Category Archives: MOOC

This is part of an ongoing series on the profitability of MOOCs. Click below for the other entries.

Part 1: Can Free MOOCs Be Profitable?
Part 2: Can Premium MOOCs Find an Audience?
Part 3: Proven Profitability: The Freemium Vertical Integration MOOC Model
Part 4: Can We Convince People to Pay for MOOC Certificates?
Part 5: Are MOOCs Effective Advertisements?

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In the previous installment, I discussed the barriers to making free MOOCs profitable. To summarize, although such classes are popular, the only real way to draw in revenue is to run advertisements. Unfortunately, ad rates are abysmally low. A class might need 20,000 students to complete a course before reaching a very narrow definition of profitability.

So if MOOCs need to turn a profit, the obvious solution is to start charging for them. Even just 300 students paying $10 for a course matches the revenue 20,000 students bring in through a free course. MOOCs have such immense popularity, surely providers can convince a tiny fraction to pay a small amount of money. Right?

Don’t count on it.

Premium MOOCs face two major obstacles. First, it is not clear why anyone would want to pay money to watch online lectures. Many students take MOOCs purely as a form of entertainment, which has contributed to the abysmally low MOOC completion rates. Since 90% of enrolled students never complete a course, it is safe to assume that current registration rates will immediately drop at least 90% once providers start charging anything. And while some might find Ancient Greek Religion appealing, they might not find it to be as appealing as keeping $10 in their wallets, especially since academic courses offer little practical use to the vast majority of MOOC students.

Academic was a major caveat there. Udemy, likely the biggest name in MOOCs without any official university backing, appears to have had some success in offering applied courses. For example, look at their top premium business courses. Some of these classes have drawn in a large number of students, and the reason is obvious–paying to learn Excel is much more sensible than paying to learn the Psychology of the Mind for the average person in the workforce. Moreover, it wouldn’t be surprising if many of these “students” are actually businesses themselves, which use courses as training tools for their employees.

That said, we should take the enrollment figures with a grain of salt. This Excel basics course has more than 38,000 students, but not all of them necessarily paid the $99 price. Udemy encourages their teachers to use social media to attract students, using Reddit in particular to generate buzz. Udemy’s logic is sound–social media attention helps increase the site’s market share, and it can help a course attract good reviews to convince others to pay money. (Indeed, the Excel course has more than 400 reviews and an average rating of 4.5 out of 5.) Some teachers are raking in full-time salaries here, but this is not the massive gold mine that it might appear to be.

The second major obstacle is that it makes little sense for a consumer to purchase a course when they can take a similar course for free. Consider my Game Theory 101 MOOC. During the school year, I have about 2000 students watching my lectures per day. If I started asking for $10 per course, would the 200 people–the 10% committed to the entire course–continue using my materials? Or would they switch to the competition from Yale or Stanford/UBC? I’d like to think my introduction is the clearest of the courses, but I have no delusions that I would keep my audience. If I could get even two students a day, I’d be thrilled.

MOOC providers are aware of this problem, and they are scared. As Americans discovered the Internet, the newspaper publishing industry willingly put their material online for free. Customers liked this, canceled their physical subscriptions, and became accustomed to receiving their news for free. A decade later, newspaper publishers are having an impossible time convincing customers to pay for something they now view as unworthy of payment.

Right now, the major university-backed MOOC providers continue to push free courses to gobble up market share. Coursera and EdX might benefit if they could mutually switch over to a premium model, but they run into coordination issues and risk drawing another provider into the market pledged to keep classes free. Nevertheless, there is real hazard that the providers will eventually back themselves into a corner like the newspaper publishers, unable to find customers at a price greater than $0.

Overall, it appears that academic courses face significant obstacles to charging for their material. But if paid courses can’t bring in students and free courses bring large number of students but next to no revenue, what can work? In future posts, I will see if freemium models have any promise.

This is the first part of an ongoing series on the profitability of MOOCs. Click below for the other entries.

Part 1: Can Free MOOCs Be Profitable?
Part 2: Can Premium MOOCs Find an Audience?
Part 3: Proven Profitability: The Freemium Vertical Integration MOOC Model
Part 4: Can We Convince People to Pay for MOOC Certificates?
Part 5: Are MOOCs Effective Advertisements?

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It’s becoming a well known fact that MOOCs are popular but not profitable. Universities are willing to suck up the costs as a means of advertising. Charging would deter enrollment and cancel out that effect. But at some point, somebody might start wanting to make money off of the. So can MOOCs be profitable without charging a dime?

Probably not.

The only free solution is to do what network television has done for decades: run advertisements to pay the bills. The goal of this post is to convince you that this won’t work very easily.

Most of what I am about to tell you comes from first hand experience with my YouTube channel, game theory MOOC, and international relations MOOC. Consequently, I am going to make a strong assumption throughout that we will be running the hypothetical course through YouTube.

However, I also believe this is the correct thing to do–YouTube’s reach is much, much further than anything else out there. As evidence, I offer myself–a PhD candidate who has received no institutional support (in the form of class releases, publicity, or technical assistance) who has nevertheless amassed more than two million views. YouTube takes a cut of advertising revenues, but they also host the videos and find advertisers for you. One potential downside is that they limit the number of advertisements a viewer has to sit through, but I figure that no MOOC student is willing to sit through 10 minutes of commercials for every 30 minutes of lectures they watch (like TV networks do).

Okay, so our course is on YouTube. Every time an ad runs, we make a fraction of a penny–roughly 3/10ths of a penny to be more precise. Thus, we rake in $3 for every thousand viewers.

Why so low? I don’t have a good answer beyond “because that’s what the market is willing to pay.” One big issue is Adblock Plus, which allows its users to ignore the ads. YouTube’s analytics page therefore differentiates between “monetizable” and “non-monetizable” views. If Adblock Plus didn’t exist, we’d be a lot happier, perhaps increasing our revenues up to $5 per thousand. Alas, we are stuck at $3.

On the bright side, we gain another view each type someone watches one of our lectures. As such, if we have a 50 lecture class–not unreasonable since online lectures should average ten minutes–we will receive 50 views per student who finishes the course (Bear in mind that few students who “take” an MOOC actually complete it.) In turn, every thousand students yields $150.

How much does it take for a class to become profitable? Constructing an MOOC has different challenges than teaching a traditional course, but they might ultimately take the same amount of time. I hear horror stories that adjuncts work for $3000 per course, so let’s use this nightmare as a baseline. If one thousand students yields $150, we need 20,000 students to make our MOOC profitable. Browsing through Coursera enrollment rates, breaking the 20,000 barrier seems possible…until you realize that only about 10% of those people are actually completing the classes.

Now, to be fair, people who do not complete a course contribute a large number of views. (My newest incarnation of Game Theory 101 has about 14,000 views for a prisoner’s dilemma lecture but only 1400 for the final lecture.) And one Coursera class, Introduction to Artificial Intelligence, had 20,000 people complete the course. Nevertheless, you can see that reaching 20,000 students (or one million total views) is far from easy. And, again, this is only to reach a very minimum level of profitability.

Thus, free courses probably won’t ever be profitable. Nevertheless, universities remain happy to funnel money into them as a means of advertisement. A decent MOOC may very well be worth $10,000 or more in publicity. Granting course releases for faculty and hiring additional visitors to compensate more than makes up for the cost.

But making money and keeping classes? Nope.

MOOCs have been in the news a lot recently, though most of the attention has gone toward their completion rates. At first glance, the data do not look good. It is hard to accurately measure completion rates since MOOC companies hold most of the data and are unwilling to release it for fear of negative publicity, but 10% is a good rough estimate of the average MOOC’s completion rate. This has led many to speculate that MOOCs will never truly compete with “real” college classes, since MOOCs cannot hold the attention of their students for very long.

Silliness! I don’t know what the endgame for MOOCs is. Perhaps they will radically alter higher education. Perhaps they won’t. But the 10% completion rate statistic tells you absolutely nothing about the quality of MOOC content.

In fact, I’d be perfectly fine teaching an MOOC with a 0% completion rate. To paraphrase Drew Carey, points are like MOOC completion rates. They just don’t matter.

Why? I offer three reasons:

1) “Taking” a Class Is More Like Adding a Class to Your Instant Queue
While MOOC companies do not like releasing completion rate data, they love publicizing their gaudy enrollment rates. One component of completion rates is enrollment rates, since you calculate it by dividing the number of individuals who completed the class by the number enrolled.

The problem is that “taking” a class is not taking a class. To use a Netflix analogy, enrolling in an MOOC is not watching a movie–it is putting said movie into your instant queue. Whether you ever end up watching that movie remains in doubt. Drive sat in my instant queue for a year and a half before I finally watched it a couple weeks ago, while True Grit has stayed in there since the beginning of time.

So, really, MOOC enrollment is a type of bookmark. People learn about a course through the interwebs and “enroll” in it to save it for later. To wit, my Udemy game theory and international relations courses went viral yesterday, but only a few of the new additions have watched any of the lectures.

Is this a problem? No. The real issue is that people do not understand that online enrollment is different from physical enrollment. Physical enrollment numbers will always be smaller, since only the super-interested will pay the hundreds or thousands of dollars to enroll in a class. MOOC enrollment will always be higher because signing up is free but only signals a passing interest in the material.

2) MOOCs Are Educational Entertainment
Undergraduates usually enroll in classes because they find the topic interesting. MOOC users start watching videos for the same reason. But think back to your undergraduate career. How many classes did you lose interest in after eight weeks? Probably a lot. In the real world, however, you stuck it out–the alternative was failing the class. But in MOOC world, you are free to walk away. So this means a student who has gone through 80% of the material still goes down as an incomplete.

Personally, I don’t blame the students. After eight weeks of teaching a course, I often get bored and wish I was doing something else as well.

College classes have to run a certain number of weeks to fulfill university requirements regardless of how many weeks of material are actually useful from the professor’s perspective. For now, a lot of MOOC syllabi are copy/paste jobs from the real world. This will eventually change as MOOCs become their own type of course. But even then, what a professor finds interesting for eight weeks, another person would only find interesting for five. But I’d rather have that student watch five weeks worth of lectures to watching none of them, completion rate be damned.

3) MOOCs Are Supplements to Real Courses
If MOOCs have done nothing else, they have proven to be an effective alternative to a terribly unclear professor. We have all had one of these teachers at one point in our life. It makes the college experience miserable. Before, there wasn’t much you could do about it. Today, you can hop online, find the corresponding class, and watch someone who is good at teaching explain the material.

But this means students graze the material. They might watch a lecture on how to find mixed strategy Nash equilibrium but skip over the easier-to-understand iterated elimination of strictly dominated strategies. They may even skip over entire sections of the MOOC if the real life professor is not covering those particular topics.

These people won’t be counted as having completed the MOOC. But the MOOC still served its purpose.

The Takeaway
While completion rates matter in real life, they don’t really matter in MOOC world. They are apples and oranges, and caring about MOOC completion is an utter waste of time.

Instead, we really should be caring about how many views our lectures receive. Views actually measure interest and usefulness of any particular lecture. And, unlike enrollment figures, they actually indicate commitment to learning.

Oh, and views can be monetized. But that’s a topic for another post.