Businessmodel of Udacity

Customer Segments

Where the majority of MOOC providers target academic learners who wish to further their education at little to no cost, Udacity aims to serve professionals who want to attain technical credentials with a view to career progression.

The platform’s courses are primarily technology-focused, attracting users from within the technology industry – notably software engineers, data analysts, software developers and computer programmers.

The Company also directly serves tech companies that wish to provide additional training to their staff members.

Value Propositions

Udacity’s principal value to users is that its courses are available free of charge. The Company provides a flexible and accessible learning experience; its self-paced programs can be completed almost entirely autonomously with access to course content made available via desktop and mobile websites and mobile applications.

Udacity’s close relationships with a number of high-profile companies are also a significant draw for users who wish to further their careers, with many employers recognising Udacity credentials and actively participating with the Company to hire Udacity graduates.

For its technology partners, Udacity provides access to a large number of potential employees, providing companies an additional avenue for identifying talent.

Channels

Udacity’s courses and materials are accessible via its desktop and mobile websites at www.udacity.com, as well as through its Apple iOS and Google Play apps. Prospective and existing Udacity partners must deal directly with the Company itself.

Customer Relationships

Udacity’s courses are primarily self-service, with enrollees permitted access to interactive course material, including online tests and quizzes, video lectures and interviews. There are no final exams at the end of Udacity courses, with programming assignments being graded by automated grading programs.

While there is little interaction between users and the Udacity team during the learning process, the Company hosts discussion boards related to each course, enabling a community of learners discuss ideas and course content.

Udacity also provides online FAQs and support tutorials, and hosts an annual Udacity Summit where its graduates can meet with representatives of the Company’s many partners. Udacity partners themselves require a greater degree of direct personal care from the Udacity team.

Key Activities

Udacity develops and maintains an online learning platform targeted primarily at professionals. Together with its partners, the Company provides MOOCs and nanodegree programs, specialising in technology-focused disciplines.

Udacity also works with major technology companies to develop the skills of their existing employees, and delivers credentials for professional that are endorsed by big-name companies.

Key Partners

Udacity partners with technology companies and educational institutions through its Open Education Alliance (“OEA”) and developers. The OEA is open to any organisation that wishes to be support online education, with partners contributing by building new courses, recognising the credentials of Udacity graduates and assisting in the certification process.

While Udacity initially sought partnerships with high-level universities and educational organisations for course content, competing online education providers such as Coursera and EdX proved more effective in attracting academic partners. Udacity has since refined its focus to concentrate more on professional organisations to provide technical content for its courses.

This includes partnerships with top names including Google, Facebook, Cisco, Cloudera and AT&T Several of these companies, including AT&T and Google, have partnered with Udacity with a view to developing the skills of their current workforce, serving as hiring partners and providing jobs to Udacity graduates. AT&T in particular has pledged to offer 100 internships to Udacity graduates.

Udacity retains some significant academic partners, notably Georgia Institute of Technology, with which it is collaborating on online Master’s degree Computer Science programs. The Company’s certifications are provided by Accredible. All of Udacity’s Nanodegree and course catalogue information is available via its API, allowing developers to design further Udacity integration across multiple platforms.

Key Resources

Udacity’s key resources are its technology – including its learning platform – its hiring and content partners, and its personnel. The Company only recently became profitable.

As such it has depended, and continues to depend, largely on funds provided by its equity investors, including Andreessen Horowitz, Bertelsmann and Drive Capital.

Cost Structure

Udacity incurs costs related to the development and maintenance of its platform, creation of course content, and certification and testing for its users.

There are also major costs relating to the management of its various partnerships and the retention of its personnel, which typically represents a significant cost for MOOC providers.

Udacity also accrues fixed costs related to the operation of its offices in the US and India, notably in the form of office rental and utilities.

Revenue Streams

Udacity uses a freemium model, whereby much of its content is made available to users free of charge, but in order to receive full access to course materials and certification upon completion a subscription fee must be paid. Udacity’s paid-for courses, which it calls nanodegrees, are self-paced programs that cost $199 per month. These courses are typically expected to take between six months and a year to complete. The Company has made attempts to increase its enrolment and retention levels by offering a 50% tuition refund to those who successfully complete their chosen course, provided that they graduate within 12 months of their enrolment date.

Udacity’s Georgia Tech Degree Program also generates revenue, with tuition fees costing $510 per 3-credit hour course or $301 per academic term of enrolment, broken down into a $194 institutional fee and a $107 technology fee. A complete master’s degree course is reported to cost in the region of $7000. Since the introduction of its paid-for programs Udacity has become profitable, with its revenue reportedly growing 30% month on month as of November 2015.