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A Direction for Online Courses

Posted in CEO Jose Ferreira on October 15, 2013 by

According to The New York Times, 2012 was the “Year of the MOOC” (“massive open online class”), but it could have more accurately been called “the year elite colleges embraced online courses.” While MOOCs are important, they are merely a subset of a much larger phenomenon. The continued growth and acceptance of online courses — whether in primary, secondary, or higher education; credit bearing or not; private or open; paid or free; delivered by for-profit or not-for-profit institutions — is a seismic shift in the education universe.

The MOOC Ecosystem

Today, you can find MOOCs in nearly every higher education field of study. Some facilitators, like Coursera and Udacity, are for-profit and venture-funded — they will one day need to pursue revenue and liquidity opportunities for their investors. Others, like EdX and Khan Academy (not technically a MOOC platform) are not-for-profit — meaning they will be generally capital-constrained compared to any for-profit players who figure out a successful revenue model.

To date, MOOCs offer only part of what constitutes a course: lectures. Almost all of the additional learning that students normally are expected to do on their own — by studying a carefully curated textbook and other materials, with professionally created scope and sequence, instructional design, assessment items, and production values — is missing. Other supporting services that schools and universities provide — both academic services like libraries and tutors, as well as non-academic services — are also missing. All of these other essential elements that constitute a course cost money. MOOCs don’t give away these other components, so they don’t give away courses. They give away lectures.

But that’s still pretty awesome. Because they’re massive and online, it is possible for the first time to share the best teachers of the world with anyone. (Strictly speaking, it’s those who think they are the best teachers, vetted with a market choosing dynamic.) This in itself is revolutionary. But it is also incomplete. For all the massive size and bureaucracy of the global education system, students primarily do just two things that drive learning outcomes: 1) attend classes and 2) read or interact with texts and other materials and supporting services. There are those who call MOOCs “massive open online courses.” They are wrong to do so. I am hopeful that they will continue to evolve, but to date, MOOCs are classes or lectures only.

Small wonder then that MOOCs have, at times, struggled with quality and retention. Take San Jose State University’s pioneering partnership with MOOC facilitator Udacity. Six months after it began, San Jose State announced it would “pause” the partnership after trial courses reported failure rates ranging from 56 to 76 percent. Completion rates for MOOCs have been similarly problematic. Half of those who sign up don’t even attend the first class. One study found the average churn rate for MOOCs to be 93%.

This isn’t to say that MOOCs aren’t a great social good. People seem generally to conflate the social value represented by MOOCs with their commercial value. The former, at least, will be tremendous. They are a game-changer where the alternative is no classes at all. Tom Friedman wrote about MOOCs that “nothing has more potential to lift people out of poverty — by providing them an affordable education to get a job or improve in the job they have.” Khadijah Niazi, the 11-year-old Pakistani girl who completed MOOC facilitator Udacity’s physics class with highest distinction, is a particularly heartwarming story. But until these classes evolve into courses and the churn rate goes down, MOOCs’ promise of widespread disruption will go unfulfilled. No one ever disrupted anything with a 93% churn rate.

The Non-MOOC Landscape

The improvements — such as high quality textbooks, materials, and supporting services —needed to turn MOOCs from lectures into fully developed courses cost money. In response, some MOOC facilitators are beginning to offer non-MOOCs, sometimes called SPOCs — “small, private online courses.” Udacity partnered with Georgia Tech to offer a Masters in Computer Science priced around $7,000.

The program is neither “massive” nor “open.” It is, however, the future. Within a decade, virtually every large university in the United States, and many elsewhere as well, will offer online courses — for credit and for fee. These courses will be particularly useful to students who don’t already have access to comparable courses.

Some very large and prestigious public institutions such as Arizona State University, Penn State, and University of Maryland have been doing this for years. Even institutions once slow to innovate are now rapidly following suit. According to a study by the Babson Survey Research Group, as of 2012, all but 13.5% of institutions had some online offerings. Furthermore, many schools that once offered only online courses now offer complete online degree programs — 62.4% in 2012 compared to 34.5% in 2002. It’s not just public and for-profit universities increasing their presence in the online space. From 2002 to 2012, the number of private nonprofit institutions with online degree programs more than doubled, from 22.1% to 48.4%.

In this new landscape have come new educational opportunities and models. Some small schools, like Southern New Hampshire State University, focus on assembling the best educational experience possible while maintaining ties to bricks-and-mortar community and regional businesses. Meanwhile, large flagship institutions like ASU, Penn State, and SUNY offer relatively affordable education in order to serve hundreds of thousands and eventually perhaps millions of students. Even elite institutions, most of which now offer online credits only, will one day begin offering online degrees (especially to overseas students) once it becomes clear that it won’t dilute their brand (i.e.,because enough of their competitors are already doing so).

This probably represents a deep threat to for-profit universities. It is already possible to attend high-quality online degree programs from prestigious state universities with fairly open admissions standards. Given the critical importance of institutional brand when selecting a university program, it is hard to imagine that students who can get into either will choose a lower-brand for-profit over a higher-brand state university. The for-profit universities have just a few years — until there is widespread market awareness that these not-for-profit degree programs exist — to improve and in some cases reinvent their operations.

Business Models

MOOCs have been the poster child as of late for online education. But the real reason people are so excited about MOOCs is not because of what they are in and of themselves, but because of what they represent. Education has always had an access problem. Everyone intuitively understands that creating video versions of the world’s great lecture experiences represents the beginning of a solution to this problem.

For many working adults with families, these courses represent an exciting way to improve one’s professional value and get promoted or find new work. When coupled with innovations in Internet infrastructure and hardware, MOOCs also provide an opportunity for students in developing countries to access educational experiences from top-tier schools for the first time.

But the commercial value of MOOCs has not yet been proven. I don’t believe their value lies in corporate recruiting of top students. That feels too goofy and niche to justify much excitement around their commercial value. But I do believe that MOOCs’ value-add may lie in serving as a lead-generation mechanism for SPOCs provided by institutions. Today, everyone who has left, or is otherwise outside of, the formal K-20 education system is largely invisible to that system. Yet the market of people who would love to take an occasional free course from reputable schools probably numbers in the billions. Even if you only sign up and don’t show up, that expression of interest is still valuable. That school (or will it be the MOOC facilitator?) now knows that you are in the market for, say, some training in statistics. They can start offering you courses with full materials and support services, for credit or for a certificate, and for a fee. MOOCs can render this vast after-market visible, for the first time ever, to the formal K-20 education system.

It will be these high-production value, for-credit online courses that will play the central role in the ongoing educational revolution. It will be the institutions themselves who are the great disruptors. From K-12 through the university level, schools will offer high quality online classes (the market will quickly sort the good from the bad). They will trade credits more easily than they do today, so that students at comparable schools can easily take live online courses from any school. This will allow schools to focus on what they’re best at, and give students subject matter and lifestyle choices they have never had before. It has been predicted that half of higher education will one day be delivered live online, and perhaps a quarter of K-12. If that’s true, it will, at global scale, dramatically improve opportunities for students and create a new trillion dollar industry in the process.