2020 might have been a tumultuous year for everyone, but for some businesses, it has turned out to be a year of extraordinary growth and value creation. The e-learning industry is among those few industries that experienced phenomenal growth after the world came to a halt because of nationwide lockdowns.
Many online course marketplaces experienced a record number of new signups in this period, and this trend is here to stay even after the pandemic is gone because now companies and schools will want to stay prepared for such events that can strike anytime out of the blue.
Therefore, it makes sense to start an e-learning business, and if you’ve taken that decision then you’re on the right track.
However, choosing the right business model is extremely important while building any kind of business. If your business model is broken, the business is bound to fail sooner or later. E-learning businesses are no different.
So in this article, we’ll take a look at various business models that are available for online course marketplaces, and how you can choose the right model for your business.
Types of Digital Learning Platforms
There are many types of digital learning platforms that educate people about various subjects. Some of them are complete course marketplaces offering hundreds of courses relevant to many dozens of industries, subjects, and niches, while some are more specific on courses relevant to one particular industry or niche.
Some are a one-man show, while others involve courses created and taught by many instructors. For this article, we’re going to focus on course marketplaces mainly, which sell the courses created by many instructors and on many diverse subjects. There are many such sites in the world, but we shall talk about the 5 most popular ones among them. Let’s begin!
5 best online course marketplaces (as ranked by Google)
Here’s a list of the top 5 online course marketplaces based on the results of Google search. Many of these may sound like familiar names if you’re in the online learning space for quite some time. Let’s check them out:
First of all, there is Udemy, which is unarguably the most successful name in the world of course marketplaces. It is home to 40 million users, 50 thousand instructors, and 130,000 courses being taught in more than 60 languages. A big reason behind its success is the first-mover advantage – it was the first website of its kind to be launched when it went online in early 2010.
It has also got the perfect mix of the right features and the right business model.
Udemy allows anyone to easily set up their own institute-like experience on its platform. People can create courses on any topic they’ve expertise in, without having to worry about site maintenance, payment processing, student management, and other tasks that they would have to do if they created their own education site.
The courses can include everything – images, videos, animations, PDF files, audio files, ZIP files, – anything it takes to create a great course, and learners can learn from it. The instructors can also hold live classes for their courses.
Coursera was launched in 2012, and since then it has gone on to pose a significant challenge to Udemy by creating a massive open online course (MOOC) marketplace that provides professional education and skill development programs in different languages. The major difference between Udemy and Coursera is that the latter is supported by a group of established universities, Fortune 500 companies, and college campuses.
These companies, colleges, and universities provide courses with certifications that are accepted and received with respect around the world. Some of the universities offering their programs on Coursera include Yale University, Illinois University, Rice University, Duke University, Imperial College London, and the University of Michigan. Companies offering corporate training programs through Coursera include IBM, Google, Facebook, PwC, Adobe, MasterCard, and Southwest Airlines.
Coursera claims to have 77 million learners on its platform, and 6,000 campuses, universities, and companies training them. That makes it the most successful course marketplace ever created. The courses offered by the company last four weeks to twelve weeks on average, but recently they’ve also started offering full-length Bachelor’s and Master’s degree programs that take 3-4 years to be completed.
edX is the result of a joint effort led by Harvard and MIT. As a result, edX offers online courses created by these two universities, and also by dozens of partner universities and corporations. Most courses on the platform are free (except for some courses that offer specialization), but if you want to be able to submit assignments and receive a certificate then you need to pay between $50 – $300.
edX claims to have 37 million learners, 160 partners (universities and companies both included), more than 3 thousand courses, and over 6,000 instructors. Some of its partner institutions include the International Monetary Fund (IMF), Microsoft, Tech Mahindra, General Electric, Arizona State University, Georgia Institute of Technology, University of California San Diego, and French Government.
edX runs on its own custom LMS, which it has open-sourced for other institutions that want to offer higher education programs in a similar manner.
#4. Khan Academy
Khan Academy started as a YouTube channel in 2006, when its founder Salman Khan, who had been tutoring only his cousin and some of his friends with his videos, decided to put the videos online after increasing demand.
3 years later, in 2009, Khan Academy got its official website and became much more than a YouTube channel being run by just one educator. Today it has got more than 6,500 video lessons covering the curriculum of all subjects for all classes from class #1 to class #12. Initially launched only for US-based students, the site has now also expanded to India, Mexico, and Brazil.
Khan Academy is different from the rest of the websites on our list because it focuses on supplementing academic education. While all other course marketplaces provide courses based on professional education and skills, Khan Academy focuses more on school education.
And that’s precisely what has made it successful – it claims that it has got over 70 million users, which makes it the most successful course marketplace ever created. It has got a team of over 200 subject experts who create course content based on various subjects. It has also created a full-fledged school called Khan Lab School in California, and an app called Khan Academy Kids to tutor the kids preparing for kindergarten.
Finally, we’ve Skillshare, which offers courses mainly in the field of arts, like animation, writing, music, photography, graphic design, UI/UX design, and fine arts. However, some professional courses are also available, like web development, business analytics, freelancing, entrepreneurship, leadership, and marketing. Many of these courses are available for free, but if you want to access all the courses then you need to purchase a premium membership that costs $19 per month (or $99 per year, if you purchase on annual basis).
Skillshare started in 2011 as an in-person tutoring platform. In 2012 it converted into a course marketplace with only 15 self-paced courses.
Today, they have a library of more than 29,000 courses that are accessed by more than 5 million users to learn and 6,000 teachers to teach. That’s quite less than all of the other platforms mentioned here, but still a fairly large number of learners, instructors, and courses.
Business models of online course marketplaces
All these course marketplaces mentioned above use a number of different business models to earn their dollars (actually millions of dollars). We’ll explore every model and its pros and cons to help you determine which one is best suited for your e-learning business:
#1. Pay Per-Course model
Example: Udemy, Coursera, edX
This is the method of choice for most course marketplaces. It’s simple – you or your instructors define a price for their course(s), and the learner pays it in order to purchase the course and learn from it. There’s a long list of successful course marketplaces that have been built on this method (you can see the examples). Here’s a short summary of its pros and cons:
- Allows you to maximize your revenue. As the number and diversity of courses increase on your platform, so does your revenue.
- Upselling is easy – you can bundle courses of the same niche together to create course bundles, which can be sold at high prices.
- Learners are not overwhelmed by the amount of course content that they need to consume. This works especially well in those circumstances where one needs to learn a very specific skill, and they want to be assured that they’ve learned it well (i.e. a company training its employees).
- Earning is easy – you can run a successful business even with a handful of learners who are willing to pay a high price.
- You, or your instructors, need to find out the right selling price every time when they create a course.
- Requires continuous creation of new content in order to keep earning.
#2. Subscription-based model
This basically means applying the Netflix model to e-learning. You make all course material on your platform available to everyone who has paid a certain membership fee. Depending on your needs you can create 2-3 tiers of subscription or just one tier. The major pros and cons of this business model are as follows:
- A steady source of income with monthly renewals
- Easy to implement and easy to track your growth
- Affordable subscription fees mean a lower barrier to entry. And once they’ve entered your ecosystem, they’ll be definitely willing to pay more if you’re providing value.
- High churn rate. You may spend hundreds of dollars to gain a subscriber, only to lose him/her a few months later. The churn rate remains a major point of concern for all businesses based on a subscription-based model.
- Requires even more content than the per course model – the learners must feel justified about paying you on a monthly basis.
- You need to have a large number of subscribers to earn a decent amount of revenue (unless your subscription prices are high and subscribers are willing to pay them on a monthly basis).
#3. Free (ad-based) model
Example: Academic Earth, OpenStudy
This business model is implemented usually by blogs and news websites, but your e-learning business can also utilize it if you want to. The only thing you need to do is find some relevant places where ads can be embedded on your website. Ads can also be included in course material like videos, PDF files, etc. The pros and cons of this model are as follows:
- Implementation is very easy. You don’t need to get a payment gateway, integrate it with your site and take care of building optimized checkout pages.
- A/B testing is also easier – you need to perform it only for converting visitors into subscribers and not for converting them into customers.
- The impact – you can teach a large number of students with this model because none of them will have to pay anything.
- Less revenue – you make far less money with this business model than you would make with a subscription-based or per course business model.
- Ads affect the user experience of learners. The more ads you include, the more distractions you create for your learners.
- You need to have a lot of learners in order to break even, let alone the idea of earning a profit.
#4. Free (donation-based) model
Example: Khan Academy
Finally, there’s the model of running your e-learning business completely on the basis of donations. If your content is really amazing, you’re targeting a large market and solving a big problem, this model can work wonderfully. There are many highly successful e-learning businesses and informative sites that have been built on the basis of donations (i.e. Wikipedia). Here’re the pros and cons of this model:
- A major advantage of this model is that you get to validate your business idea right in the beginning. If there’s a sizable market willing to pay for an e-learning portal for your niche, you won’t have any problem collecting the donations required to get started. Then once your site is live, those same donors can become your first few learners and start spreading the word.
- Running a course marketplace based on donations is also beneficial for your brand. Ask any marketer and they’ll tell you that mission-focused businesses that exist solely for the purpose of bringing a change are much easier to market than businesses that exist largely for the purpose of making a profit.
- You can also tap the talent of experts who are best in their respective fields while building a business based on this model. Many of them will be willing to contribute without asking for generous payments from your end.
- The biggest disadvantage of a donation-based business model is that your financial standing depends on the mood of donors. In most cases, your business ceases to exist once there are no more donations or grants.
- There’s also a limit on how rich you can get from such a business. If people get a feeling that you’re using the donations of business for your personal benefit, things can quickly go haywire.
Final Thoughts: How to choose the right business model for your course marketplace?
Now when you know about the proven business models that exist for online course marketplaces, it’s time to decide which model is best suited for your business. The answer depends to a large extent on your requirements and what you’re trying to achieve. Here’s some basic advice:
- If you want to maximize your revenue, and there’s no problem in creating fresh course content every month, go for the pay-per-course model. If you don’t want to create the content yourself then you can allow instructors to do it on their own, just as Udemy does. But keep in mind that your income will fluctuate regularly with this kind of business model and you’ll have to find a way to keep gaining more and more customers every month. Marketing strategy matters a lot for the success of this model.
- If you want a stable income, you can opt for a subscription model. This model will help you earn recurring revenue, which is a crucial part of success for any business. But your content must provide maximum value to make this model successful, which requires creating even more content than pay per course model on a regular basis. Because if subscribers can’t justify the price that they’re paying regularly to your platform, why would they want to keep paying?
- If you’re not sure about whether or not your e-learning idea will work, and want to test if there’s a sizeable market for your business or not, you can opt for a donation-based model. There’s a good chance that if you can raise enough money to get started then you can also earn enough from a donation-based e-learning business to lead a good and fairly successful life. Khan Academy has proved that.
- As far as the ad-based business model is concerned, we would not advise anyone to adopt it as their primary source of revenue. It’ll be good if you combine it with pay per course or subscription-based model to extract some value out of your free courses, but it’s not a very sustainable model for creating a thriving e-learning business in the long run.
We hope we were able to provide you enough information that should be known before choosing the business model of your e-learning business.
Now you can choose the model that suits your goals and start building your course marketplace. But if you still have any questions, feel free to share them in the comments section below and our team will try to answer them at the earliest!