How Coursera Works and Makes Money

Anybody without the knowledge or experience to do some task can simply look to the Internet to find advice and instruction. If you don't know how to change a car battery, install fluorescent lighting, cook an omelet, or solve differential equations, the Internet is here to help. Up until recently, it would have been difficult, time-consuming and expensive to obtain that knowledge, and your perfect omelet would have been just out of reach.

This efficient and cost-effective transfer of information is not reserved just for learning simple tasks or basic skills from the comfort of one's home. Traditional education in the form of attending school in physical classrooms and lecture halls is also becoming increasingly accessible solely online. Individuals looking to study high school or university level subjects can do so now using massive open online courses, or MOOCs.

MOOCs are now available from major colleges and universities around the world and offer engaging online classes across a wide array of topics from computer science to finance to economics to art history and biology. While many of the current MOOCs are free, some innovative new start-ups, like Coursera, are seeking to offer online courses for profit. (For related insight, read more about how to invest in yourself with a college education.)

Before the invention of the Internet, those looking to take classes to supplement their education could choose from a number of correspondence courses. Also known as distance learning, these programs allowed students to learn and prove their knowledge acquisition without having to attend a physical classroom. Typically carried out via mail, enrolled students would obtain the relevant coursework and materials, study on their own time and submit assignments and exams back to the course provider.

This system, while benefiting some students, faced technological hurdles that led to suboptimal results and much criticism from traditional education providers. According to studies at the time, the majority of students taking these correspondence courses would drop out, perform poorly on tests, or cheat. Furthermore, employers and academics did not take the credentials earned from such coursework very seriously. (For related insight, read more about the choice between online and campus study.)

The Internet was able to solve many of these problems. Not only was the transfer of information and course materials much faster and easier, but the addition of interactive forums, multimedia, voice and video made the learning experience better for students and teachers alike. In 1999, Jones International University became the first accredited online university. Although Jones announced in March 2015 that is would close, many other all-online universities, like the University of Phoenix, have filled in the gaps.

The very first MOOC was offered by University of Pennsylvania professor James O'Donnell on the subject of the life and works of St. Augustine of Hippo. Short lectures and supplemental notes were made available by email and the internet service "gopher" and it attracted more than 500 students from around the world. Today, many MOOCs exist on nearly any topic imaginable and millions of people are signing up for them.

As of today, there are more than 566 accredited online schools offering degrees in more than 19,000 fields or subjects. Moreover, many traditional schools offer online courses to students in addition to their regularly scheduled on-campus classes.

Coursera was founded in 2012 by two Stanford University computer science professors as a for-profit provider of MOOCs that has grown to become one of the most recognizable names in the space. Rather than creating its own educational content, Coursera partners with the world's top universities and other organizations such as governments and works with them to make their existing courses available online.

Coursera first began working with a handful of pilot schools (Stanford, Princeton, University of Michigan and University of Pennsylvania) to bring a handful of their more popular courses online. Today, more than 117 institutions are Coursera partners, more than 1,000 courses are offered through its platform, and more than 12 million students from 190 countries have enrolled since it began. Universities are incentivized to use Coursera because the company pays their partner 6% to 15% of gross revenues for the courses of that partner.

Coursera offers a wide variety of courses in the sciences, humanities, business and information technology. These classes are typically scheduled and run between four to 10 weeks with video lectures, reading assignments and quizzes along the way. Some courses also require group collaboration for graded projects – all done online. Some classes are made available on-demand rather than running on a fixed schedule. 

Students in the same class are encouraged to participate in web forums and arrange virtual or in-person meet-ups and study groups. All students sign an honor code, pledging not to cheat, plagiarize or engage in unethical academic behavior. The biometric analysis of keystrokes and the use of webcams during exams help ensure the identity of test takers for those earning certificates. Coursera now offers courses through their website as well as via their mobile app.

The majority of courses are offered for free; however, students who wish to earn a certificate of completion can pay per class to participate in the "signature track," which requires the student to submit graded assignments and take graded examinations to ensure subject mastery. Signature track graduates earn a verified certificate with the name of the course and the university who provided its content. The certificates are used by students to show employers professional qualifications or prove acquired skills. Just more than a year after launching the signature track, Coursera had generated more than $5 million in cumulative revenues from it.

In 2014, the company announced a specializations track, which involves a curriculum based on subject-related signature track courses. There are now a few dozen such specializations, generating more than $1 million in extra revenue above the traditional signature track courses. Each specialization program culminates with a capstone project wherein students apply their new knowledge to relevant, real-world challenges. Coursera is partnering with top companies to create and sponsor these projects.

In addition to charging optional tuition fees, Coursera's monetization strategy includes providing networking opportunities that introduce its students to potential employers and recruiters. Employers can also pay for access to valuable student information – with their consent – such as performance metrics and demographic information.

Other sources of revenue may include:

• Students on the free track can also have the option to purchase university-branded certificates of completion for each course. 
• Enrolled students can pay for human-provided tutoring services to help them in trouble areas.
• Enterprise versions of the platform may be sold to companies, governments or other organizations for professional training and certification.
• Coursera may sell advertisements on their website/app or offer official course/specialization sponsorships.
• Coursera could license their identity-verified testing services for secure assessments to end users.

The Internet has made learning at a university level accessible to millions of people around the world. MOOCs are one exciting area of online education that allows students to supplement their education. Coursera has partnered with some of the top universities in the world to provide their educational content online in MOOC form. By offering some MOOCs for free, they are able to attract a larger user base.

By creating signature track and specialization curriculums that charge a modest tuition, the company is able to generate revenue which is scalable. In addition, the company can monetize employer recruitment of its students, as well as possibly earn money from advertising and sponsorship of specific classes. In the end, the platform offers a great way for people to educate themselves and enrich their knowledge base with courses taught by the world's leading academic institutions.