In the midst of the Covid-19 pandemic, what came to your mind when you thought about how to spend your stay-at-home time wisely? You probably started rewatching entire series of Friends on HBO, reading your unfinished mystery novels, or exploring new hobbies such as painting, or playing an instrument. You…might have also enrolled in online learning course. The MOOCs (massive open online courses) industry has experienced exponential growth during the pandemic and the number of learners has grown from 300,000 to 220 million between 2011 and 2021. The largest MOOC player is Coursera.
What is Coursera?
Founded in 2012 by Andrew Ng and Daphne Koller, computer science professors at Stanford University, Coursera focuses on offering online learning opportunities. It partners with more than 275 leading universities (e.g. Stanford University, Yale University) and companies (e.g. Google, IBM, and Meta). It boasts 5,200 classes and 35 degrees available online. The number of learners was 47 million at the beginning of 2020 and Covid-19 added 30 million only in 2020, and in 2022 they have 113+ million learners.
Went public in March 2021, Coursera creates an online platform that connects Learners, Educators, and Institutions.
Coursera has historically attracted learners by offering more than half of its classes for free. It monetizes these learners by upselling guided projects, certificates that signal learners’ achievement of course completion and are postable in their Linkedin profile, and a monthly subscription that allows users to enjoy the unlimited number of certificates. This freemium model enables Coursera to grow its user base and attract more Educators that seek to reach out to a broad range of learners. The stronger the catalog that Coursera offers to learners, the more users log into Coursera, it is a cross-side network effect. Subsequently, the quality contents provided by renowned universities also attract enterprises whilst enterprises provide what skills are in high demand to educators. Educated learners potentially seek job opportunities at these enterprises. This value creation triangle is what makes Coursera valuable.
Was Covid-19 one-time shift for Coursera?
The network effect that educators, learners, and institutions provide has helped Coursera to scale, and Covid-19 clearly accelerated its growth. But is it sustainable? Question mark.
- Sales and Marketing Cost remains high
The Q3 2022 financial continues to present its high sales and marketing expenses, with its ratio floating around 45% of its revenue despite a decline in stock-based compensation upon completion of the IPO. The main driver of its sales and marketing expenses is personnel, learner and partner acquisition, brand marketing, and hosting cost for free learners. It boasts a substantial number of learners in its platform and a strong network effect but the fact that it spends 45% of its revenue on sales and marketing casts a shadow on its sustainable growth. The reality is that Coursera has never been profitable.
What we have seen in the MOOC industry is that it does not seem like a winner-take-all industry. Since switching cost is not high, learners can choose which platform they want to use and switch a platform dependent on their needs.
Competition against other MOOC companies
Just to name a few, there are many competitors in the space. Udemy (went on public in Oct 2021), edX, Linkedin Learning, Udacity… As Linkedin Learning is more specialized in business skills, all players have different products, pricing, UX offerings but they still remain as MOOC and fight for mostly the same pie. It also has to compete with local players globally as it continues to expand its global footprint.
Competition against Higher Education Institutions
Coursera claims that it does not cannibalize offline higher education but actually assists them. The pandemic accelerates a shift in higher education toward affordability, accessibility, and relevance to jobs. Coursera helps these institutions to change their ways to provide college degrees and also integrates industry credentials into college degrees. A lot of IT jobs, in particular, do not necessarily require applicants to have college degrees while they place importance on their skills. Industry credentials are able to assist this and even though a college degree is not necessary it still helps people continue to thrive in their professional careers. However, it still remains a possibility that colleges and universities would develop in-house online learning platforms and abandon Coursera.
Not a lot of people would doubt when it comes to Coursera’s contribution to providing equal opportunities for higher education. But will it remain as is now? We are yet to know the answer.