EdX’s Struggle for Sustainability

Online education provider unveiled plan to monetize its MOOCs, but observers say real opportunity for edX to grow lies in online program management business.

December 18, 2018
 

It’s no secret that the nonprofit online learning provider edX was founded with rather idealistic notions about providing education to all, and not much of a business plan. On Monday, it unveiled the latest steps in its needle-threading effort to keep its courses widely accessible while also becoming self-sustaining.

Founded in 2012 with $60 million in funding from the Massachusetts Institute of Technology and Harvard University, edX set out on a mission to provide affordable education to the world, notably through the much-ballyhooed use of massive open online courses. Initially, a lot of content on edX was completely free, but slowly the company -- like its for-profit cousin Coursera -- has moved more content and features behind paywalls.

Though edX’s revenue is growing and reached $54 million in 2016, the MOOC provider consistently spends more than it makes. For edX to grow, that needs to change, says Anant Agarwal, CEO of edX.

 

2013

2014

2015

2016

Total Revenue

$21,432,057

$36,309,401

$42,808,106

$54,092,657

Total Expenses

$24,702,712

$36,382,888

$46,072,385

$57,073,054

Revenue Less Expenses

($3,270,655)

($73,487)

($3,264,279)

($2,980,397)

Net Assets

$14,629,899

$14,556,412

$11,292,133

$8,311,736

Writing in a blog post on Monday, Agarwal announced that after toying with the idea of introducing support fees for previously free content, the company has decided on a way forward that will “strike a balance of moving edX towards financial sustainability while maintaining a robust level of free access.”

The plan boils down to two changes: students will no longer be able to audit an individual course free for an unlimited period of time. That period will vary, but is usually around six weeks for most courses, said Adam Medros, president and COO of edX in an interview.

Additionally, all graded assessments are now accessible only to students who pay. Students who audit courses at no charge will continue to be able to access ungraded assessments.

Explaining the rationale for moving graded assessments behind a paywall, Agarwal wrote, “The fee that you pay when you select the verified track allows for your assessments to be graded at the high integrity level necessary for edX and our partners to award certificates, credentials, and, in some cases, academic credit for your hard work.”

By removing some of the features that make the free audit track attractive to students, edX hopes to encourage many more students to opt for the paid verified track over the free audit track, said Medros. If more students take the verified track, edX will be able to invest more in its platforms and technology, as well as expand its financial assistance program, he said.

Dhawal Shah, founder and CEO of Class Central, a review site for online courses, wrote a blog post comparing edX’s new policies with other MOOC providers. Coursera introduced a paywall for graded assessment three years ago, but it does not have a time limit for free users.

“It may come as a surprise to some that edX’s paywall will now be higher than Coursera’s, especially since Coursera has borne the brunt of criticism about restricting access to MOOCs, which many attributed to pressure from Coursera’s venture capital investors,” said Shah.

Whether edX’s new monetization strategy will work is uncertain, said Shah. Coursera made $140 million in estimated revenue for 2018, “of which $100 million or so might be from their consumer-facing MOOC business.” But FutureLearn, the British MOOC provider that, like edX, has introduced a time limit for free users as well as putting graded assessment behind a paywall, “hasn’t generated similar returns,” said Shah.

Krishna Rajagopal, dean for digital learning and professor of physics at MIT, said that edX has been open with partners like MIT about its plans, which the institution supports.

“We were consulted at many steps along the way,” said Rajagopal. He added that MIT has built more than 150 courses on edX’s platform and is constructing 20 more. MIT also has four MicroMasters programs. Not only is the edX platform seen as “the way we share our learning with the world,” it’s also a useful tool for faculty on campus, he said. Many faculty members use the edX platform for in-course assessments, particularly in science, engineering and mathematics.

“Our goal is to keep the doors of MIT wide-open, and we will continue to offer the MIT learning experience all over the world for free. At the same time, those who seek to earn a certificate will pay a small fee,” said Rajagopal.

With over 100 university partners, edX is constantly getting suggestions for ways in which it can improve or change its platform, which edX has to prioritize. Constant upgrades mean constant costs, but he believes the company has found “a good and balanced approach to bring them towards sustainability.”

A Bigger Opportunity Elsewhere?

Phil Hill, co-founder of Mindwires Consulting and co-publisher of the e-Literate blog, applauded edX for its transparency about the changes to the MOOCs but said he would be surprised if the changes help much with edX’s long-term sustainability.

“They need to acknowledge that MOOCs by themselves are not sustainable as a business model,” said Hill. It is edX’s work in the online program management space, which edX has been doing more of recently, which Hill sees as key to ensuring the long-term stability of the company. In October, edX announced plans to launch nine new low-cost, fully online master’s programs from selective institutions, following the successful launch of a cybersecurity master’s degree at the Georgia Institute of Technology.

Changes that nudge students to opt for the paid track over the free track may increase edX’s revenue incrementally, said Hill. But the changes feel like “tinkering around the edges,” he said. “If they’re hoping this alone will work, I think they’re going to be pretty disappointed.”

Paul Freedman, CEO and co-founder of Entangled Group, an investment and consulting firm focused on higher education and education technology, agreed that the OPM business represents a bigger opportunity for edX than MOOCs do.

“Any organization that provides content for free has to strike a difficult balance. How much do you give away for free to illustrate the value proposition of your paid content? There’s no silver bullet,” said Freedman.

There’s an assumption that edX, as an established provider of online learning, has a competitive advantage when it comes to recruiting students for online master’s programs, said Freedman. “But maybe this is an indication that that funnel doesn’t work,” he said. If free access to MOOCs helps attract students to master’s programs, “then I’m not sure why you would want to put any barriers in front of that,” he said.

Paul LeBlanc, president of Southern New Hampshire University, a major online provider, said that MOOC providers like edX, Udacity and others have “a lot of potential” as OPMs but do face something of an “existential challenge.”

By establishing themselves as a place where so much content is available free, he said, providers like edX have to work extremely hard to get customers to pay for credentials they have created. 

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