How Does Coursera Make Money?

column | MOOCs

How Does Coursera Make Money?

By Dhawal Shah (Columnist)     Oct 15, 2014

How Does Coursera Make Money?

Coursera is an education platform that partners with top universities and organizations worldwide to offer courses online for free. It was started by two Stanford professors in late 2011. In less than three years it has reached 10 million students around the world and raised $85 million in venture capital.

Why have VCs invested so much money in the company? How does offering free online courses generate revenue? Many have asked, so we examined Coursera’s different monetization models and offer estimates based on some known numbers.

First Attempt: Headhunting

In a blog post in December 2012, when it had around 2 million registered students, Coursera pitched Career Services as “a recruiting service that connects passionate and committed Coursera students with positions that match their skills and interests.” The service used sophisticated analytics to match students to companies. Students had to explicitly opt in and create a profile to be eligible.

Coursera charged companies a flat fee for introductions to matched students. The revenue would be shared with the university whose courses the student had registered for. At launch, positions were limited to Software Engineering and initial companies using the service included Facebook, Twitter, AppDirect, and TrialPay.

Career Services seems to be have been shut down. The webpage no longer exists and there is no mention of it in the FAQs. This doesn’t mean that Coursera will not try something similar in the future.

Verified Certificate/Signature Track

Coursera announced the Signature Track in January 2013. Signature Track “securely links coursework to real identity” via a verified certificate, which costs between $30 and $100. At launch, six courses were eligible for the verified track; students facing economic hardship can apply for financial aid.

Nine months after the launch, Coursera had hit $1 million in revenue through 25,000 sales of verified certificates among its 4.7 million students. Five months later, cumulative revenues reportedly reached $4 million. It may be that a handful of popular courses drive this number: In an interview back in April, Wharton professor David Bell mentioned that 10,000 people signed up for Signature Track in his Intro to Marketing course, part of the Wharton Foundation Series. At $49 per verified certificate for the course, that amounts to nearly half a million dollars in revenue. At present Coursera is receiving more than $1 million per month in revenues from verified certificates.

Coursera is also increasing the number of courses eligible for Signature Track. Currently, 70% of the upcoming courses have this option enabled. There are also a growing number of courses (around 40) which do not offer a free Statement of Accomplishment, leaving the Verified Certificate as the only option for acknowledgement of course completion. Some students have been quite vocal in their opposition to this policy and have even dropped courses out of protest.

After the course starts, users are asked to sign up for a verified certificate via different prompts. In the forums, students in Signature Track have a badge identifying them as Signature Track users, which also increases the visibility of the program.

Specializations

In Jan 2014, Coursera announced Specializations, which consist of a group of related courses designed to help students deepen expertise in a subject. Currently there are over 25 such programs available in several subject areas, from data science to writing. To obtain a Specialization certification, a student has to earn a verified certificate in each of the course listed under that Specialization. The final step is a capstone project (described further below).

Although we don’t know how many have signed up for specializations, Coursera has indicated that 1.5 million students have registered for courses that are part of the 10 specializations that were initially available. From a revenue standpoint, it’s likely that Specializations drive an increase in the number of verified certificates sold.

To give us an idea of this impact, we can look at John Hopkins University, which recently shared details about their Data Science Specialization, consisting of nine courses and a capstone project. In the five months since the Specialization started, 14,000 people completed at least one course with a verified certificate (each cost $49) while 266 students completed all 9 classes. These figures, not accounting for any financial aid given, amount to about $1 million in verified certificates. It may be that some of these would have been sold even without the larger specialization, but it is safe to assume that the Specializations may be a big factor in driving sales of verified certificates.

Corporate Collaborations

Coursera is experimenting with a number of different ways to bring corporations in its folds. Revenue from these collaborations (if any) is unclear. We look at a few possible collaborations below.

Capstone Project

Every Specialization culminates with a Capstone Project that allows students to apply what they've learned to relevant, real-world challenges. Coursera is partnering with top companies to create these projects. For the John Hopkins Data Science specialization Coursera is partnering with Swiftkey, maker of a popular keyboard replacement app for the Android operating system:

Employee Training

Companies around the world could leverage Coursera’s courses for employee training and development. They could potentially integrate Coursera courses into professional development offerings. In a survey by Coursera of 3000 users, 92% found Coursera courses are rated as equal to or better than their corporate training programs. There are no current publicly available offerings in this area yet.

Source: "Coursera for Companies: What we've learned, and where we are headed"

Course Sponsorships

Top companies can sponsor the production of a course created by a top university. This allows for companies to align their brand with a top university around the content area relevant to the company’s core competency. Through these courses, companies could potentially recruit top performers. There are no public details about these efforts, but given private companies’ willingness to work with Udacity,it seems likely there are partnerships being developed here.

Conclusion

Overall, given that Coursera’s largest source of revenues is verified certificates, and with the current revenue rate of $1M per month, we estimate that Coursera is on its way to making $8-12 million in revenues in 2014. According to Coursera CEO Rick Levin, a couple of universities are already recovering their costs through shared revenue. Documents obtained by The Chronicle of Higher Education shows Coursera shares with universities 6-15% of the total revenue and 20% of gross profits on its courses.

So is Coursera profitable? Probably not with over 100 employees, a number that is expected to grow to 170 by the end of the year. But with decent revenues and plenty of money in the bank, Coursera has plenty of breathing room to continue growing its existing business models and trying out different ones to bring returns to the VCs who have invested so heavily in it.

Learn more about EdSurge operations, ethics and policies here. Learn more about EdSurge supporters here.

More from EdSurge

Get our email newsletterSign me up
Keep up to date with our email newsletterSign me up