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EdTech & E-Learning

Parting Ways: How MOOCs Are Differentiating In the Marketplace

POSTED 07/28/2014
By Jonathan Haber

The media usually discusses the three major MOOC providers as if they are minor variations on the same theme. It’s never been that simple, but lately MOOC platforms are starting to become more clearly differentiated in the market — both for students and for their university or corporate partners. In this in-depth report, MOOC expert Jonathan Haber talks to VC funders, market analysts and other observers to see how the MOOC platforms are parting ways.

When Massive Open Online Courses (MOOCs) started making headlines in both the educational and mainstream media, stories about them gravitated toward three specific companies: Udacity, Coursera and, later, edX.

Courses from these companies racked up enrollments in the tens or hundreds of thousands, and even today there is a tendency to define “MOOC” as a course distributed by one of these “Big Three” providers that still largely define massive open learning.

In reality, despite the shared label, each of these providers followed a different direction with regard to course design, business practices and approaches to the market, even when they first started. Those early decisions are playing a role in how these platforms are differentiating themselves today.

And some of those early choices are being rethought, not least of all because it is becoming clear the MOOC market is not what was first assumed — college-bound students looking for a low-cost alternative to high-priced residential education. Step-by-step as they seek routes to viable markets, the “Big Three” are taking more clearly defined paths, resulting in clearer MOOC differentiation.

And they are becoming more distinct not only from one another but also from a new crop of large-scale online learning solutions struggling to determine what market they serve and what problems they might solve.

Founding legends

Ground Zero for what has come to be thought of as massive open learning was Stanford University.

In 2011, a group of professors there decided to see what might happen if they opened up a set of computer science courses available on the school’s OpenClassroom learning portal to anyone with an Internet connection. The classes were popular, so the professors were excited at the prospect of attracting several hundred, maybe even a few thousand, students. But when those enrollments climbed into the 100,000+ range, a new and largely unanticipated approach to teaching and learning was born.

Sebastian Thrun, the Stanford professor who taught a course on Artificial Intelligence (enrollment 160,000) is also an inventor and entrepreneur famous for his celebrated self-driving car. But watching that car get upstaged by Salman Khan, founder of Khan Academy, at a TED Talk where both men presented, triggered Thrun’s interest in how technology could be used to further expand and improve education.

When enrollments climbed into the 100,000+ range, a new and largely unanticipated approach to teaching and learning was born.

With his connections in the academic, technology and investment communities, Thrun was able to leverage excitement over the open version of his AI course to establish the first of the three companies that came to be known as MOOC platforms. KnowLabs (now Udacity), was founded in order to expand and commercialize massive online learning.

Meanwhile, Andrew Ng, the professor behind a Stanford MOOC on Machine Learning (also with a six-figure enrollment) partnered with his friend and colleague Daphne Koller (a MacArthur Award winning computer scientist and researcher) to found Coursera. That company was dedicated to bringing courses from the world’s most well-known colleges and universities to massive online audiences.

The consortia forming around these West Coast startups invited Harvard University and the Massachusetts Institute of Technology. But, in a decision that would define the rapidly popularizing MOOC space, the Cambridge schools instead decided to create a new non-profit entity. edX was founded to deliver online courses from schools interested in an alternative to the for-profit Udacity and Coursera.


Early decisions affected course design

While each company had to build systems for tens or hundreds of thousands of users, Udacity, Coursera and edX each made initial technology, design and partnering decisions that would play significant roles in their growth and development.

Udacity courses, for example, were structured more like modern e-learning programs than traditional college classes. “Lectures” were broken into very short video segments (most of them less than two minutes long) designed for a YouTube generation.

And more than any other MOOC provider, Udacity integrated assessment items directly into their course workflow. Automated quizzes and exams acted like armed guards preventing a student from advancing in a sequence without demonstrating competency in what they had just studied.

This strategy tends to work best in math, science and technology where assessment questions require students to perform calculations, rather than just select options from a multiple-choice list. Fortunately, a focus on STEM-related subjects, computer programming and entrepreneurship also seemed like the preferred subject matter for the engineers and entrepreneurs at the helm of Udacity.

Udacity, Coursera and edX each made initial technology, design and partnering decisions that would play significant roles in their growth and development.

In contrast, Coursera’s aggressive partnering strategy allowed participating institutions and professors to make their own choices regarding how a class would be structured and organized. The features and functionality of the company’s platform provided the only practical constraints on what professors could and could not include in their courses.

This choice led to wide variation within the Coursera catalog with regard to course length, video format (and quality), rigor, and overall demand. But it also allowed Coursera to quickly outpace Udacity’s limited catalog to become the biggest player in the MOOC space in terms of number of courses offered, academic subjects covered and overall number of enrolled students.

In theory, edX is also a consortium where schools and professors are similarly free to “do their own thing” with regard to course design and implementation. But the first courses released through the edX platform, including online versions of popular courses from Harvard and MIT, set a standard that made edX courses more of a commitment for both students and the for team responsible for bringing edX MOOCs to market. Most of the initial edX MOOCs were designed to be as demanding and rigorous as existing full-semester class, and they included as much of the traditional syllabus as edX technology allowed.

Features such as high-quality, studio-produced video also established edX as a quality player whose courses reflected significant investment of money and time. This commitment level might explain why edX’s course catalog, while robust in terms of both scope and number of courses, is still less than a third the size of Coursera’s.

Udacity’s pivot(s)

The product and strategy choices just described also set the stage for business decisions currently driving the remaking of the MOOC landscape. For example, Udacity’s focus on STEM and technology subjects made it that much easier for them to “pivot” in new directions that focused on markets valuing those skills.

Consequently, Udacity has undergone dramatic changes in the last year. They’ve switched from general education to corporate training as the company’s focus, they’ve stopped awarding free certificates to course completers and, most recently, they’ve created of a new line of micro-credentials called “nanodegrees”.

Alliances with major employers like Yahoo and AT&T are meant to match Udacity “graduates” with potential employers hungry for personnel skilled in what Udacity teaches. And they have reconfigured their “product” to combine online training with mentoring and other “high-touch” human services, which is designed to build enough value into Udacity’s offerings to support new revenue models based on subscriptions to their services.

This is at a company founded by a man who once claimed a MOOC revolution would eventually leave only ten higher education institutions standing. So when these changes first started taking place, critics of the MOOC experiment saw the decision as an admission of failure. Stories featuring headlines like “The King of the MOOCs Abdicates the Throne” expressed a sense of vindication of the entire academic critique of massive open learning.


But they also reveal a lack of understanding of what goes on inside an Internet startup. Michelle Weise, Senior Research Fellow for Higher Education at the Clayton Christensen Institute for Disruptive Innovation, describes a gulf that often leaves academics and other institutional players unaware of how decisions get made at organizations like Udacity.

“The way in which iteration occurs in the private sector is very different from the way change happens in a traditional institution,” she says. “I think the idea of failing fast and iterating and having beta product is something that is not familiar to an academic audience.”

Far from being a failure, Weise says, “really it was very strategic and forward thinking of Udacity to realize that their business model was not viable in terms of partnering with traditional institutions as they saw the need to attend to the skills gap in the United States.”

One of the best ways to understand what Udacity has been up to would be to take a course in their own catalog entitled How to Build a Startup taught by legendary Silicon Valley guru Steve Blank.

Blank’s Customer Development Process, which has become catechism within startup culture in Northern California and beyond, encourages companies to engage in aggressive experimentation in order to find out if customers actually exist before fully building a product and company to serve them.

To academic critics, Udacity partnerships at San Jose State University, where MOOCs demonstrated questionable effectiveness for college-age learners, proved massive open learning was not effective with young students. And a program at Colorado State University that offered students the chance to substitute a Udacity MOOC for much-more expensive residential course was perceived as a flop when no students signed up for the offer.

Alliances with major employers like Yahoo and AT&T are meant to match Udacity “graduates” with potential employers hungry for personnel skilled in what Udacity teaches.

But in Customer Development parlance, Udacity was engaging in real-world experimentation to see if a segment of the college paying market (of students or schools) existed where MOOCs would be effective. And as those experiments came back negative, Udacity “pivoted” toward another experimental market (corporate training) where their services might have more value.

Rather than look at such changes as failures, the Christensen Institute’s Weise sees them as a demonstration of health, or at least an acknowledgement of reality. “When the first MOOCs came out that attracted hundreds of thousands of students I think the three major players were swept up in the moment because there was so much excitement about 250,000 accessing this one course,” she explains.

“The problem is that the idea of the MOOC was really pushed on them. They really didn’t begin with identifying a business model in the massive open market delivering education for free. It was an exciting moment when they saw the potential and wanted to see if they could build business models out of this kind of huge classroom experience but what we’ve seen is that it’s a lot harder do than imagined.”

Seth Reynolds, a partner in the Education Practice for the Parthenon Group consulting firm, also stresses the need for a sustainable business model if MOOCs are going to progress beyond their current status as intriguing programs with an unclear future.

“We tend to work with later stage investors,” he says. “So while I’ve been keeping an eye on MOOCs, investment in companies like Udacity and Coursera has come from venture folks who are more ready to speculate on something new. These guys can invest in one of these companies because they find them interesting, while later stage folks are still trying to figure out what’s the business model.”

Reynolds is underlining the “story behind the MOOC story” playing out as MOOC differentiate: the quest for an effective way to generate revenue from a product category that started as a massive Internet giveaway.

Coursera’s business model experiments

Over sixty million dollars of the venture capital Reynold’s mentioned has gone into Coursera, underwriting the expansion of the company’s catalog, partnership rolls and student base. That investment has also supported business model experiments that see both institutions and students as potential paying customers.

Licensing MOOC content to colleges was originally seen as a business-to-business (or B2B) revenue model of choice for all three major MOOC providers. But interest in licensing third-party content by academics and institutions has been light and fraught with controversy.


In fact, the revolt against one such deal by professors at San Jose State University marked the beginning of last year’s MOOC backlash. More importantly, such B2B deals, especially ones based on royalty payments that assumed students would pay to take MOOC classes, was not driving the kind of revenue expected for a fast-growth company.

One of Coursera’s Business to Consumer (B2C) initiatives, Signature Track, is currently the biggest money maker in the MOOC space, having generated over four-million dollars in revenue since the program began in 2013. Signature Track students get the same material and perform the same work as students taking a Coursera MOOC for free, but thousands have paid $50-$100 for certificates of completion that verify their identity.

It is unclear what is driving such purchasing behavior, although early anecdotal evidence seems to indicate that students are choosing this option in order to earn a credential that can help them achieve professional goals. For example, early Signature Track enrollees in a Coursera course on health and nutrition included health professionals looking to burnish their resumes.

Earlier this year, the company introduced a new program called Specializations that awards a different certificate to students who pass a sequence of courses under Signature Track and then complete a capstone project.

Melissa Loble, who was recently named the Senior Director for the Canvas Network (a MOOC course builder provided by the Learning Management System company Instructure), has also taught a Coursera MOOC for the University of California at Irvine. And she finds Specializations an interesting new direction for the organization.

“I think Coursera is getting at something by trying to create a collection of experiences that fit together, much like in a continuing education model,” she says. “I know they also have a strong push toward internationalization as well as their Learning Hubs program where people take MOOCs in a hybrid classroom setting. But their success is still going to be based on their partnering strategy since that is where their product ultimately comes from.”

The edX approach to teaching and learning

While edX’s status as a non-profit is often used to distinguish the organization from its MOOC rivals, a more defining characteristic may be its commitment to research and experimentation.

Loble says, “Every time I hear Anant Agarwal [President of edX] give a talk, the emphasis is on educational research, teaching and learning, and giving back to the community.”

She says the edX research agenda is evident “on their web sites that include analysis of many edX courses, in their encouragement of partners to participate in bigger investigations of online learning and in their public statements regarding what MOOCs might do for teaching generally.”


Reports generated by Harvard and MIT earlier this year provided some of the best analysis yet of what people do while enrolled in a MOOC. Those statistics helped dispel myths about both high enrollment and high attrition rates. And once the data used to generate those reports was scrubbed of personal information, it was made available to people outside the edX consortium for further analysis and research.

While early enthusiasts talked about MOOCs disrupting higher education, leaders who are part of the edX consortium seem focused on how this new technology can enhance, rather than upend, residential learning.

For example, Sanjay Sarma, MIT’s Director of Digital Learning (which gives him responsibility over MITx), says the edX system is today the most frequently used educational application at MIT. Instructors there use it to facilitate the flipping of classes whereby students watch MITx lectures at home, which provides more opportunities for lab or group work during class time.

And Peter Bol, a China Scholar who co-teaches a popular MOOC on Chinese history and culture (and also serves as Harvard’s Vice Provost for Advances in Learning), has flipped his own class and also integrated videos of classroom discussions back into his MOOC. This kind of feedback loop demonstrates how MOOCs can enhance the classroom, and vice-versa.

Licensing the MOOC

While edX, as a non-profit, may be liberated from having to come up with a fast-growth revenue model, the organization still has to ultimately come up with the means to generate the cash required to be self-sustaining. As Seth Reynolds from the Parthenon Group points out, “So far, edX has been playing with house money. But, at some point, that money is going to dry up, or at least the people providing it are going to ask what are they getting from costly investments in online learning — even if they’re not looking for a big financial return.”

Since the inception of edX, partners making up the consortium have experimented with different revenue models such as content licensing, including the licensing of materials to San Jose State that triggered that professor’s revolt mentioned earlier. But the federated nature of the organization means different partners have been pursuing different strategies in their quest for financial sustainability.

Harvard, for example, has leveraged its relationship with the Harvard Extension School to offer for-credit options that can lead to a Liberal Arts degree through that institution. Meanwhile, MIT has begun to sell courses in fields like Big Data that are leveraging both the MIT and “X” brands.

And edX itself, the entity chartered to create the technology used by consortium partners to deliver online courses, has been engaged in its own business model experiments. One leverage last year’s decision to make the edX learning management system open source.

Online learning is back in vogue, even if MOOCs are still somewhat polarizing.

For example, the medical device company Ethicon (a division of Johnson and Johnson) recently released a MOOC designed to dispel myths about bariatric surgery and similar procedures. And rather than build a new platform to deliver this course (or simply upload lecture content to popular video services such as YouTube), they instead created a MOOC built on the edX’s open source system, hiring edX to configure and host their material for them.

Chris Hartigan is the Vice President for Higher Education and Verticals for Acquia, a company which supports schools using the open-source Drupal content management platform. And as a vendor involved with both education and open source, he sees a number of intriguing possibilities for MOOCs.

“I’ve been involved with the industry long enough to remember the rise and fall of earlier efforts to popularize online learning, efforts which foundered due to technology limitations such as lack of adequate bandwidth at the time, rather than a failure of vision,” describes Hartigan. “Now that those technical limitations are largely behind us, at least in the US, online learning is back in vogue, even if MOOCs are still somewhat polarizing in the academy, which makes talking about them so much fun.”

“For a company like ours that relies on more people being skilled in the software we support, we are exploring how to best teach the world Drupal,” he continues, describing another MOOC that could be built outside the academy. “We’re still in the active exploration phase but MOOCs offer a great opportunity for corporations like ours whose future and growth depend on the expansion of certain skill sets and the continued aggregation of a community.”

Another example of using MOOCs for public education about a new subject is the partnership between Udacity and the personal genomics company 23andMe. The company’s future partly depends on a basic familiarity with genetics, so they’ve added a MOOC is part of their overall public education strategy.

New Players, New Credentials, New Models

The changes and experiments taking place at Udacity, Coursera and edX are not happening in a vacuum. Since the Big Three first came to dominate this new product category, other players have entered the market such as the European MOOC providers FutureLearn and iVersity, or, which opens up classes running on the Instructure learning management system to the world.


And all of these activities are playing out against a backdrop of an education system that continues to be criticized for charging too much while providing too little, even if customers (i.e., students and their parents) continue to line up to buy the product traditional higher education currently sells.

Less than three years after the original Stanford experiment that triggered the MOOC “revolution,” one of the companies the grew out of that experiment (Udacity) looks much more like a corporate training organization than a wrecking ball aimed at traditional higher education.

Meanwhile, Coursera continues to focus on those who make up the majority of their user base, such as older students and non-traditional learners. And edX and its partners have shown far more interest in using MOOC technology to enhance the classroom experience, rather than disrupt the edifice of higher education to its foundations.

With this level of change underway, it may be time to stop trying to figure out who is and is not a MOOC provider and instead look at all the ways the dynamicism that have been part of the “MOOC moment” are helping to redefine the relationship between technology and education across all world.

Jagged Edge Media JAcom Consultants