Coursera is famous for its free courses. Of the company’s approximately 77 million users, only 3.6 million are paying users. But analysts said that Coursera’s business model allows the company to spend less than its competitors to attract paying users.
Editor’s note: This article is from Tencent News, compiled: Wuji.
It was reported on March 31 that when online education company Coursera launched its first courses nine years ago, it was betting on the future of higher education: free online lecture-style courses taught by professors from well-known universities. At that time, the clamor around these well-known large-scale open online courses was so loud that the New York Times declared 2012 as “The Year of the Large-scale Open Online Courses (MOOC).”
The promise of large open web courses and online courses to popularize higher education more broadly broke in the next few years, but this did not stop Coursera from continuing to attract users and find consumers who converted free courses into paying The user’s approach. The new crown pneumonia epidemic has brought workers home and allowed more students to receive online education, which has accelerated the growth of Coursera.
Howard Lurie, a principal analyst at Eduventures Research, an educational research and consulting company, said: “Going back to 2012 and 2011, we are all thinking about whether Coursera’s business model can be maintained. What’s really interesting is that , What they can do with the large number of students they have accumulated. Now we see.”
Coursera, headquartered in Mountain View, California, said on Tuesday that the company will issue 15,730,000 common shares through an initial public offering at a price of $33. Excluding the execution of over-allotment rights by underwriters, Coursera will raise $483.9 million through an initial public offering before deducting issuance fees and commissions. In Coursera’s IPO, the company will issue 14,664,776 new shares, and existing shareholders will offer 1,065,224 shares. Coursera will be listed on the New York Stock Exchange on March 31, under the stock code “COUR”. Based on the issue price of US$33, Coursera is valued at approximately US$4.3 billion. Investment banks Morgan Stanley and Goldman Sachs are the lead underwriters of Coursera’s IPO.
Multiple revenue-generating models
Coursera is famous for its free courses. Of the company’s approximately 77 million users, only 3.6 million are paying users. But analysts said that Coursera’s business model allows the company to spend less than its competitors to attract paying users.
The company has three main lines of business. One is direct-to-consumer courses. Interested students can sign up for free courses orPaid courses, including a two-hour project instruction course for $9.99 and a professional certificate that takes 3 to 9 months to obtain, cost 39 to 99 dollars per month. The second is corporate business. Companies, governments, and other institutions pay Coursera to allow their employees to use courses to improve their skills or acquire new skills. Coursera said that as of the end of last year, more than 2,000 companies paid Coursera for these services, including 25% of Fortune 500 companies.
The third is Coursera’s degree program. The company cooperates with universities to provide bachelor’s and master’s degrees. In these agreements, the college accepts students, their faculty teaches courses, and the school awards degrees. But Coursera assumed most of the marketing and technical responsibilities in exchange for a certain percentage of tuition income.
“When you have this unified platform, it allows you to build a very large funnel at a low price and push students into a series of projects you provide,” Berenberg Capital Markets vice president of equity research Brett · Said Brett Knoblauch. Coursera said that in 2020, about 50% of the company’s degree students had previously registered on the site, and more than 30% of corporate users came from consumer platforms. The company’s prospectus also shows that in the two years before the end of 2020, the company has received 12,000 new degree students at a cost of $2,000 per student.
As the company grows, it is also likely to benefit more and more from network effects–or in other words, every new user makes the platform more attractive to other users. Nubrak believes that each new customer creates an opportunity to expand the company’s content library, increasing the platform’s appeal to other customers.
A surge in users during the epidemic
In 2020, the number of new registered users of Coursera will reach 30.6 million, far exceeding the 9.2 million in 2019. Of course, this increase is largely related to the new coronary pneumonia pandemic. The epidemic has forced many workers to return home for work, and some are still unemployed as a result. Coursera said that during the peak period at the end of March 2020, the number of registrations was 15 times higher than the average.
Although the epidemic has undoubtedly created conditions for such a high user growth, industry insiders also pointed out that Coursera’s use of interest in online courses to choose an opportunity to go public is a problem that it will not consider in the early stages. The industry believes that if the epidemic appeared in 2013 and won in 2014, Coursera would not choose to go public at that time. In the past few years, Coursera has been able to gather millions of users – and the data they are interested in – and use this information to recommend to users what they might want to learn.Paid courses, as well as cooperation with universities and employers to provide related courses or degree programs, so as to distinguish it from other online education companies.
Still at a loss
Coursera lost US$66.8 million in 2020, an increase of 43% from the US$46.7 million in 2019. The company said that as it expands its curriculum, users and marketing efforts, and engages in other growth activities, it expects its operating expenses to continue to increase for the foreseeable future.
Industry insiders believe that Coursera will still be unable to achieve profitability for some time to come. Coursera’s revenue in 2020 reached 293.5 million U.S. dollars, an increase of 59% from 2019’s 184.4 million U.S. dollars.
Business model still has risks
Public and private non-profit universities have historically been hesitant to offer online degrees because they are often associated with for-profit universities, which are more likely to provide students with expensive degrees that are not worth much in the labor market.
“The reason universities have historically lagged behind or hesitated to invest in online education is because of the potential impact on the brand,” Nubrak said. “Universities care most about their brand, which is the key factor they use to attract students.”
Coursera pointed out in the prospectus that the review of for-profit universities and their online education programs may pose risks to the company’s business. The company said: “Although we did not promote our solutions to these institutions, negative media attention may increase general suspicion about online higher education, including our solutions.”
However, public and non-profit colleges and universities are facing budget challenges, which may push them to earn income through online degrees. Although partnering with companies like Coursera to provide online degrees may bring more tuition, this is not without controversy. Critics worry that the contractual arrangement between the operating management company and the university, that the company receives a certain percentage of tuition income, will drive up the cost of students.