Imagine that you’re a second-year college student returning to campus in September, only to discover that your school has made some curious changes. Instead of offering just one introductory Spanish course, one calculus course, and one chemistry course, the college now lets you choose from a dozen of each, led by different instructors with different teaching styles.
Imagine further that the course catalog has gone entirely online, and consists of three-minute video previews of each course, plus reviews and ratings from former students. And instead of paying tuition to the school, you’re now expected to pay your professors directly, with the college keeping a small cut.
Amidst such changes, instructors would now be competing for attention and pay—and it would be easy for students to find out which teachers were the best. Within a few weeks, the top teachers would naturally wind up with the largest classes, while there would still be a “long tail” of smaller classes on specialized subjects.
In other words, your school would have been transformed from a medieval semi-meritocracy with a catalog of take-it-or-leave-it courses into a true marketplace.
Of course, no real university works this way. But Udemy does. And the market dynamics behind the company’s lineup of 8,000 technology and business courses are what make it stand out from its competition in the edtech market—both on the casual-learning side, where Udemy’s peers include companies like Lynda.com and Khan Academy, and on the formal-learning side, where the hottest properties right now are massive online open course (MOOC) purveyors like Coursera and Udacity.
Udemy’s courses focus mostly on career skills like Web design, iOS app development, social media, and accounting software. The San Francisco startup announced today that it has served 1 million students since it first began offering online courses three years ago. That makes it a lot bigger than Udacity, which has 400,000 registered users, and means that it’s rapidly catching up with rival training site Lynda.com, which has about 2 million subscribers.
The company also said that its site now supports speakers of nine languages, including Chinese, French, German, Italian, Japanese, Portuguese, Russian, Spanish, and Turkish, reflecting the fact that half of its users are from outside the United States.
Dennis Yang, Udemy’s president and chief operating officer, says his company is growing so fast mainly because it’s an open, competitive marketplace. Prospective students can connect with the sorts of teachers who might never land a university job or be commissioned to make a video series for Lynda.com, but who are nonetheless experts in their fields.
“You don’t have to be a top researcher at a top-100 school in order to teach on our platform,” Yang says. “We believe we are able to uncover great teachers around the world better than anyone else.”
Udemy courses are delivered mostly via online video, are usually about 10 hours long, and typically cost about $100. None of the content is produced by Udemy itself, with the exception of a few videos that show instructors how to create their own course materials. Rather, the site serves as a catalog and marketing platform for DIY creators of instructional video, with Udemy taking a cut of either 15 or 30 percent of the tuition dollars, depending on how much marketing help an instructor wants.
There’s a heavy emphasis at Udemy on teaching skills that will help workers advance in their jobs. For example, there are more than 60 courses on mastering Microsoft Excel. Whether there’s really a demand for that many courses on spreadsheets is debatable, but the point is that prospective students can easily find out which instructors have the happiest customers. The top Excel course at Udemy has 43,500 students, while many others have only a few hundred.
Udemy’s top instructors earn a surprising amount of money through the site. I talked with Miguel Hernandez, an animator and Web developer based in Vancouver, BC, who created a 10-hour course on how to script, storyboard, animate, and record product-demo videos using Adobe After Effects and other programs. Hernandez says 2,500 students have completed the course, and that he earned $90,000 the first year it was offered and more than $100,000 the second year.
Hernandez is an accomplished videographer, so he didn’t need help creating the course, but he says he never could have reached so many students if he’d tried to publish it on his own. “If you are really good instructor and you have a really hot course, they go to a lot of effort to market that course,” he says. “They have a strong marketing machine that most individuals don’t have.”
Udemy emerged from the Founder Institute accelerator program in early 2010.The original plan was to teach startup-building tips to entrepreneurs in Turkey, until the product was reinvented as a video learning platform with broader potential. Since then, the company has raised $16 million from Insight Venture Partners, Lightbank, MHS Capital, 500 Startups, and a variety of Bay Area angel investors such as Keith Rabois and Naval Ravikant.
At its core, the Udemy platform isn’t terribly high-tech—it’s a content management system that lets instructors upload and arrange course videos and supporting materials. On top of that, there’s an iTunes-like store where students can browse, preview, rate, and sign up for courses, along with tools that let registered students communicate with instructors. Students can also access the courses through native iPhone and iPad apps. Last year the company introduced “Udemy for Organizations,” a service that lets companies buy bulk access to the courseware for their employees.
Yang, a former executive at mobile advertising company 4Info, was brought in last summer to help jumpstart Udemy’s growth. Udemy’s advantage, Yang believes, is that it draws on a large community of instructors, who have their ears to the ground in their subject areas. Competing sites like Lynda.com and Skillsoft also offer career-oriented, video-based training with an emphasis on software skills, but both companies create their content in-house, which can be more costly and time-consuming. (Lynda.com courses, especially, are known for their high production values.)
“We will always have a much larger catalog, and we will tend to pick up newer content faster,” Yang says, pointing to recently added courses on the Raspberry Pi computing platform and Bitcoin, the virtual currency. “If a new database language came up and got really hot, I can assure you we would have a course on our platform before anyone else. Going to a movie studio to create a course is a great way to do it, but folks in the market are thinking about it and will create it themselves faster.”
Udemy offers a 60-point checklist to help instructors create decent courses, and every course is reviewed to make sure it meets minimum standards. Instructors learn from each other, and “over time the bar gets higher and higher,” Yang says.
For students, the costs of taking a Udemy course average out to about $10 per hour. That’s much more expensive than Lynda.com, which charges $25 per month for unlimited access to its 2,000 courses, but it’s a lot cheaper than enrolling in an extension or community-college course. And for the most part, students’ money goes directly to the teacher. When students sign up as a result of an instructor’s own promotional efforts on e-mail, Facebook, Twitter, and the like, the instructor gets to keep 85 percent of the fee. For students who sign up via Udemy’s site, instructors keep 70 percent.
As in any true marketplace, most Udemy customers clump around a few top offerings, and the most popular courses, including the huge Excel course, are prepared by outside e-learning companies like Oakland, Ontario-based Infinite Skills or Mumbai, India-based Corporate Bridge Group. That means successful individual instructors like Hernandez are outliers; three out of four Udemy courses never break the $10,000 revenue barrier.
That’s something traditional universities, with their crowded first-year lecture courses, have a notoriously hard time doing. A world where more and more people get their education à la carte won’t resemble the ivy-covered halls of old, but it might make economic sense for a much larger number of learners.
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