How edX Works

The edX Business Model

EdX is an education nonprofit that gives away its products for free to millions of students worldwide. There is no advertising on the edX website or during its course videos. Sure, you can pay $50 to $90 to receive a certificate of completion for a course, but why buy the cow when you can get the milk for free? All of this brings up the question that hounded Facebook and Google in their early days: How exactly will you make money?

When edX launched in 2012, both MIT and Harvard kicked in $30 million in seed money [source: Hashmi and Shih]. Two years later, most of the nonprofit's revenue comes from universities who sign partnership agreements with edX to create more edX courses. There are two types of deals for edX partners [source: Kolowich]:

  • Self-service -- Universities can use edX's open-source platform for free to create their own edX courses. EdX keeps the first $50,000 in revenue from each new course (or $10,000 for each recurring class) plus 50 percent of revenue exceeding that threshold.
  • EdX-supported -- For a fee of $250,000, edX helps the university produce a course, and the university keeps 70 percent of all revenue once the course is live on the edX website. EdX collects a further $50,000 for each time the class is repeated.

Like its for-profit competition, Coursera and Udacity, edX has tested the idea of working with universities to create blended classes, in which online videos and homework are supplemented by in-class discussions. In one pilot program, San Jose State University (SJSU) blended an edX engineering course on circuits and electronics created by MIT with its own on-campus engineering class. Pass rates for the course jumped from 55 percent of 91 percent [source: Lopes Harris].

EdX didn't charge SJSU for the use of that pilot class, but the idea would be to charge universities a group rate for using edX courses in for-credit classes. Coursera, for example, has signed deals with universities in which the school pays $25 per student for the first 500 students to sign up for a for-credit edX course, then $15 for each additional student [source: Kolowich].

Another potentially lucrative arena for edX is corporate training. In March 2014, edX offered a pilot course on big data for 3,500 IT professionals from 2,000 organizations that grossed nearly $1.75 million. In October, edX announced a suite of professional development courses in cybersecurity, energy and entrepreneurship for up to $1,249 per student [source: Korn].

For all of the hype and potential profits, are MOOCs like edX the future of higher education? We'll tackle that question next.