The Revolution of Education Industry:
 Coursera’s Business Model on Massively Online Open Courses

Online education is an emerging form of new education that reshapes our definition of the education industry. Online course providers have commercialized many of the education re- sources and benefits from revenues of tuitions and beyond. Coursera, as one among the many for-profit course providers, has an increasing population of users and has gained much attention. Its miraculous connection with many leading institutions around the world reflects its successful business development model. It can be easily predicated that, in the not far future, online education will be implemented in replace of a large part of the traditional classroom-setting courses, cooperate training and special skill training.

Education has been one of the topics of greatest concern among people. Throughout his- tory, it has been regarded as the inner power to promote the development of the human race. As the technology and human’s commands with different discipline advances, the education itself is improving as well. More and more disciplines are separated from the existing ones, more profes- sional facilities and specially designed sites for educational purposes. With the advent of the in- formation era, education has been immensely changed. Online education, for instance, is one of the most remarkable revolutions of education that has received increasing attention over the decade. Virtual classes delivered by recorded videos or audios, distinguish itself from the tradi- tional distance education developed earlier such as telephone calls, radio education or television educations. Massively online delivered curriculum also makes virtual schools and degree possi- ble. With more and more enrollment in digital classes, business related to online education start- ed to mushroom and flourish. Coursera, one of the most fast-growing technology company that provides for-profit online education services, is one of the most important evidence of the incor- poration of business and online education technology. Labeled “accessible for free”, Coursera was founded by two professors from Stanford University, Andrew Ng, and Daphne Koller. (Lewin) After several round of partner negotiation and agreement contest, more and more col- leges around the globe started the join the company’s bargain. Traditional courses available only in prestigious and highly competitive colleges, through Coursera’s business development, now become easily accessible.

Coursera offers online certificate and course evaluation for those who finish the video lectures and obtain a passing grade in auto-graded tests or quizzes. Humanities and Arts courses will have peer-graded paper and research journals. At the beginning stage of Coursera’s devel- opment, most courses were offered for free.

What is driving Coursera’s giant business power under the courses offered on its website? How is it challenging the traditional education and who should be alarmed? How well are the instructors in the videos paid? How does Coursera legitimize its business intention under the spectrum of higher education system and people’s common expectation of education as “social welfare”? In this journal, we will specifically discuss the generation of massively online courses and its developed business model like Coursera, and will further deepen into the educational meaning of it.

Massively Open Online Courses (MOOCs) has been a topic of great popularity. Numer- ous researchers and educators dedicate to the study of the commercial pattern that companies like Coursera operate upon. Discussion around the business model as well as the effectiveness of online education has been heated. In late 2012, Patricia A. Machun, Catherine Trau, Nadia Zaid, and Minjuan Wang from Sandiego State University collectedly published their research regard- ing the MOOCs’ instrumentation of expansion. Coursera, as one of the highlighted platforms that provide online educations, is analogized with iTunes U, a virtual digital university service pro- vided by Apple, Inc, which manages, distributes, and controls access to over 500,000 lectures, videos, and books. (Machun, 2) These platforms share some common features that make them easily accessible and multiculturally compatible. As one table analysis in the journal goes, the commonality of MOOC platforms include: Location (Location neutral content availability, situa- tional/location-based learning), Technical (Cross-device compatibility, data capture utilized), Culture (Multi-cultural elements included, globalized English, captioning, voiceover), Satisfac- tion (Adaptive learning, practice and assessment, real world applications, learner attention, learner-controlled pace, social interaction, feedback), Design (Effective video, effective color, effective audio, effective font, limited scrolling, content chunking). Commercialized MOOC platforms seek maximum reduction of the language barrier, user accommodation problems and device incompatibleness. This is defined as the “Mobilegogy Model” of MOOC platforms, which takes the learning experience to the next level by successfully using the capabilities of mobile technology. The core of the Coursera business is it, users. The more users it attracts the more potential benefit it can expect. Therefore, developing cross-device compatible, easily ac- cessible and fruitful content-wise.

Higher Education in the United States, for the most part, has been long regarded as a so- cial benefit and is, therefore, delivered mostly for non-profit purposes. A typical college educa- tion that a student in U.S. can expect is either a private institution with higher tuition or a state, public university with a lower rate. None of the money a student pay goes beyond the facilitation of the institution, research endowment or the salary of staffs and faculties. The emergence of On- line Courses Businesses apparently challenges the conventional operation rule of the education industry, particularly monetary wise.

In 2012, Coursera signed an agreement with the University of Michigan on online course hosting and services , officially marking its commercialization of education resources from a public university on online platforms. As the agreement states, Coursera was granted with per- mission to benefit from the course content the eight ways. (Donnell, 1)

1. Certification. Coursera offers certification to those who successfully completed a cer- tain course, pass the auto-grading test or alternatively receive a passing grade on the paper they turn into their peer reviewers. Even though the certificate has the brand of the university entitled to the course, it cannot carry any formal college credit, nor can it be incorporated in a traditional college education process. All the certifications will only be granted for personal education pur- pose.

2. Secure Assessments. Although this policy has not been officially implemented, Cours- era has the right to charge a user for identification and security verification during an online test or self-paced homework. Secure assessment can be legitimatized by academic integrity appeal, and part of the charge goes to the revenue of the company.

3. Employee Recruiting. As much as considerable amount of Coursera’s offerings is tech- nical training and career-oriented, recruiters of companies can reach out to potential prospective employees through the platform. Recruiters can email course participants of high-level sophisti- cation and obtain impressive grade by paying for the email addresses. While none of the major companies in the industry has confirmed a recruiting channel like that, Coursera, undoubtedly, can expect a great amount of revenue if any company recruits employee through their platform.

4. Just as recruiters may want to hire outstanding course participants, college admission officers may also want to find their potential students by looking for academically competent members on Coursera. They can pay for the email addresses of these students and encourage them to apply, no matter if they ultimately get in or not. After all, admission officers love a com- petitive applicant pool for every class they admit.

5. Manual Grading. If students are not satisfied with that auto-grading system or the peer review, or if they seek professional feedbacks on their course works, they can choose to pay for a manual grader to grade their works as a real college professor or teaching assistant would do.

6. Corporate / Enterprise Model. Many companies provide training for new employees and interns. To minimize the cost of training, many companies will likely choose a hybrid con- vention which includes both on-site real person instruction and remote online courses. Coursera provides an ideal solution for those companies. With the exponentially increasing amount of courses available, team managers can easily find the courses that meet their needs.

7. Sponsorships. Coursera is not the only platform to offer its courses. Through sponsor- ship agreements, it allows it partners to spread and deliver course contents that Coursera consid- ers more valuable on a third-party platform. Again, partners will pay for the contents.

8. Tuition fees. Last and the most important revenue of Coursera, is the tuition that stu- dents pay for the courses they take. The process of commercialization, of course, is evident on the change of price on courses. Introduction to Programming in Python, for example, was a course offered for free before 2013, and is now 49 dollars for a single course, and 199 dollars for a course package within the Basic Programming Skills.

With all the above revenues stated, it is now easy to understand how Coursera as a for- profit technology company survives in the competitive internet market. How, then, does it con- vince non-profit universities to share their valuable education resources, and how can universi- ties benefit in any way out of this process?

Just as Google did not make a penny out of search engine at the beginning, Coursera was experiencing hardship convincing its partners to join this risky arena of education. Beyond a handful of faculties and dedicated educators in the industry with altruistic intentions, no one was willing to publicize their educational work without a decent paycheck? Google’s business model serves as an ideal instance for the cross-industry business model. Google adopted a mutual bene- fit pathway that comes along with the service they provide instead of a direct benefit — pop-up and image side advertisements. It seems to be a pretty trivial and unnoticeable attachment to their services, but it created the very first revenue of the company. Advertisements later became one of the main sources for benefits of Google. The mutual benefit of Google and its partners is that Google absorb as many users as possible, and partner companies use the user population to Coursera was adopting the same pathway.

Universities are always seeking research citations, academic prestige, and popularity. The more well-known a certain college is, the more likely it can obtain research credit, alumni dona- tion and increasing the amount of applicants. Online education is regarded as an ideal pathway for universities to expand their influence. As users of Coursera users are captured by a course, they are also captured by the university that offers the course. The quality of the courses offered online can, to some extent, reflect the actual quality of education at the university. Just as school boards in colleges fund millions of dollars in athletic competition to raise their public recogni- tion, investing online education is an important means to seek public attention. Offering online courses is an important marketing strategies adopted by many colleges, as those with settled pub- lic prestige such as the Ivy Leagues and leading research universities validates their reputation with actual evidence of their courses, other colleges that are in the pursuit of higher public recognition, and attract consequential alumni donation, increment of research funding and so forth. Coursera successfully grabs colleges’ desire to increase academia popularity, and, there- fore, persuades their partner universities with numbers: numbers of registration per day, number of active users, number of each course view and number of alumni and prospective students available on their platforms are crucial indexes of the expansion capability of online MOOCs. The

Statistics demonstrated in MOOCs in 2014: Breaking Down the Numbers by EdSurge re- flects the tremendous growth of online education industry. In 2014, the number of universities around the United States that offer MOOCs doubled to around 400, with accumulative more than 2400 courses offered. Within the 25 top universities defined by US News & Ranking, 22 of them are offering online courses for free. A well-developed ecosystem has been fostered around MOOCs: “hundreds of people employed full-time , thousands of people involved in the creation of MOOCs, many millions in funding, and, importantly, millions in revenue.”

Three of the most influential MOOC providers, Udacity, Coursera and edX recently shared their figures regarding their user populations and company revenues. EdX hit 5 million student mark in August 2015. The same month, Coursera reached a 15 million registered users along in its latest funding round, which is even close to the amount of students in the United States enrolled in a college. (Wan) In pursuit of further business growth, Coursera has announced to raise $49.5 million in an almost completed Series C round led by New Enterprise Associates, who is one of the initial backers for the company. According to statistics data revealed by eLearningIndustry, the global self-paced eLearning market reached $32.1 billion in revenue in 2010, with a five-year compound annual growth rate of approximately 9.2%. The market trend for online education corresponds with Coursera’s vision — the fastest growing consumers of on- line educations are large corporates who make up the 30% of the eLearning Buyers. In 2016, 77% of the United States companies use some level of online training to improve the efficiency and the enhance professional development of their employees. (Pappas) The self-paced eLearn- ing market should see estimated revenues of $49.9 billion in the past 2015. With a compound annual growth rate of 18.2% for the next five years, it is estimated that the worldwide mobile learning market in 2015 will reach $8.7 billion and it will even reach $12.2 billion by 2017. Based on the 2014 Training Industry Report,

The traditional education industry is expressing unprecedented challenges. The many un- beatable advantages that MOOCs bring to people, such as mobility, cross-device compatibleness, career-oriented structure, and most importantly, for some of the courses, free of charge, result in the record-breaking amount of new users and business growth in the online education industry. On the other side of the crossroad is the remarkable decline of traditional industries. Reports by HigherEducation reveals that the number of enrolled college/master students with ages over 24 is continuously declining. Enrollment at four-year for-profit institutions plunged by nearly 14 per- cent. In all, U.S. university and college enrollment have fallen 6 percent in the last four years, even as policymakers push to increase the proportion of the population with degrees.

The education industry is experiencing significant commercial transformation. Online education is the key factor promoting the transformation. As Harvard Business Review asserts in Surviving Disruption (Wessel, Christensen), identifying what jobs people need to be done and how they could be done more easily, conveniently, or affordably is what enables a disrupter to imagine how to improve its product to appeal to more and more of your customers. Coursera and many other for-profit online education providers are the “disrupters” of the conventional educa- tion setting. They offer people with extremely portable while easily accessible courses while of- fering course makers (prestigious universities for most of the times) resources that traditional education is incapable of.

The study of online education industry in the future can be essentially important for the human race as it reshapes people’s means to absorb information. As the director of the Center for 21st Century Universities at Georgia Tech claims, “It’s all so new that everyone’s feeling their way around, but the potential upside for this experiment is so big that it’s hard for me to imagine any large research university that wouldn’t want to be involved.” (Lewin) People’s incrementing curiosity of knowledge trigger by the exponential increase of online education availability can have a profound effect on the modes of development of education industry.

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Machun, Patricia A., Catherine Trau, Nadia Zaid, Minjuan Wang, and Jason Ng. “MOOCs: Is There an App for That? Expanding Mobilegogy through an Analysis of MOOCS and ITunes University.” 2012 IEEE/WIC/ACM International Conferences on Web Intelligence and Intelligent Agent Technology (2012). Web.

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