Monetising MOOCs

David Smith, Director Simon-Kucher & Partners, explains how universities can make money from online education

David Smith (pictured) is a Director at the London office of Simon-Kucher & Partners and a specialist in the Education sector. Debra Freedman, a Consultant at Simon-Kucher London, interviews him regarding his key insights and recommendations for monetising online education and, in particular, MOOCs.

DF: What are your main observations from working in the online education space?

DS: I have three key observations. Firstly, I believe the online channel represents a huge opportunity for universities – with MOOCs in particular, the sheer numbers involved are staggering. Secondly, the market is still very immature, with new and innovative offerings popping up every day. Thirdly, universities have tended to be quite opportunistic so far in their approach to online, meaning they don’t always have a joined up and coherent online strategy.

DF: Given these observations, what are the implications for universities from a monetisation point of view?

DS: The fact that the market is so immature presents a real opportunity for universities to be innovative in the way they monetise MOOCs and online education more generally. I’ve seen a lot of innovation on the product front, but sometimes universities can be a little too cautious about the commercial side of things. Whilst we’ve seen remarkable growth in the online space over the past year or so, its long term sustainability will depend on whether or not universities can find a business model that works. It’s also important that universities transition from being opportunistic to being more strategic. They need to consider their online portfolio holistically in order to maximise outcomes and minimise risks.

DF: So monetisation is a key area for improvement. Do you have any insights on how universities could better monetise?

DS: Most early MOOCs have adopted a “freemium” approach whereby basic access is provided free of charge but more advanced features such as certificates must be paid for. In theory this is a great model for the education sector as it allows you to hit multiple objectives at once. The free entry point should help maximise student numbers, with no barriers to up-take, whilst the availability of paid-for extras should generate the income required to cover development costs. In my experience, striking the right balance between student numbers and income is a constant challenge in the sector, and freemium is a great win-win solution to this.

DF: But can’t universities just charge for MOOCs?

DS: The eternal question! In my experience, charging for MOOCs is a bit of a taboo subject amongst universities. I think there is a lingering concern that charging for MOOCs will drastically reduce volumes, but I would challenge that. Firstly, it’s becoming increasingly clear that high volumes do not equate to high completion rates, hence chasing volume at all costs is more of a vanity point. Secondly, universities should look to providers such as Udemy for insights on how paid-for MOOCs could work out.

DF: So is there anything we can learn from Udemy?

DS: Yes, definitely, we did some simple analysis of Udemy’s student numbers and the findings were fascinating. Firstly, it sounds simple but the experience of Udemy shows once and for all that it is possible to charge for MOOCs. Udemy do it, they still have substantial student numbers, and they generate significant fee income doing so. But the best thing about Udemy is that they take a differentiated approach. Some courses are free, some are cheap, and some are expensive. Too often universities think in binary terms – paid vs. free – but why not mix up the two? This allows Udemy to monetise MOOCs where there is willingness to pay while the free courses stimulate demand. Another interesting insight is that the price of each course appears to bear no relation to the volume of users, with some of their most popular courses costing around $200! Universities should ask themselves: What is the opportunity cost of not charging for MOOCs.

DF: Very interesting. But are there other business models worth considering?

DS: Yes, of course. It’s important to remember that monetisation does not necessarily mean MOOC users need to pay for anything! There are a whole host of indirect ways of generating income from MOOCs, for example, driving sales of other courses, enhancing the value of other courses, boosting donations. You could even look to third parties, for example, other universities paying to use licensed content, advertisers paying for advertising space and employers paying to access user data. There’s a whole spectrum of indirect monetisation approaches out there.

DF: Sounds good… so all universities should now go and launch MOOCs?

DS: Good question, and the answer is “it depends”. I mentioned earlier that universities have tended to be quite opportunistic with MOOCs so far. To maximise outcomes, all elements of a university’s portfolio (on-campus education, paid-for online education and free online education such as MOOCs) should be used collectively. Each element should have a clear role in the portfolio with a business case underpinning it and the elements should complement one another and not conflict or cannibalise. Any new elements should be introduced strategically, filling in gaps in the portfolio and performing specific roles. At best, a scatter gun approach to launching MOOCs will lead to unsustainable MOOCs. At worst, it will lead to confusion internally and externally, and ultimately to cannibalisation and devaluation of a university’s core offering.

DF: I see. So are there any key challenges when introducing free, freemium or low cost products to your portfolio?

DS: Absolutely. When offering part of your portfolio for free or at low cost, the way you “fence” it off from other products is critical. It is vitally important to ensure there is a clear distinction between what is free and what is paid for. This includes the choice of content offered but also the features and services provided.

DF: So how should universities figure out what to make available?

DS: With caution! Just because there is demand for certain content and features to be delivered as MOOCs doesn’t mean universities should necessarily offer it. It comes back to the need to differentiate between their free, low cost, and core products. For example, are there certain integral features that should only ever be available as part of a core course? Alumni status and formal credits could be examples. Just because people would be willing to pay for them as part of a MOOC does not necessarily mean universities should make them available. Universities need to think about the bigger picture to maximise overall outcomes. 

UPCOMING LIVE WEBINAR

Is compliance keeping you up at night?

JOIN FOR FREE 19 Feb 2021, 11AM [GMT]