ECONOMY OF THE INTERNET AND E-LEARNING

28/11/2014

1. Introduction
Udemy is an exchange platform that puts at your disposal learners, courses catalogue free of
charge or paying and allows the courses designers to design, to share and/or to market their
simplified contents.
Udemy is characterized by its high degree of marketing approach by applying codes of ecommerce of the education's market. Udemy is seen as the supermarket e-learningi.
Although listed in the top 50 of the MOOCii and despite a recent fund-raiser of 32 million
dollars, whether 48 M USD since 2010iii, Udemy is still not profitable. Hence the challenge to
go higher profitability.
We offer you, after an encrypted presentation of the identity of Udemy, to explain how it
works, to detail business model, to study its future prospects and its elements of fragility.

2. Identityiv
Sector : Distance learning / MOOC
Social structure : Limited liability company (Ltd)
Site : http://www.udemy.com
Head office : 640 2nd Street San Francisco, CA94107 USA
Size : 100 salaries
Creation : 2010 by Eren BALI, Oktay CAGLAR and Gagan BIYANI
Key figures : 4 000 000 learners, 20 000 course in 53 languages, 10 000 000 registrations
Turnover : NC (Udemy prefer not to communicate us their figures)

3. Operation
Instructor's side, Udemy appears more as an assembly tool vthan an online application. It
doesn't have tools but on the other hand it can facilitates the downloads of videos and courses,
presentation (Slide share, Scribed, etc..) and articles already products. We can also achieve
mashups, especially to coincide writing presentation and videos.
Udemy will be interesting to re-use existing files of different formats, order them in a logical
learning path.
Its main income comes from the sales of the courses. It earns money as soon as the course was
sale several times because it has marginal costs of reproduction (A course was seen 30 or 50
times). it does everything to promote the best courses sales and the prominence of his
instructors by federating them by the social networks.

We can also hold synchronous classes, by presenting documents in live, work on a white
board and chat. The platform can support a limited number of participants simultaneously in a
course and the opportunities of interaction are multiple.
Udemy also propose an enterprise offer as the possibility of created confidential courses,
allowing the instructor to " privatize " its contents.
Finally, with a similar operation at a Saas Application, Udemy is usable everywhere in the
world dice there is an Internet connexion. So Udemy has no problem concerning the
interoperability except to respect the standards of the W3C.
4. Economic model
Born of the net, Udemy is a pure player, including the platform multi-sided, presented the
following characteristics :
- Linking two types of actors : The instructors and the learners.
- Externality networks : More there are interesting courses, more the learners stay, loyal.
- Tariff and no tariff instruments that influence the volume of transaction.
1) Exchange platform two-sided
Udemy is more particularly a marketplace. Udemy has 2 categories of users which is not
involved with directly.
-> Firstly , the instructors (Contents experts)
There are no specifics conditions to be an instructor except that Udemy imposes a strict
quality process to obtain a definition of the optimized course.
and finally that the couse has to be "marketed" according to the Udemy standards.
-> Secondly, the learners who buy the courses available on the platform.
For those one, Udemy works on the business model of intermediate that takes is share of
transaction between the learners and the instructor.
Udemy mediates between the different categories of actors :
- B2B via its business area or via the confidential courses
- B2C via its public courses
- C2C via its public courses
- C2B via its public courses or via its confidential courses
The border between the different actors that who intervene on the platform is very fluctuating.
Each learners can be at his turn instructor.

2) Pricing / sales details by transaction

It exist 8 possible scenario in terms of sales and/or buying courses on Udemyvi.
Here are the 4 cases :

Source of income
Sale through the coupon
issued by the instructors
Traditional sales courses
Sale via a paying advert
program Udemy
Sale via a partner who will
conserve 50%

% Instructor
97 %

% Udemy
3%

50%
25%

50%
75%

25%

25%

Udemy did not give you indications calculated as for the most acclaimed models. The
scenario the most interesting is of course the second in the extent that Udemy will gain 50 %
of the sale price, its strategy basing on an externality of networks.
3. Externality of crossed networks
This is a development track of Udemy. Its course structure its constant support to design a
course, while its accompaniment aims to reassure the instructor. Its strategy allows to attract a
maximum of instructors and learners (because the marketing incites the instructors to bring
learners on the platform, as well by means of the system of the special offers as by its system
of confidential courses allowing "to privatize" its platform). The ultimate goal is to attract the
largest number of learners and to ensure the quality of its courses so that learners remain
faithful to Udemy for their training.

4. Tariff instrument
Udemy took the option to charge the learner and, to a lesser extent, the instructor who wants
to be put forward through a paid ad service, the use of partners or affiliates. The great
majority of the courses are paying and, for example, there is no filter of possible research to
get the free courses. For the instructor, the creation of courses are free and it is him whom the
platform tries to attract the most.

5. Non-tariff instrument
The non-tariff strategy intended to the instructors (except the programs of paying
announcements and partnerships - see the board of the pricing) has a direct impact on the
volume of transactions and maybe summarized by the following equation :
More Instructors = > more courses = > more students = > more profit
At this point, it is likely Udemy has solved the problem of the egg and the goose by
subsidizing and by helping the creation of courses and the rise of the number of instructors.

5. Challenges, perspectives
On the market of moocs, Udemy fights against several companies representing 2 trends :
In one side the institutional : With courses supported by universities that deliver
certifications such as diplomas (Coursera, stanford, etc.) Constituting at the same time a
special place in the management of the big dated (Subscribers in the course)

 In another side "private" model: or everybody shares his expertise with the others by
charging more or less his course (Udemy, Khan Academy)
These two models are currently not profitable, they are still in a race, And it is very likely that
if the instutionnel model collapses, Udemy, winner becomes the model of Mooc destroying all
the others to impose his standard. Up to the next newcomer. Until next newcomer.

In this perspective of development schumpeterian style , in its strategy of development :

Evoluate in a community model thanks to its presence on the social networks, By
grouping the followers of the MOOC, by going to the continuation towards a price of
fixed access then a price of little raised use. Some networks have evolved such as
Viadeo, Linkedin.
Take the place of the training on mobile, market still stammering, and in this case it
could intend to develop an ecosystem by adopting a technological standard (By
acquiring for example an active start-up on this crenel).
By developing emergent skills towards companiesvii, By developing a Saas system for
example, on its platform dedicated to compagniesviii.

6. Fragility of the economic model

The study highlights various elements of fragility of the economic model of Udemy
Since 2010, Udemy continues to live under consequent fund-raiser certainly, but what
would happen with the impatience of the shareholders ? Will Udemy continue to get
other necessary fund-raised without being able to give of wages as for its profitability
to average and/or long term ?
The strategy of Udemy consists in recruiting instructors who will generate by the
quality and the diversity of their contents and for other, their networks an increase of
the attendance of the platform by the learners. And if the number of the instructors
came to decrease? And if the quantity of the courses were too lowix?

As a reminder, an instructor will have to settle 50 % of committee in favour of Udemy

if the platform supplies to the instructor the learner. This remuneration could
encourage the instructors to favor a report of their learners on the platform. The
number of subscribers on the platform would increase however in this case by face,
Udemy would affect that inherent 3 % of committee at the expense of transaction. If
this alternative was imperative, it would then be necessary to him to see again all its
model (ex: announcers' entrance on the platform interested in the significant number
of learners). Even if Udemy blames his detractors for being lacking long-term vision
of its economic modelx.

Although Udemy offers 10 native languages and 53 languages of courses, The

majority of the courses are still intended for the English speakers. Within the
framework of its development except the USA, It is imperative that Udemy "seduces"

many non English-speakers instructors at the risk of seeing them turning to other
platforms (Ex: tuto.com)

Up to here, the offer of training is too restrictive and limits itself to big domains
which are: the photography, design Web, the Photoshop, Excel and html. It is
necessary intended to arouse the arrival of new expert instructors in a number less
limited by domains to bring more learners on the platform.

7. Conclusion
Udemy is a pure player expanding whom arouses a lot of hope both with the public and the
investors in the field of the digital learning.
We have seen that arranging many finance resources, Udemy nevertheless fragility and has to
face various stakes (structural and economic).
Not being leaned to an institution and not freeing no certificate, she can suffer from a lack of
legitimacy with the learners and from instructors.
If it has significant assets (usual languages, ease of use, number of courses), marketing,
pattern of courses, social networks.), can she gain the battle in the time in front of chief
warrant officers whom are coursera, crossknoledge, etc.?
Of how long it has to set up a profitable economic model?

Udemy the supermarket e-learninghttp://www.letudiant.fr/educpros/actualite/udemy-ou-lesupermarche-du-e-learning.html

i

Udemy is one of the best start-up who dispose online courses, She is ranked 15th of top50 by
the site www.opencolleges.edu.auhttp://www.opencolleges.edu.au/informed/features/free-onlinecourses-50-sites-to-get-educated-for-free/
ii

Fund-raiser obtained by Udemyhttp://www.crunchbase.com/organization/udemy

iii

iv

Udemy identityhttps://www.linkedin.com/company/udemy

Udemy, promising platformhttp://cursus.edu/institutions-formationsressources/technologie/22369/une-nouvelle-plate-forme-formation-prometteuse/

v

Compensation policyhttps://support.udemy.com/customer/portal/articles/1609093-instructorrevenue-share-new
vi

The moocs for compagnieshttp://www.atelier.net/trends/articles/moocs-adressent-egalementaux-entreprises-leurs-salaries_418942

vii

viii

The buisiness portal for Udemyhttps://www.udemy.com/business/

12 platform to the bench-testinghttp://www.letudiant.fr/etudes/mooc-ces-cours-en-ligne-ouvous-apprendrez-avec-les-meilleurs-profs-du-monde/trouver-son-mooc-12-plates-formes-au-bancd-essai.html

ix

We can really win money by being instructor at Udemyhttp://www.skilledup.com/insights/isthe-udemy-marketplace-model-still-valuable-to-instructors/

x