State Subsidies. Most countries subsidize
education as a key state function. The
case for subsidizing education based
on socially interdependent demand
could hardly be stronger. People who
complete high school pay more taxes,
vote more often, volunteer more often,
have higher savings rates that stimulate
more investment; commit fewer violent
crimes, live longer, use less health care,
and consume fewer welfare services. 1
MOOCs could be as defensible as Pell
grants. This is already happening.
Based on San Jose State University’s
experiments with edX and Udacity, the
state of California plans to expand use
of MOOCs to other state campuses. 4
a framework for organizing mooc business models.
What are they paying for?
Tuition. We believe education is better
positioned than media to generate direct revenue from content. In contrast
to music, film, and books, piracy is less
likely to limit MOOC charging ability.
Digital courses are interactive services whose completion often requires
live coordination with other students,
graders, and server-based staff. One
could watch pirated lectures and work
through pirated problems, but it takes
the participation of others to answer
questions, grade assignments, and
ultimately verify completion. Each of
these represents a control point ensuring the platform receives payment.b
Given pricing power, charges can vary
with business and pleasure: degree
classes cost more, avocational classes
In addition to tuition models,
MOOCs can also charge based on a
variety of freemium models, meaning
a business logic where basic course
content is free and students pay for
complements as with the following
Certification signals to others that a
student has mastered course content.
Coursera is already experimenting with
the idea of making MOOCs available for
free but charging for credentialing. One
level could certify completion and an-
b Of course, students might acquire skills using
pirated materials then obtain credentials from
third-party agencies. Pricing decisions must
reflect competition in the same manner that
i Tunes pricing has curbed music piracy. Reputation effects can also make such students unpopular with employers.
other could certify skill. The University
of Washington, a Coursera partner, is
testing a hybrid model of a free MOOC
offered simultaneously with more
academically rigorous credit-bearing
version that includes a fee. Udacity is
partnering with Pearson’s extensive
network of testing centers to offer similar, fee-based, certification services.
Diagnostics. MOOC platforms can
use rich data generated from online
interaction to offer personalized diagnostic analytics that identify student strengths and weaknesses and
adjust pace of delivery to match.
These capabilities can be offered as
value-adding fee-based services or
Tutoring and Peer Assistance. When
students flounder, the MOOC can offer online “genius bars” staffed by faculty experts and accredited students
from previous classes, for a fee.c
Tutors and peers can answer questions
while helping push students to higher
Collaborative Group Learning. MOOCs
have atrocious attrition rates. One
solution is to charge students for recommended study groups to help find
compatible peers. Another option
borrows from “Grameen Banking”
where people apply for loans as a team
(see http://en.wikipedia.org/wiki/Gra-meen_Bank). MOOC groups could self-organize and commit to learning like
the teams that take out loans together.
Study groups solve both the adverse
selection problem (bad risk loans/un-
c We thank Jeff Jarvis for this idea.
committed students) and the moral
hazard problem (ex post monitoring/
letting your peers down). Pricing in
such schemes can be a simple up-front
payment with a rebate for completing
with one’s peers.
Recruiting services. To compete on talent, companies can either hire more
talented workers or improve the talent they have. MOOC funding models
thus have opportunities both pre- and
post-employment. To help employers
tap into new talent, MOOC analytics
can provide information on student
qualifications and improve the hiring
process. Digital learning platforms
generate substantially more detailed
insights into prospective employee
behaviors than transcripts. Firms can
also recruit the best students before
they enter the job market.
Udacity has been running a recruiters program using its database of
students to identify candidates who
would be good matches for openings
at partner companies like Google,
Amazon, and Facebook among others.
The MOOC platform, matching inter-
moocs could be
as Pell grants.