Just two years ago, massive open online courses (MOOCs) were all the rage. They were garnering lots of media attention and The New York Times called 2012 “the year of the MOOC.”
Today, though the hype has died down, the world’s largest provider of MOOCs – Coursera – keeps on innovating and developing its online platform to serve millions of learners. Coursera co-founder Daphne Koller, whom Knowledge at Wharton interviewed in November 2012, returned to campus recently to speak about her progress since launching her company 2.5 years ago, and she gives her predictions for what the MOOC landscape will look like in the future. In her interview, Koller also provides an update on how Coursera is staying afloat even though the vast majority of students don’t pay a penny for their education.
An edited transcript of the conversation appears below.
Knowledge at Wharton: When we last met two years ago, The New York Times called 2012 “the year of the MOOC.” But by 2013, a number of people covering higher education in the press decided the revolution was over. I have to ask: Is the revolution over?
Daphne Koller: No. If you think about the “Gartner Hype Cycle,” I think we’re emerging from the “trough of disillusionment.” The previous hype was completely unmerited because it was based on the presumption that MOOCs were going to put universities out of business, which is an idea that we neither endorsed nor believed was right. In 2013, there was a lot of disillusionment because people saw that over the course of 12 months we hadn’t put any universities out of business…. That isn’t the right way to look at it.
Our target audience is people who are primarily working adults and are not currently candidates for traditional forms of education. That’s the vast majority of our audience and they keep coming to us. We have more than 10 million users on the site right now and they’re very happy with what they’re getting.
“The previous hype was completely unmerited because it was based on the presumption that MOOCs were going to put universities out of business.”
Knowledge at Wharton: Has the rate of increase remained constant?
Koller: Yes. We’re seeing a significant increase over time in both the overall number of users and the number of active users. We’re also seeing a very significant increase in the number of people who pay for verified credentials, which are the Verified Certificates that we offer to people who complete certain courses.
Knowledge at Wharton: Early demographic studies showed most MOOC participants were generally well-educated people from developed nations, and they were disproportionately male. This was surprising, since many would have expected or hoped MOOCs would have reached more lower income people in developing nations. Have those demographics changed over time? What kinds of metrics do you follow?
Koller: We definitely track those metrics. Those initial studies were done on a subset of early courses that were primarily graduate level courses offered at particular universities. As such, the courses appealed primarily to people with university degrees.
If you look at our current demographics, 75% of our users have college degrees. In turn, that means 25% do not, which is still 2.5 million people. That’s an awful lot of people who are getting access to education that otherwise wouldn’t have access.
It’s also important to remember that the 75% of users who have college degrees aren’t necessarily wealthy yuppies working on Wall Street. In many parts of the world, having a college degree is not a guarantee of employability. In some cases, including in developing countries, many colleges offer a very mediocre educational experience.
In other parts of the world, people are finding that the education they received in college 15 to 20 years ago is no longer adequate for jobs in the current economy. They need an educational refresher to access the jobs they want. We hear many stories about people who take these courses, even though they have college degrees, who find the experience to be transformational for their careers and their prospects.
Knowledge at Wharton: Is there evidence that employers value this too?
Koller: There’s evidence from both the employer side and the employee side that this is valuable.
Roughly 70% of people who earn Verified Certificates from either a course or a specialization are posting their credentials on LinkedIn. Coursera is currently the second biggest credential supplier on LinkedIn, right after Microsoft, which is incredible since we’ve only been operating for about 2.5 years. This suggests that prospective employees are seeing value in the credentials.
On the employer side, one of our university partners, Duke, worked with the research institute RTI International, to conduct a study of employers in North Carolina and gauge their views on MOOCs. This study looked at employers across multiple sectors, not just high tech firms in Silicon Valley. The majority of employers said they would value a credential from a MOOC during the hiring process. I think we’re starting to see significant uptake on the employer side.
Knowledge at Wharton: The last time we met, we talked about different avenues Coursera could pursue for revenue generation. Do you have any updates on the business model behind Coursera?
Koller: At this point, we are focusing on Verified Certificates for both courses and specializations as the primary revenue source for us. This has worked out really well because the number of course completers who are opting to earn a Verified Certificate has climbed steadily from less than 10% to roughly 20% or 25%.
“The majority of employers said they would value a credential from a MOOC during the hiring process. I think we’re starting to see significant uptake on the employer side.”
As for specializations, these are larger units of learning that include a project at the end to demonstrate a student’s ability to apply his or her learning in the context of a real world problem. The conversion rate for Verified Certificates in those specialization courses is often above 40% among course completers. We’re confident this could be a significant revenue source that will make us a sustainable business while still allowing us to continue offering free education.
Knowledge at Wharton: Have you had conversations with companies who are looking to use your materials and online platform for their own purposes?
Koller: Absolutely. We’ve had contact with a relatively large number of companies, including some of the biggest brands. But this kind of collaborative work is on hold until we build the current Coursera platform, which will allow for more dynamic, on-demand learning. This platform will make courses available to anyone at any time, rather than the old model which features courses that are set on particular dates. The updated platform will help our learners, who are often working adults who cannot structure their lives around their learning.
The new platform would also be useful for potential corporate partners because they need their employees to have access to the content whenever they need it, as opposed to a particular start date that is arbitrarily determined by a faculty member. This platform is going to be critical for corporate training programs.
Knowledge at Wharton: You built the cohort model, which was distinctive because it incorporated social learning in the process of professional development. It helped people remain motivated and stay with a project to the end. Do you believe the cohort model and on-demand model are at odds with one another?
Koller: We’ve spent a lot of time thinking about this. We are very committed to the social component of learning. But we’ve realized that in large courses, what matters is that people around you are doing the same thing at the same time. It doesn’t necessarily need to be the same people from the beginning of the course to the end.
If you’re in Module 3, what matters is that there are a few hundred or thousand other people working with you on Module 3 and you can engage in conversation with them. Some learners will have started earlier and are going slowly. Others may have started the course very recently and are blazing through. But that doesn’t really matter to you in terms of your social engagement.
That being said, we’re also incorporating a capability in the system to create pre-constructed cohorts. For example, a group of employees at a company could come in and say, “We’re going to take the course together as a group, with all of us on the same schedule.” The on-demand platform should be able to accommodate this, allowing them to start when they want and enabling them to create a little social community of people who get to know each other.
“Our investors have not been pushing us to monetize our platform.”
Knowledge at Wharton: Coursera uses a for-profit structure, while another large MOOC provider – edX — took the 501(c)(3) non-profit approach. Does this difference in corporate structure change the way decisions are made at Coursera?
Koller: We believe this structure has made us more nimble because we don’t need to get approval from a governing board for every decision. We believe that it has also given us a sense of urgency. I think we have been able to execute our ideas quickly while still remaining true to the social mission that inspired us in the first place.
For example, when we launched the Verified Certificates, we realized that $50 might not be a significant amount to someone here in the U.S. or Europe, but it might be too expensive for someone in Africa or India. Therefore, we launched it together with a financial aid option that allows people who can’t afford it to request a fee waiver. I don’t think edX had that. I think this really speaks to the fact that we’re balancing the commercial component of who we are but also staying true to our social goals.
Knowledge at Wharton: Are the venture capitalists a problem for you?
Koller: No. Our investors have not been pushing us to monetize our platform. We mainly feel pressure to bring in revenue because we want to bring revenue back to our university partners so that they can sustain their course development. Otherwise, it’s potentially a drain on resources for them. We’ve started to bring in revenue early primarily to allow university partners to increase their content offerings.
Knowledge at Wharton: Looking into the future, can you project where Coursera might be in two or three years?
Koller: That is an exciting question. There are lots of moving parts to consider.
First of all, we are hosting nearly 900 courses and I expect to have 1,000 courses on our platform by early 2015. In three years, we’ll have 5,000 courses, which is about the curriculum of your average medium to large university.
On top of that, we are putting significant effort into translation and localization so there will be a time that we can teach anybody anywhere anything that they want to learn. This is a compelling vision in terms of democratizing education, which can have a profound impact on pretty much any problem that plagues the world. The goal is to make this world a better place.