Harvard and MIT's Online Education Startup Has a New Way to Make Money

Even non-profits need to eat.

The auditorium of Tsinghua University (Shan Zhong/Flickr)

It’s been about a year and a half since massive open online courses (MOOCs) achieved notoriety, and the industry now has three giants: Coursera, Udacity, and EdX. Coursera and Udacity are West Coast-run, Stanford-spawned, for-profit standard-style startups.

EdX is different: It launched as an East Coast, non-profit collaboration between Harvard and MIT.

EdX, then, is more of a mystery. As a non-profit, it’s not concerned with, well, profit. But it is concerned with its own survival, so, this month, it debuted a new way of making money.

Until this fall, EdX had mimicked a tack Udacity and Coursera have taken: A “business-to-consumer” approach, in which students pay the course provider to verify their identity before they take a class on EdX.org, a kind of certification of achievement. To help get these verified learners, EdX has begun to link courses together into curriculum. (I wrote about these “XSeries” course sequences last month.)

The second push has come much more into view in October. It’s a “business-to-business” pitch—although, so far, we’ve seen it take effect in a business-to-nation way.

It has a different product for this pitch, too: “Open EdX.” Announced in September, Open EdX is the code that makes EdX.org work; it’s a platform for MOOCs.

So far in October, EdX has announced partnerships using the Open EdX code with the nations of France and China. Both countries will adopt EdX’s software for their own national MOOC networks—and, for an ongoing fee, EdX will supply technical support and advice.

I talked to Anant Argarwal, the president of EdX, about these new national deals earlier this month. He saw them as an expansion of a contract EdX already holds with the International Monetary Fund, in which EdX hosts and administers courses for that bank for a fee.

“From a business standpoint, does it make sense to give [the platform] away [like this]?” he said. “The answer is yes.” Especially since organizations will then pay you to advise how they should use the platform.

The Chinese government’s Internet censorship makes a locally hosted approach  to MOOCs worthwhile, he said. EdX often uses YouTube to host course videos, but that’s not possible on the Chinese Internet, as YouTube is blocked.

“In the Chinese market, there’s some real issues with bandwidth, the blockage of YouTube, and so forth. So what [China] wants to do is take the open-source EdX platform, and they’re going to host it themselves with local companies, and offer local courses to the local market.”

While China has a lackluster history on press and information freedoms, Argarwal saw EdX’s partnership with the country as beneficial. He said the country had not expressed concerns about content hosted on EdX.org.

“It’s good for us because they’re adding mobility and other features to the [open source] platform, which benefits everybody in the world,” he said. “And for EdX it turns out to be a nice revenue source.”

There are precedents for a strategy like this. Red Hat, a public company with over $1 billion in annual revenue, makes money by advising companies in how to use its open-source software. Argarwal referenced it during our talk, calling EdX’s new model a “Red Hat for Linux approach.”

“Red Hat is a successful company supporting others using open source,” he said, and that is EdX’s goal.

These announcements haven’t garnered much news, perhaps because they don’t seem to threaten the status quo of American higher education. But they matter. They offer a way for EdX to offer courses for education’s sake—a marked difference from how Coursera and Udacity could offer courses. It also helps build one more international infrastructure for online education.

Advise companies (or nations) how to use a product you’re giving away for free—as Red Hat and EdX both do—and you’re offering more of a service than a good. It’s a seemingly irregular way to do business, but the environment of education, in all its market-esque complexity, is anything but regular.