coursera-business-model

How Does Coursera Make Money? The Coursera Business Model In A Nutshell

Coursera is an American massive open online course (MOOC) provider founded by Andrew Ng and Daphne Koller in 2012. Coursera revenue is categorized according to consumer, enterprise, and degrees. The consumer category accounts for the majority of revenue with multiple studies and course options for individual students looking to upskill.

History of Coursera

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The Coursera Timeline, from its inception to its IPO (image Source: Coursera prospectus).

Coursera is an American massive open online course (MOOC) provider founded by Andrew Ng and Daphne Koller in 2012.

Before launching Coursera, both Ng and Koller were Stanford University computer science professors with a mission to bring high-quality education to the masses. The idea for the company came after Ng decided to offer a version of his popular machine learning class online. Ng himself was inspired by Udacity founders Sebastian Thurn and Peter Norvig, who launched their first course on artificial intelligence in 2011. 

To ensure the class would be ready for the start of the semester, Ng hired three freshman interns to develop the platform and course content. The group expected around 20,000 people to sign up for the class once it was released. However, over 100,000 signed up.

At some point, Ng partnered with friend Daphne Koller – who was also interested in online education and alternative teaching methods. The pair quickly realized they wanted to scale their idea, eventually deciding to leave Stanford and establish a for-profit business backed by venture capital funding. The start-up raised $16 million with a couple more million dollars contributed by university partners. The three freshmen who initially developed the platform were also hired as paid employees.

Coursera began partnering with high-profile educational institutions such as Princeton, Stanford, and the University of Pennsylvania. Over the years, the company would continue this tradition and attract more students in the process. COVID-19 induced lockdowns also contributed to growth as people used their extra free time to upskill or acquire new knowledge for the sake of it. By the end of 2020, the platform boasted 77 million users.

In February 2021, the company received B Corp certification. This means Coursera has a legal duty to not only its shareholders but also to making a positive impact on society.

Today, Coursera partners with more than 200 universities and companies around the world. Each partnership allows the individual to partake in learning that is flexible, affordable, and job-relevant.

Coursera mission, vision and core values

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The Coursera Purpose Statement (Image Source: Coursera prospectus).

Coursera’s mission is to “provide universal access to world-class learning so that anyone, anywhere has the power to transform their life through learning.”

Coursera’s core belief is “that education is the source of human progress.” Its vision is accomplished by building up a global platform connecting learners.

As the company highlighted:

The current system of higher education faces inherent challenges. The predominantly classroom-based model may not be able to keep pace with the rapidly emerging skills required to succeed in today’s workforce. While serving certain learners well, the in-person experience may fail to meet the needs of learners in more remote areas and non-traditional learners who need access to education and upskilling the most, both domestically and internationally. Lastly, the cost of education has grown considerably. According to the Federal Reserve Bank of New York, student loan debt in the United States was the second largest component of household debt at $1.55 trillion as of September 30, 2020, creating further headwinds for individuals navigating their careers and personal lives.

Below are some KPIs.

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Coursera KPIs as per its financial prospectus.

Coursera revenue generation

coursera-revenues
The company generated over $293 million in 2020 and over $66 million in net losses. As Coursera tries to scale its platform, its cost of revenues (money shared with its partners which provide the courses’ materials) and sales and marketing expenses make up most of its costs to run the business.
coursera-revenues-breakdown
Some of the Coursera key performance indicators. The platform had over 76 million students in 2020, it had released 11,900 degrees by 2020, of which it recorded 387 Enterprise Customers. Of the total revenues, about 65% came from the consumer segment, and more than 20% came from the enterprise segment.

In general, Coursera works on a freemium business model. Students can take courses for free but must pay if they require official accreditation.

Coursera has multiple revenue generation strategies, split broadly into three segments: consumer, enterprise, and degrees.

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Consumer

coursera-consumer-offering

The consumer segment covers payments and subscriptions made directly by students. This is by far the most significant source of revenue for the company, amounting to $192.9 million in 2020.

Individual students have several options here:

  • Signature Track – for those wishing to earn an official certificate of completion upon completing a free course. Coursera charges between $30 and $100, depending on the course topic.
  • Specializations – this option is essentially a bundle of a few different courses designed to help students deepen their knowledge in a specific area. Students are charged monthly, with prices starting at $39.
  • Professional Certificates – a longer-term commitment of 1-6 months enabling students to gain new knowledge and launch their careers. Some of the available topics include marketing analytics, project management, and social media marketing. Again, prices start at $39/month.
  • MasterTrack® Certificates – featuring 4-7 month learning modules designed to earn credit toward a university degree. These certificates focus on real-world projects that have practical applications. Topics include data analytics, social work, and health informatics. Prices start at $2,000.
  • Coursera Plus – an all-in-one solution featuring unlimited access to 3,000 courses, Specialisations, and Professional Certificates. Once the 30-day free trial has ended, students must pay $395 annually.

Enterprise

The enterprise segment incorporates business and government clients wishing to train teams of employees. Coursera also includes universities offering online courses to students in this segment.

Some of the major clients to utilize the Coursera For Business service include L’Oréal, Danone, General Electric, Tata, and Proctor & Gamble. For teams and smaller organizations, the cost is $399 per user per year. 

For larger companies, prices are tailored to the size of the organization and are available on request. Its enterprise offering comprises:

  • Coursera for Business: seat license subscription through the Enterprise Plan where small and larger businesses can use to train their teams.
  • Coursera for Campus a subscription to college and university customers with either a fixed number of licenses or enrollments per campus or a fixed contract with unlimited learners.
  • Coursera for Government: a fixed subscription per licensed user per year.

Degrees

Lastly, the degrees section deals with universities that are offering complete Bachelor’s or Master’s degrees online.

Degrees are offered in a range of disciplines, including Business, Computer Science, Data Science, Public Health, and Engineering. 

Prices for online degrees are substantially less than the equivalent in-person degrees because overhead costs are lower. Most degrees can be completed in 2-4 years and prices start at $9,000.

How Coursera business model works

Coursera’s business model is based on an educational platform enabling educators, learners, and institutions to connect through a broad range of learning offerings: Guided Projects, courses, Specializations, certificates, and degrees. Its go-to-market strategy is based on freemium offerings.

The large registered learner base makes it easy to acquire users that can be converted into paying consumers or enterprise accounts. Indeed the consumer learners represent the “top-of-the-funnel” or the main source of leads that can be converted in Enterprise or degree offerings.

In fact, in 2020, about 50% of new degrees were generated by registered free Coursera users and 30% of Coursera Enterprise leads were also sourced from the Enterprise platform.

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The Coursera consumer flywheel starts with a platform that provides free, high-quality content with an efficient acquisition model. The company estimated in 2020 the student acquisition cost was below $2000 per student’s degree.

As noted in the introduction, Coursera partners with leading educational institutions to offer online courses to students.

These courses are pre-recorded video lectures the student can watch on a set schedule or at a more convenient time. To facilitate learning, each course incorporates homework, assignments, exams, and a discussion forum. Importantly, courses are taught by actual university professors.

Interested students need to sign up for a free account and choose the subjects they are interested in studying. Then, they must select the courses they want to take and decide whether they would like to receive accreditation for their successful completion.

In recent years, the company has moved away from its massive open online course heritage and toward a model where students pay for stackable, short-course credentials. These credentials take the form of completion certificates which are endorsed by the high-profile universities Coursera partners with. Coursera qualifications are looked upon favorably by employers, despite the company favoring a non-traditional, off-campus approach to higher learning.

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Image Source: Coursera prospectus.

Who owns Coursera?

Below is a look at the ownership structure of Coursera, with the company last releasing data in December 2020:

  • New Enterprise Associates (18.3%) and Kleiner Perkins Caufield & Byers (9.2%) – venture capital firms.
  • G Squared (15.9%) – a growth-stage venture fund.
  • Northern Trust (7.9%) – a financial services company.
  • Andrew Ng (7.8%) – Coursera co-founder.
  • Jeffrey Maggioncalda (3.5%) – Coursera president and CEO. 

Key takeaways:

  • Coursera is an American massive open online course (MOOC) provided founded by Andrew Ng and Daphne Koller in 2012. The idea for the company came after Ng noticed the popularity of an online extension to a machine learning course he was teaching at Stanford University.
  • Coursera revenue is categorized according to consumer, enterprise, and degrees. The consumer category accounts for the majority of revenue with multiple study and course options for individual students looking to upskill.
  • Coursera courses are taught by actual professors from top universities that endorse the completion certificates awarded to students. In recent years, the company has moved away from its massive open online course focus toward stackable, short-course credentials.

Related EdTech Business Models

Duolingo

how-does-duolingo-make-money
Duolingo is an EdTech platform leveraging gamification to enable millions of users to learn languages. Duolingo leverages a hybrid between ad-supported and freemium models. Indeed, the free app makes money through advertising. Free users are also channeled into premium subscriptions with an ad-free experience and more features.

Khan Academy

how-does-khan-academy-make-money
Khan Academy is an EdTech non-profit organization whose mission is “to provide a free, world-class education to anyone, anywhere,” It runs thanks to the sponsors of various donors that keep the platform developing content at scale for its millions of students across the world.

Masterclass

masterclass-business-model
Started as an attempt to transform education, MasterClass finds top talents and turn them into instructors. With a straightforward membership model of $180 per year, the streaming online education platform gives access to all its courses and the new releases on the platform. In 2020, it got valued at over $800 million.

Udacity

udacity-business-model
Udacity is a freemium EdTech platform, offering MOOCs (courses open to anyone for enrolment). Udacity partners up with companies and universities to offer nanodegrees (short-term online education programs focused on specialized skills in computer science). The user either pays a one-time or subscription fee to access one or all courses.

Udemy

udemy-business-model
Udemy is an e-learning platform with two primary parts: the consumer-facing platform (B2C). And the enterprise platform (B2B). Udemy sells courses to anyone on its core marketplace, while it sells Udemy for Business only to B2B/Enterprise accounts. As such, Udemy has two key players: instructors on the marketplace, and business instructors for the B2B platform.

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