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Will Online Ed Ever Make Money?

The early successes of online ed ventures like Coursera and Udacity up to this point have left one important question unanswered: When (and how) should they make money, much less turn a profit? For all their achievements, measured in terms of a growing user base and rising enthusiasm, no venture has yet been able to translate its efforts into a steady revenue stream.

The New York Times profiles the debate over the question: to monetize or not to monetize? On one side are venture capitalists who, looking to the long game, argue that building up a solid user base early on is more important than revenue:

“Monetization is not the most important objective for this business at this point,” said Scott Sandell, a Coursera financier who is a general partner at New Enterprise Associates. “What is important is that Coursera is rapidly accumulating a body of high-quality content that could be very attractive to universities that want to license it for their own use. We invest with a very long mind-set, and the gestation period of the very best companies is at least 10 years.”

On the other side are the pessimists, who expect most of these ventures to go bust unless they hit on a sustainable business model quickly:

“No one’s got the model that’s going to work yet,” said James Grimmelmann, a New York Law School professor who specializes in computer and Internet law. “I expect all the current ventures to fail, because the expectations are too high. People think something will catch on like wildfire. But more likely, it’s maybe a decade later that somebody figures out how to do it and make money.”

Now that more universities have thrown their chips in with Coursera, the pressure to show some profit is building:

“We’ll make money when Coursera makes money,” said Peter Lange, the provost of Duke University, one of Coursera’s partners. “I don’t think it will be too long down the road. We don’t want to make the mistake the newspaper industry did, of giving our product away free online for too long.”

For our part, we are optimistic that these programs will eventually find a sustainable business model. Their rapid growth has made it clear that there is a market for their products, and as the old higher-ed model continues its slow collapse even more students will seriously consider paying for online courses. And as the Times points out, all of the online ed companies are already brainstorming ideas for generating revenue—everything from advertising to payments for certificates of completion to syndication fees for universities who wish to use online content. Most of these ideas will probably fail, but the few that will succeed should be enough to keep the business running.

This is certainly not to say it will be an easy ride. These online ventures and their traditional university business partners are now discovering what journalists already know: It is easy to upload money and content into the internet, but very hard to get the money out again.

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