Highlights

1. MOOCs have mostly emerged as an approach to democratizing educational content out of Western countries and Asia has been slow on the uptake at least in terms of local plays and investor interest.
2. Benefiting from the MOOC model requires a cognitive departure or mindset shift from the formal education system many people are thrust into at a young age.
3. These are the two main go-to-market angles for Southeast Asia players to widen the MOOC market in the region: introducing MOOCs as a viable alternative, and closing the localization gap when it comes to language and topics that users in various countries in the region would pay for. 
4. Learning from Unicorn and Public Comparables:
   1. Coursera: Scaling through Credibility of Institutions
   2. Udacity: Scaling through Career Relevant Partnerships
   3. Pluralsight: Scaling through Company Reskilling and Upskilling
   4. Masterclass: Scaling through Celebrities
   5. Udemy: Scaling through Creators
   6. Kajabi: Scaling through Content Toolkits
5. Looking at the success of MOOCs in the West, and the opportunity to democratize cheaper access to online learning (and potentially even education content creation) in developing countries, MOOCs will become more predominant in the region in time, as MOOC platforms have to overcome the learning curve for adoption in the region.

In June 2021, Harvard and MIT-led nonprofit edX announced its acquisition by edtech company 2U for US$800 million. edX was started as a joint project between the two universities in 2012 as massive open online courses (MOOCs) were taking off. As more for-profit players emerged and began heavily investing into the space, the MOOC pioneer realized that while they had been doing well for over a decade, they were also falling behind. Online program management company 2U (US$3.38 billion market-cap) came into the picture and presented an opportunity to provide the investment and scale that edX had been hard pressed to achieve as a nonprofit.  

This acquisition is just part of the larger picture of the global edtech ecosystem (especially in the West) forming MOOC giants, with the Coursera IPO earlier this year (US$5.31 billion market-cap), Udemy and Duolingo on a path to the public markets, and Masterclass and Kajabi entering the unicorn class, with the latter garnering the largest edtech investment so far this year at US$550 million putting its valuation over US$2 billion. 

This is great and all for MOOCs (massive open online courses)– but the question is when will we see the same levels of investment into MOOCs in Southeast Asia? And what will it take for MOOCs to emerge in the region? MOOCs have mostly emerged as an approach to democratizing educational content out of Western countries and Asia has been slow on the uptake at least in terms of local plays and investor interest, with the edtech ecosystems in East Asia dominated more by one-to-one or one-to-many tutoring platforms (the ones in China taking a huge blow with new government policy, but that’s a discussion for another time). 

Southeast Asia ripe for MOOCs but still an open field

In January this year, we wrote about Prakerja, the Indonesian government’s incentive program for the unemployed to get cash (roughly US$180) in exchange for taking courses on MOOC platforms like Skill Academy. We also commented on the initial online response on the program, where it seems that in spite of this induced demand for MOOCs, a lot remains to be seen when it comes to how effective the program (or specifically the MOOCs themselves) has been in upskilling or reskilling, much less enabling the unemployed to concretely secure jobs. We also acknowledged that Prakerja brought MOOCs into the spotlight in a market that has not really been keen on adopting even the more global MOOC platforms like Udemy. 

Southeast Asia is a market ripe for MOOC adoption, for two reasons: (1) conventional education costs are high but consumer spending in education ranges from 5-7%, much higher than Western countries like the US and just on par with China and India, and (2) more than 60% of the combined populations of Indonesia, Philippines, Vietnam, and Thailand are of working age — a segment that MOOCs will often target, although MOOCs are designed for anyone to consume. They are not limited in the same way that K12 edtechs are by the curriculum. 

But at the same time, benefiting from the MOOC model requires a cognitive departure or mindset shift from the formal education system many people are thrust into at a young age. Using MOOCs requires more agency on the part of the user to complete courses, and the goals are specific skill acquisition as opposed to achieving high test scores or high grades Given that most global MOOCs have come out of the US, there is also still a localization gap (e.g. in terms of language, topics that potential users would pay for, etc.). 

These are the two main go-to-market angles for Southeast Asia players to widen the MOOC market in the region: introducing MOOCs as a viable alternative, especially for working professionals who cannot afford to take full-time conventional education to reskill and upskill, and closing the localization gap when it comes to language and topics (i.e. the user experience and content) that users in various countries in the region would pay for. 

Because MOOCs are still largely uncharted territory for both founders and investors, it’s worth looking into global public and unicorn comparables (i.e. still mostly from the West) and the various models they have used to scale and whether this could apply to Southeast Asia as well. 

Benefiting from the MOOC model requires a cognitive departure or mindset shift from the formal education system many people are thrust into at a young age.

How MOOC comparables in the West have scaled

Coursera: Scaling through Credibility of Institutions

Coursera (NYSE: COUR) built its marketplace around democratizing courses previously deemed “exclusive” or inaccessible due to costs, acceptance processes, etc. Their success came primarily from the ability to partner with essential stakeholders in the industry: universities, government institutions, businesses. These partnerships have run so deep that users can obtain full bachelor and master degrees fully online from reputable universities — also becoming an aggregator or marketplace for “open” universities or programs. 

The company segmented their courses into several tiers, from guided projects for users to gain job-relevant skills in two hours all the way to MasterTrack Certificate courses, which last for three to 12 months but grant the user a university-issued certificate. This diversity in offerings meets the variety of pain points a potential MOOC user might have as they hop onto the platform. It also enables users to stack up completed courses and certificates all on the platform (i.e. strengthening retention and lengthening lifetime value). 

This expansion into various offerings however only works the way it does because of the credibility Coursera built around its courses, tying it to reputable universities. For users, this credibility creates a higher likelihood of these courses carrying over into their resumes and helping them secure a job as much as a formal education would, which drives up demand for the platform even more.  

Executing a similar model in Southeast Asia would mean identifying which “brands” users would want or are more likely to get specific courses from (demand), and what courses can potential partner institutions offer en masse. The pull of certain brands like Harvard or MIT on Coursera extends even to Southeast Asia such that it also poses considerable threat towards local demand, especially for English-speaking countries. That said, a local player could carve out a piece of the market through price and market segmentation. 

Then it may also take a while to sell, much less onboard, regional or local institutions to offer courses on a marketplace. Finding the “credibility” SEA users would be willing to pay for and competing with the “credibility” of Western institutions — which has historically had a strong pull over the region — will be the key challenges for local execution. 

This expansion into various offerings however only works the way it does because of the credibility Coursera built around its courses, tying it to reputable universities.

Udacity: Scaling through Career Relevant Partnerships

Udacity took a similar approach to Coursera in that it also became a marketplace for certificate courses, but instead of focusing on partnerships with universities and more generalist education institutions, they focused on partnering with FAMGA (Facebook, Microsoft, Google, Amazon) and similar top tier tech companies to create more than 200 online courses offered as “nano-degrees” with certificates, mentor support, and human graded projects.

Udacity built on the “credibility” play of Coursera, but focused their partnerships that would not just bring in credibility but also career relevance and direction. While one could argue that this would further increase the likelihood of getting hired by specific companies, it also limits the kinds of courses that could come out of the platform and there are no guarantees made by the platform that jobs would be waiting at the end of the course. 

Taking this evolution of the Coursera model into Southeast Asia would also face similar difficulties mentioned earlier in the article. The added challenge would be a tighter competitive landscape since the addressable market for these MOOC platforms partnering with tech companies would also be a lot smaller and switching from one platform to another is more likely. 

Udacity built on the “credibility” play of Coursera, but focused their partnerships that would not just bring in credibility but also career relevance and direction.

Pluralsight: Scaling through Company Reskilling and Upskilling

While most MOOCs have taken a B2C approach because of how the product is packaged — on-demand courses — Pluralsight’s success could be attributed to their pivot from B2C to going entirely B2B. They became a fully-fledged platform for businesses to assess employee skills and align employee skill sets with key business decisions. While Coursera and Udacity’s course selection and segmentation of offerings incentivize users to become sources of recurring revenue for these companies, Pluralsight benefited from an even more stable form of recurring revenue through corporate training segments, bringing on hundreds of Fortune 500 companies to become their users. 

In a way, this is also another evolution of the MOOC model because it makes the end-to-end experience of the “student” a lot more direct. Benefits for the paying customer (the company) are also measurable, and the customer essentially serves as a channel to scale usage. This is compared to the Coursera or even Udacity model where the motivations for adoption are less measurable and more tied to the credibility of the partnerships. 

While still an edtech, selling this value proposition to businesses in Southeast Asia or even East Asia would also face the same challenges an enterprise SaaS company (only a little more customized than a typical plug-and-play SaaS) would face in terms of shortening sales cycles and targeting the right types of companies.   

Like Udacity, Pluralsight has focused primarily on technical skills, so companies could upskill employees by having them learn new programming languages. This same focus on technical skills makes the competitive space also a lot more constricted for any player, though the shifts in the competition are less variable because companies are generally more long-term customers than individual consumers.  

While Coursera and Udacity’s course selection and segmentation of offerings incentivize users to become sources of recurring revenue for these companies, Pluralsight benefited from an even more stable form of recurring revenue through corporate training segments, bringing on hundreds of Fortune 500 companies to become their users. 

Masterclass: Scaling through Celebrities

Instead of linking their value proposition to the skills or courses, Masterclass made its bucks from selling the credibility of the teacher or author of the course. With famous and respected luminaries in their relevant industries like Gordon Ramsay, Stephen Curry, or Neil deGrasse Tyson, Masterclass reaped benefits from the network effects of all these “celebrities” from their fans and followers around the world. 

In a way, Masterclass is still following the vein set up by the likes of Coursera by winning through partnerships, but what is even more valuable for the company is the “evergreen” nature of the content on their platform — ultimately tied to the enduring reputation of these “masters” whom people will still want to learn from even if they are past their prime, simply because of the experience and insight they have gained throughout their careers.  

And unlike the previous models we’ve covered, the Masterclass model is less about reskilling or upskilling but more about creating a premium platform of content from these influencers in their respective industries. 

Because of the global nature of the pull and popularity of these celebrities, the differentiation among competitors in this model will be more along the lines of the focus on the industry or topic as well as the engagement with the user in terms of the learning. For example, Garry Kasparov (himself having a course on MasterClass) launched his own platform kasparovchess featuring MasterClass-like videos from chess grandmasters and chess studies tailored to the avid chess fan. 

In a way, Masterclass is still following the vein set up by the likes of Coursera by winning through partnerships, but what is even more valuable for the company is the “evergreen” nature of the content on their platform — ultimately tied to the enduring reputation of these “masters”…

Udemy: Scaling through Creators 

So far we’ve been tackling models that have been democratizing access to supply — the supply of exclusive university courses, training from top tech companies, courses from the best in their class — but MOOCs have also evolved to democratize access to demand, where anyone who wants to start their own online course can do so and earn money from it all on the same platform. Udemy has been a leader with this type of model, tapping into the fast-emerging “creator economy”. 

From a scale perspective, compared to Coursera or Udacity, Udemy definitely has a broader horizon, but the risk is also monetization. Monetization for Coursera and Udacity is driven by these brands and partnerships, but for Udemy there is more weight put on the actual course and benefits because it can be made by anyone, literally. Then there’s also Youtube and even other video-based social media platforms that have long been a source for free, on-demand education — both for the supply end and demand end of the equation. Udemy found its niche by tailoring that Youtube dynamic specifically to education and focusing on the creators’ benefits as “teachers” on their platform. 

MOOCs have also evolved to democratize access to demand, where anyone who wants to start their own online course can do so and earn money from it all on the same platform.

Kajabi: Scaling through Content Toolkits

Kajabi, the MOOC sector’s latest unicorn as of H1 2021, and having the largest investment to date, found its success in scaling as a “Shopify for MOOCs” enabling creators from anywhere in the world with the tools to create and sell their own online course anywhere. Compared to Udemy, Kajabi allows its users to use any platform for distribution, and adds value simply through the creation and management of the courses.

This productization of MOOCs is a significant evolution for the sector as the platforms enable D2C distribution (which is a trend we also see in ecommerce). While it may take some time for the Southeast Asia market to mature to this point — because Kajabi’s existence requires having a critical mass of creators who can themselves navigate distribution of their courses — this productization also opens up a lot more opportunities for localized value propositions in the region to emerge as Kajabi comparables. 

This productization of MOOCs is a significant evolution for the sector as the platforms enable D2C distribution.

Southeast Asia still on the learning curve 

Looking at the success of MOOCs in the West, and the opportunity to democratize cheaper access to online learning (and potentially even education content creation) in developing countries, MOOCs will become more predominant in the region in time. MOOCs have the potential to provide a more affordable and highly niche content as an online learning solution for a lot of people from all ages, but the learning curve for MOOC adoption will be the primary challenge — and so once again, as with many industries, innovations, and business models introduced to Southeast Asia, localization is the key. It’s also worth noting what really is the focus for MOOCs as a business — and that might not necessarily be the expectation of government programs for students. MOOCs as a model are not designed to bridge people to careers. If that is the objective, perhaps a more cohort-based or bootcamp model (see Lambda School) might be more appropriate. 

The MOOC model is about distribution, and the goal is therefore to distribute to as many people as possible with a selection that users can go back to on the platform. It’s not so different from ecommerce, where we’ve seen how unlocking distribution to goods opens up a whole host of new opportunities (D2C commerce, social commerce, hyperlocal logistics, live streaming, etc.). In the same way, growing the MOOC industry here in Southeast Asia could potentially open up a whole host of other opportunities for other models as well. 

The learning curve for MOOC adoption will be the primary challenge — and so once again, as with many industries, innovations, and business models introduced to Southeast Asia, localization is the key.