When we first started edX, authoring courses was a real challenge. We had to use XML, which is a programming approach to writing problems and questions, and you had to be a computer scientist in order to be able to author a course. Frankly, at that time, we had somewhat of the naive view that we could help author courses and would build a huge support team to help people author courses. So we would have people that could work with professors and help them author courses where the computer science side of authoring courses would be done by us. We very quickly found that it was very expensive, it would not scale, and that professors and schools wanted much more control over how they did things, so we rapidly, rapidly created a huge initiative called “Studio.” We built an authoring platform as part of the whole system. It’s like GarageBand for courses. It makes it much easier for mere mortals to author courses, and frankly that has been a game-changer. Whether you’re teaching a humanities course or a computer science course or an engineering course, it’s become significantly easier to author courses. Frankly, I think we have a long way to go, but we’ve come a long way. I think that was a huge challenge, and I think we’ve made a dent in authoring courses as well.
THC: On edX’s website, there’s a list of guiding principles, the first of which is, “not for profit,” and the last of which is “financially sustainable.” These two ideas are not necessarily at odds with each other, but are edX’s current sources of revenue sufficient to sustain it long-term?
AA: I’m glad you said that being a non-profit does not mean non-revenue. It does not mean non-sustainable. The difference between a startup and a non-profit startup is that get their investments from venture capitalists. Then, they expect a return on investment, so you have to make profits to return on investments for your investors. At edX, our investment comes from Harvard and MIT. Many of our university partners have contributed substantially as well, and philanthropic foundations contribute. At the same time, we want to be sustainable, so we want to be able to generate revenue so that we can not only sustain ourselves, but more importantly, sustain our university partners. Our university partners are spending anywhere from $50,000 to $250,000 or more to create courses and so right now, they are spending that money to put those courses on edX and also to use those courses on their own campuses. That said, we need to find revenues to sustain their efforts as well so the ecosystem can continue. There’s only so long that courses will keep putting courses on edX without seeing some way of sustaining themselves.
THC: I know initially, there was a $30 million investment from Harvard as well as a matching $30 million from MIT, so a total of about $60 million. How much of that initial investment is remaining two years in?
AA: I want to point out that it’s MIT and Harvard, but many other universities have contributed and many of the foundations have also contributed. I would say that we still have significant portions of all the investments that are still available to us and so, we have a significant amount of runway for several years. We are pretty comfortable that we have the time to reach sustainability, and so we are quite happy with that.
We started out, frankly, with not that many ideas about how to generate revenue that would sustain us, so we have been experimenting for a couple of months. So one model that we used at the beginning was that we would issue certificates for a fee. Right from day one, we said we would charge for certificates and we would charge the order of magnitude of the cost of a textbook for these certificates. So the course would be free, but we would charge for certificates. That was one approach, so we launched verified certificates last year, where a student can take a course for free—they can even get a free honor code certificate. However they would have to pay a fee that could range from $50 to $250 for a verified certificate where we use webcams to compare the face to the photo ID to make sure they are who they say they are. We charge a small fee to do that. So it turns out that that can be quite a healthy source of revenue. However, our experiments have shown that that alone is not going to be sufficient. So, we expect that it’s going to be like a Swiss-army knife, where we need more than a single blade in our arsenal, but that is one blade.
We are experimenting with a number of other approaches. A second source of revenue is called course licensing. As you know, we have open-sourced our platform, so a number of countries have adopted it. The Middle East has adopted our platform and created edRawq. The Queen Rania Foundation. China has launched a platform called XuetangX. France has launched a platform called “FUN”—France Université Numerique. So many of them are coming to us, [asking to license courses from edX.] So a second line of business is that they pay us a fee to license courses, so we are generating a revenue for our partners and for ourselves from licensing courses.
A third approach is executive education or professional education where we create a line of business where you charge for certain types of courses and there’s no free version of certain types of courses and professional ed is one example of a class of courses. We did a pilot with a big data course in partnership with MIT and that partnership went extremely well. We are looking to create executive education as well.
These are three examples of businesses and we believe that these three, perhaps with one or two others that you will discover along the way, give us confidence that we will be sustainable along with our partners.
THC: Is there a quantitative breakdown of edX’s finances in terms of how much revenue has been brought in from things like the verified certificates and course licensing?
AA: Right now, we haven’t provided a detailed breakdown of where revenue is coming from how much the revenue is. It’s still the early days. It’s still very experimental, but I think as we solidify this and get more comfortable with the number and put our future plans together, I think that’s when we can feel a lot more comfortable providing these numbers at that time.
THC: edX saw a major change of leadership in the hiring of COO Wendy Cebula, which was actually on the same day as the hiring of Richard Levin as the [CEO] of Coursera [edX’s major competitor]. What do these two hires indicate about the directions in which edX and Coursera are going in?
AA: At edX, we expanded our leadership team. We were looking for a really strong, business-oriented COO and president, [one] who worked with a large company, someone who understands how to execute on a business, which is why we had an international search and we identified Wendy Cebula and are absolutely delighted that she came on board edX. Previously, she was on the leadership team that was running a billion dollar company [Vistaprint], so we brought her in because we really believe that financial sustainability is a critical, critical aspect of what we have to do. There are three legs of our mission, of course, but at the same time, you want to be sustainable, and bringing in Wendy Cebula was a clear and strong indication that we view sustainability as extremely important, not just for edX, but for our partners. In fact, edX views the sustainability of our partners as one of our corporate goal, so we will use that as a corporate goal to say, “Look, all of us have to be sustainable, not just edX.”
And second is that we want to continue to execute very effectively internally and oftentimes, non-profits have been dinged for less than stellar execution in comparison to a for-profit company, and from day one, we have run edX as a startup company, but a non-profit startup. We want to continue in that vein. Like any startup company, we want to be super innovative. We want to be hardworking. We want to be extremely effective and efficient. We want to continue to be that and so, we brought in Wendy to really continue on a path of extremely effective execution.
THC: Do you believe that virtual education could ever replace face-to-face interactions, which have been the norm for teaching since the dawn of humanity essentially? If so, would that be a worthwhile development?
