Businessmodel of Udemy

Customer Segments

Udemy has a multi-sided business model, with two interdependent customer segments that are both needed in order to operate:

• Instructors: Individuals who create online courses for topics in which they have expertise
• Students: Individuals who are interested in taking online courses ### Value Proposition

Udemy offers six primary value propositions: accessibility, customization, convenience, price, cost reduction, and brand/status.

The company creates accessibility by giving consumers the opportunity to take courses that might not be available or are too expensive in other channels. Also, classes are available in 80 languages, and there is a wide variety of content ranging from higher education subjects to trade-oriented skill topics. It offers access to experts by enabling them to connect with consumers seeking education.

The company enables customization by allowing instructors to personalize the programs they create using state-of-the-art course design tools. They are encouraged to experiment over time.

The company offers convenience for instructors by handling all customer service and payment processing. It does so for students by enabling them to view the courses on any device (computers, tablets, smartphones, etc.) at any time (while online or offline).

The company provides a price value proposition. It limits the cost of all courses to $20 - $50.

The company reduces costs. Its design tools for instructors are free for them to use, and it absorbs all website hosting fees.

The company has established a strong brand as a result of its success. It provides over 40,000 courses designed by 20,000+ instructors to more than 11 million students in 190 countries. The classes include over 9 million minutes of video content. Udemy also offers “Udemy for Business”, a collection of business-relevant courses used by several companies in the Fortune 500 for their employees, including IBM, T-Mobile, and Pitney Bowes. Lastly, it has received positive coverage in many prominent sources, including the New York Times, Fast Company, and TechCrunch.

Channels

Udemy’s main channel is its website. The company promotes its offering through its social media pages, advertising, and attendance of conferences.

Customer Relationships

Udemy’s customer relationship is primarily of a self-service, automated nature. Customers utilize the service through its website and mobile apps while having limited interaction with employees. The site’s “Udemy for Business” portion features a “Resources” section that includes white papers, case studies, Infographics, and eBooks, while the parent website provides answers to frequently asked questions.

That said, there is a personal assistance component in the form of 24/7 e-mail support.

Key Activities

Udemy’s business model entails maintaining a robust common platform between two parties:  instructors and students. The platform includes website and mobile apps.

Key Partners

Udemy often forms partnerships with educational content providers in order to expand its portfolio of offerings. A high-profile example of this is an alliance it established with Benesse, one of the top education and publishing providers in Japan. Their arrangement involves Benesse sharing at least 100 of its Japanese-language courses through Udemy and inviting Japanese experts to create courses.

Udemy also forms partnerships with nonprofits and non-governmental organizations through which it encourages them to offer its courses or create their own. It provides “Social Innovation Grants” in amounts as high as $2,500 to help these groups get the technical tools they may need to get started.

Lastly, Udemy maintains an affiliate program through which it enables third parties to promote its services through their platforms (websites, mobile apps, e-mail newsletters, etc.). The parties use promotional tools such as site-wide links, course-specific links, custom links, banners, and creatives. Valid purchases made through the tools enable the parties to earn commissions.

Key Resources

Udemy’s main resources are its human resources. They include the technology employees that create the design tools used by instructors for their courses and the customer service employees that provide 24/7 support for users.

As a relatively new startup it has relied heavily on funding from outside parties, raising $173 million from 17 investors as of June 2016.

Cost Structure

Udemy has a cost-driven structure, aiming to minimize expenses through significant automation and low-price value propositions. Its biggest cost driver is likely transaction-related expenses, a variable cost. Other major drivers are in the areas of customer support/operations and administration, both fixed costs.

Revenue Streams

Udemy has one revenue stream:  the fees it charges instructors for hosting paid courses. Fees are applied as follows:

• Udemy earns 50% of course revenues if it promotes the course (with the remainder going to the instructor; instructors that market the course themselves receive 100%)
• Udemy earns 25% of course revenues if it promotes the course and the course was purchased through an affiliate link (50% goes to the affiliate and the remaining 25% goes to the instructor)