Monetizing MOOCs

Monetizing MOOCs

Education January 06, 2014 / By Mike LaBossiere
Monetizing MOOCs
SYNOPSIS

A look at how MOOCs might make money...and some possible consequences.

Having been a professor for a while, I have learned the obvious: fads come and go in higher education. In some cases, a fad turns out to not be a fad—that is, it lodges in the system and becomes part of it. At this point, MOOCs (Massive Open Online Courses) seem to be a fad. Within the academy, administrators and some faculty sing the praises of the MOOCs…at least until one starts asking for specific details. Then the song turns to whistling and a bit of hand waving, followed by a quick departure from the stage. Outside of the academy, MOOCs have also become a subject of buzz—there are those eager to use MOOCs as money siphons and others who delight in throwing around the term at every opportunity—ranging from motivational speeches to training sessions.

While there is a multiplicity of issues relating to MOOCs, one obvious point of concern is how the MOOCs are going to be monetized. That is, how will the MOOC companies make money in order to sustain the MOOCs and, perhaps, make a profit.

One of the biggest and best known MOOCers is EDX. This nonprofit is funded by MIT and Harvard, which puts it in a fairly good position in terms of money. Since EDX is a non-profit, it does not face the burden of generating a profit. Since it is backed by two academic powerhouses with considerable funding, it can rely on them for the cash needed to keep their MOOCs MOOCing. That said, EDX might not be able to rely on the funding indefinitely and even a non-profit needs cash flow to keep it in operation.

Other big MOOCers include the for-profit Coursera and Udacity. Unlike the non-profits MOOCers, they face a dual challenge: 1) having enough cash to stay in operation and 2) making a profit. For profit MOOCers are typically funded by venture capitalists who are gambling that the MOOCs will be MOMMs (Massive Online Money Makers).

One rather obvious challenge of monetizing the MOOCs is the “Open” in “Massive Open Online Courses.” For the most part, “Open” is taken to mean “free.” One obvious problem with a business model based on giving away the sole product for free is that free product does not, in general, result in much income. The obvious solution to the lack of income from being free is to make the product non-free. However, this would require changing how people see the “Open” in “Massive Open Online Courses” or changing “MOOC” to “MOC” (For “Massive Online Courses”).

If MOOCs become online paid classes, then they would need to offer services that people would be willing to pay for and they would need to compete with established alternatives (such as universities). This could be done by providing a better or cheaper product—or, as some for-profit colleges do, massive advertising and perhaps a bit of deceit.

Not surprisingly, the for-profit colleges do provide an excellent look into how to monetize a MOOC. The for-profit colleges have managed to tap into federal money quite effectively: in 2011 25% of all Department of Education financial aid money went to the for-profits. They have also tapped into Pell Grants and veteran’s educational benefits. No doubt the for-profit MOOCers will endeavor to follow the same tactics, only with the MOOC spin on the selling. MOOCers are already hard at work lobbying and have enjoyed considerable success, especially with certain governors. As such, student financial aid seems to be a likely source of money for well-connected MOOCers. Of course, this would just be the same as the for-profit colleges, only with massive classes. This might result in change in education from a small scale operation (in terms of class sizes) to what could be regarded as industrialized education: massive production via automation. Naturally, there are concerns about the quality and value of such massive courses—at least to those who are concerned about education.

MOOCers can also make money by selling their services to existing universities. Based on my own experience and a bit of research, many administrators and politicians are excited about using MOOCs to reduce the cost and increase the availability of public education (and funnel money to the right people). A university might fund MOOCs and allow students to take them for free (which would be the traditional MOOC) or they might offer MOOCs as they would offer an online course of their own—by charging students a fee. This might seem to be an odd approach for a university—like a sign shop hiring someone else to make their signs or McDonalds hiring a catering service to make the food they will sell. After all, universities already have people who create and teach classes, namely professors. Why not have university faculty create and run the MOOCs? The obvious answer is that faculty are often not “the right people” when it comes to who should be receiving the money.

Another approach, borrowed from the freemium games, is to provide the basic product for free and then make money charging people for extras. For example, a student might be able to take a class for free, but have to pay a fee to get a certificate proving that she passed the course. This would require offering courses where the certificate would mean something (or hoping that people will buy them to print to hang on their walls). As another example, the basic course could be free, but students would have to pay for extra tutoring or access to premium course material. Given the success of freemium games, this could be a viable option for the MOOCers—provided they can offer premium options that people will buy in quantities enough to sustain the MOOCer. One point of concern is, of course, that the freemium approach could run counter to one of the “selling” points of MOOCs, namely that they are supposed to open education up to the masses. If people have to shell out for premiums and these premiums are actually important or essential to the course, then the divide between those who can afford to pay and those who cannot will exist in the land of MOOCs—just as it does in traditional higher education. But, perhaps the premium content would still be far less than the cost of traditional education.

Whatever the approach, the MOOCers are going to need to monetize the MOOCs. This might result in the MOOCs ceasing to be MOOCs—that is, becoming just more online for-profit colleges (only with really big courses). Then again, maybe MOOCs will go the way of Friendster rather than becoming the Facebook of education. 

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