly sum (correlated to monthly revenue) is divvied up among instructors based on each teacher’s percentage of total video lessons watched that month.

In contrast, Udemy charges for each individual course with instructors setting prices. And the controversy described in Robert’s piece flared up when the company changed their revenue share model from on where instructors kept 70-85% of course fees (based on who delivered the customer/student – the instructor or Udemy) to one where the instructor keep all the money for students they brought to the site, with revenue from any course taken by a student Udemy delivers split 50-50.

While God may dwell in (and on) the details, we mortals tend to base our judgments more on the macroscopic – like the size of monthly royalty checks. And I suspect that if those go up for most course developers as Udemy invests in growing the size and activity of its paying community, then controversy over this or that policy will go away.

But in our modern age, everyone participating in a marketplace needs to understand that the interests of individual vendors (in this case course developers) and the guy who owns the mall are not always in 100% alignment. Yes, everyone wins as overall revenue grows. But a maturing startup like Udemy measures growth not just in dollars but in eyeballs (i.e., number of enrolled students) as well as the size and rate of growth in number of courses offered through their site – numbers that investors interested in monetizing the future care about as much as present earnings and profits.

This might explain the numerous discount coupons that have appeared in my Inbox since completing a couple of Udemy courses last year, coupons offering anywhere from 50-80% off the cost of any course. Such discounting is a tried-and-true means of increasing subscribers/market share, but frequent discounting also trains customers to wait for the next coupon to arrive before enrolling in a new course, essentially establishing a new global pricing structure applied to all courses – regardless of the price an individual vendor has chosen to charge for his or her offerings.

Given that decisions related to such global promotions are being made by Udemy, their eyeball-growth strategy will eventually need to start delivering those aforementioned higher monthly checks if they want to avoid the flight of talent to other platforms. But I can think of some other educational startups mentioned above whose services have enrolled millions that would kill to have problems related to optimizing pricing for existing paying customers vs. trying to figure out how to get someone to pay for a product they have so far been given away for free.

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