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MOOCs and Money

When I tell people that I am a venture capitalist who invests in educational technology companies, I frequently get asked what I think of MOOCs (Massive Open Online Courses). And the next question is almost always whether MOOCs can make money. This is one thing I am not worried about. If Udacity and Coursera continue to attract millions of students, they will be richly rewarded. Coursera's standard contract with universities lists a variety of possible monetization strategies, including payment by students for specific credentials, but the monetization opportunity that jumps out at me is recruiting excellent employees.

Consider the needs of technology firms. Every tech firm I know complains of the difficulty of recruiting programmers. A recruiter typically charges a third of first year salary, or, for a talented programmer, often over $30,000 per recruit. How can Udacity and Coursera and their peers help out? 160,000 people signed up for Sebastian Thrun's first computer science MOOC, 23,000 finished the course, and 248 got a perfect score. How talented are those 248 programmers with perfect scores? Probably at least better than the norm. How much would a tech firm pay to recruit one of them? $50,000? $100,000? For true superstars, the number could well be higher. Facebook and Google have been known to make acquisitions just to hire extraordinary people, and the rate for these acqui-hires can exceed $1,000,000 per programmer.

Computer programmers may be especially hard to recruit and especially easy to evaluate, but MOOCs may eventually be able to source and evaluate employees in disciplines outside of math and science. It is not hard to see Udacity or Coursera facilitating the recruitment of thousands or tens of thousands of top employees every year. This service alone could generate hundreds of millions of dollars in revenue.

The key question, then, is whether MOOC platforms like Udacity and Coursera will continue to attract millions of talented students. Right now MOOCs have a lot of buzz, and they are attracting many students who are just curious. Many Udacity and Coursera students are already experts in their disciplines. There are programmers and even people with doctorates in computer science taking introductory courses to learn about MOOCs, not about programming. Will enrollments decline once the novelty wears off? Also, there are new MOOC entrants announced all the time. And universities are happy to experiment with Coursera, but they will not hesitate to switch platforms or add additional platforms to their ongoing experimentation with online learning. Coursera might be the Google of MOOCs, but it might also be the Lycos or the Altavista. Google won because it had a better technology. There is going to be a lot of innovation in pedagogy over the next decade, and Udacity and Coursera will have to evolve rapidly to survive.

One possible vulnerability of the MOOCs with a Stanford pedigree is their attitude toward pedagogy. Like the Marine Corps, Udacity and Coursera are currently attracting the few and the proud, the students who want to test themselves against Stanford students. The courses are demanding in many ways and have unannounced prerequisites. The students who succeed with MOOCs are a little annoyed when they discover that they have to teach themselves HTML or refresh their knowledge of linear algebra to complete an exercise, but also proud when they overcome a major obstacle and persevere. Most students, though, will quit when they encounter challenges for which the course has not prepared them. If there are MOOCs for the academic equivalent of the Marine Corps, there also need to be MOOCs for the students who want to master a subject as painlessly as possible and don't care whether they signal their elite status.

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