Udemy

Case Study: Business Strategy of Udemy

Udemy is an online learning platform and marketplace focused on students and working professionals. Founded in 2010 by Eren Bali, Gagan Biyani, and Oktay Caglar, the company amassed over 50 million students enrolled and a total of 150,000 courses on its platform with a valuation of $2 billion (Viktor, 2021). As of 2021, the company reported annual revenue of $126 million with an estimated 600 employees (Udemy, Inc., 2021).

Being a part of Massive Open Online Courses (MOOC), Udemy is a global marketplace for instructors teaching a wide range of topics such as business & entrepreneurship, programming, academics, the arts, health & fitness, language, and music. Udemy is not an accredited institution and courses offered are skills-based courses taught by experts in their respective fields. Udemy’s courses are available in over 65 languages.

Udemy has two revenue streams. The company generates revenue through (1) instructor’s fees and (2) Udemy for Business. Instructor’s fees depending on how the student purchase the course, see Figure 1, whilst Udemy for Business is based on a subscription revenue model, see Figure 2.

Founders Eren Bali and Oktay Caglar initially made this concept of idea to build software for a live virtual classroom in Turkey. They moved to Silicon Valley to start the company and two years later, pave the way to Udemy (You + Academy). The platform attracted thousands of instructors and learners disrupting the traditional and costly classroom setup in Universities. Courses are provided at lower fees due to economies of scale and enabled learners to upskill on-demand. As Udemy was created with the pursuit of lifelong learning, it’s logical that the mission is to align with the purpose.

Udemy’s mission is to improve lives through learning and the platform serves this purpose. Furthermore, the organization has four core values central to the company’s culture:

  • Mission inspired and results obsessed
  • Always learning
  • Individually humble and collectively proud, and
  • Earnestly authentic

Strategy

Udemy did not achieve an E-V-R congruence during its initial phase, and it can be described as a consciously incompetent organization (Thompson, Scott, & Martin, 2017). The founders struggled to get investors and it is reported that over 30 of them said no when the founders pitched the idea of Udemy (Viktor, 2021).  After several rejections, the Udemy team decided to wait 6 months to launch the website and go back to the drawing board to re-design the platform and modify the business model. This time around the founders was able to generate $1M from investors leading for the platform to materialize.

Udemy is not the first to offer online courses however they were able to put the company into a blue ocean strategy when offers a dynamic user interface for online instructors and users in a live classroom setting (Lynley, 2010). In addition, the platform allows instructors a wide range of teaching formats such as video streaming, chat room functions, audio streams, and video and PowerPoint-like presentations. Moreover, Udemy collates several online courses from leading institutions (like MIT) and formats them in a more chronological and accessible manner. These strategies enabled the founders to achieve the E-V-R congruence, hence the company became a success.

Analysis of Relevant Trends

The education sector has shifted overnight to eLearning when COVID-19 happened. According to IntelligentHQ (2021), there are two major trends that will take place post-COVID-19 and are divided into two parts: technologies and content (Figure 3).

Perhaps, the biggest trend for e-learning is Artificial Intelligence (AI) and is expected to capture the entire eLearning industry (Lawton, 2020). Global Insights (stated in First Research, 2021) stated in the quarterly report that the worldwide e-learning market including the education and training software accounts for $190 billion in annual revenue and is projected to increase to $300 billion by 2025. Because of the pandemic, Asia/Pacific region is becoming the fastest and largest market for educational software, led by India, China, and Australia. Other upcoming geographical segments will rise such as Latin America, Eastern Europe, and Africa.

Industry-wide issues include the industry will become a highly competitive marketplace and data security will become vulnerable. In addition, Global Insights (stated in First Research, 2021) further reported, rapid change in technology will foster competition and pushes companies to offer the latest and most-in-demand courses. In terms of online security, because everyone is online, from school to training and meeting, we are all vulnerable to cyber-attacks. Measures for risk assessment implementation and maintaining secure online products require significant resources.

In terms of business challenges, the research reveals that course piracy and IP protection will be the priority of organizations. Piracy laws in the US and Australia have very strict enforcement of piracy laws however not all nations are achieving this. Because of the rapid shift to e-learning, countries facing the new normal (such as the Philippines) are still grasping the e-learning platform and course piracy is most likely to have a minimal concern.

Analysis of Business Market and Competition

Udemy already integrated AI technology into its platform through real-time questioning and feedback, smart content, and automating administrative tasks (Udemy, 2021). Even before COVID-19, Udemy has pioneered the content trend through virtual classroom training, on-demand microlearning, and the pursuit of a lifelong journey. COVID-19 has just accelerated these trends and Johnson Hess (2020) reported Google joined the e-learning bandwagon and is now offering low-cost certificate programs to alleviate the historic unemployment rate in the US.

Last 5 years trends in Google. Udemy starts to show an upward trend starting in 2018 and maintain its position throughout the next 3 years. A sharp increase is seen in March 2020, a slight decline throughout the rest of 2020.  But Udemy is still ahead of its competitors.

According to the 2021 Industry Analysis Report released by Udemy (2020), the number one surging soft skills post-COVID is anxiety management courses. Figure 4 shows the top 10 surging soft skills:

Based on the report Udemy has found 6 trends that will share the workplace post-COVID and based on the results, it is highly likely the company will shift its priority among the rise of mental health-related courses and technical skills needed (Figure 5).

Figure 5. Udemy’s Trends for 2021

 

Competitor Analysis

Cornejo-Velazquez, Clavel-Maqueda, Perez-Lopez-Portillo, and Lyubimova (2020) provided a comprehensive analysis of the e-learning industry and focus on the five platforms namely: edX, Coursera, Udacity, Udemy, and Codeacademy. This paper will explore the competitor analysis provided by the authors on five categories: market orientation, customer segments, value proposition, consumer relationship, and key activities. Figure 6 shows the overview of each platform.

Before COVID, Codeacademy appears to have the highest number of students as of 2018 however post COVID data shows edX acquired the greatest number of learners as of 2020. However, the data reveals Udemy earnest the highest revenue of $400 million. edX has 110 million new users in 2020 however the business model of edX is Non-Profit and courses can be accessed for free.

Going in-depth with the competitor analysis, Figure 7 shows only Udemy has a global marketplace reach and this enables the company to achieve revenue in 2020.

In terms of market orientation, Udemy focuses on non-academic courses and offers a wide range of topics from leadership to entertainment. The nearest competitors are Udacity and Codeacademy and the two platforms are focused solely on IT and programming courses. For Customer segmentation, Udemy and Codeacademy offer a platform for Instructors. The value proposition is the strength of the company. Only Udemy has a global marketplace niche and provides opportunities to the instructors to generate income on their own. This is what makes the company successful. For customer relationships, this is a segment where Udemy deems to have weakness amongst its competitors. Udacity is the only platform that offers personalized support/mentorship which is the upcoming trend reported post-COVID.

And finally, for the key activities of the learning platform, Udemy also shows a weakness in these areas showing the general purpose of an eLearning platform. Partner acquisition is an important aspect to keep the course content updated. This is the dilemma faced by Udemy, since instructors can create their own courses, there is no mechanism for Udemy to check if the content is being updated on a regular basis.

SWOT Analysis

Strength and Weaknesses

It is now established that Udemy’s strength relies on its global marketplace reach and the ability for instructors to generate income on the platform. However, there is numerous weakness found on the competitor’s analysis. The company’s strengths can be the weakness. Looking at the platform description “anyone can create the course in Udemy”, this is an issue on its own. The author collected reviews posted on the Udemy website and it appears to have a good number of negative reviews ranging from not quality courses materials or the instructors heavily promotes their own merchandise instead of teaching. Also, instructors themselves are competing against each other, and the title of courses must convey an immediate “hook” towards potential learners, losing the value of the content along the way.

Another issue with an open marketplace platform is that majority of the revenue goes back to Udemy. As an independent elearning instructor, the author manages a WordPress website dedicated to elearning and one of the marketing strategies is to promote the courses via Udemy because of its global reach. LearnDash founder Justin Ferriman (2020) highlights the disadvantages on the instructor’s end when using Udemy. Some of the points worth mentioning are:

The instructor does not:

  • own the platform and the brand
  • have online visitor traffic
  • own100% of the revenue generated from course sales
  • own the student account
  • own the refund policy

Although according to the Udemy website, courses created by the instructors are not own by Udemy. However, the organic traffic and important student details which are the important ones when setting up a business are owned by Udemy.

Opportunities and Threats

Udemy has an opportunity to get accreditation for its courses from universities and the industry. This will provide more value to the courses offered. And the company can take a direction from which quality course will be front and center. The organization already achieved a massive number of online courses as well as instructors and students across the globe. The timing to focus on the quality of content is paramount to the continued success of the company. The lack of quality assurance for the instructors teaching in Udemy and the broad range of topics offered may be posed a threat to the company.

Finally, Udemy must focus on consumer relationships for both the learners and instructors. Udacity is the only one that offers personalized support/mentorship and Udemy must take advantage of this having a massive platform. Professional instructors and industry experts with the right credentials can be asked to be mentors for novice instructors in Udemy. In this way, the platform will still stay true to its original business model where everyone can teach in Udemy but with a proper guide and mentorship program.

Final Thoughts

Living in post-COVID may no longer seem challenging and the world appears to have adapted to the new normal. The eLearning sector has accelerated at a rapid pace and learning will never be the same again.

Udemy is a major disruptor in the eLearning space and has progressed rapidly post COVID. Reaping now the rewards, the company must take a deeper look at its current business model and provide more value to both learners and instructors. The industry trends call for personalized/adaptive learning and Udemy must shift focus on the quality of course content material and provide mentorship programs towards its instructors.

Reference List:

Brown, M., Costello, E., Donlon, E., & Mairead Nic Giolla-Mhichil. (2015). A strategic response to MOOCs: How one European university is approaching the challenge. International Review of Research in Open and Distributed Learning, 16(6) https://search-proquest-com.excelsia.idm.oclc.org/scholarly-journals/strategic-response-moocs-how-one-european/docview/1770070934/se-2?accountid=32565

Cornejo-Velazquez, E., Clavel-Maqueda, M., Perez-Lopez-Portillo, H., & Lyubimova, E. (2020). Business model of learning platforms in sharing economy: EJEL. Electronic Journal of E-Learning, 18(1), 102-113. http://dx.doi.org.excelsia.idm.oclc.org/10.34190/EJEL.20.18.1.008

Education & Training Software – Quarterly Update 1/25/2021. (2021). (). Fort Mill, South Carolina: Mergent. Retrieved from ABI/INFORM Collection https://search-proquest-com.excelsia.idm.oclc.org/reports/education-amp-training-software-quarterly-update/docview/2480719575/se-2?accountid=32565

Ferriman, J. (2020, 13 January). Why you should not use Udemy. Retrieved 20 April 2021, from https://www.learndash.com/why-you-shouldnt-use-udemy/

Google Trends. (2021). https://trends.google.com/trends/explore?date=today%205-y&q=udemy,edx,Udacity,Coursera,Codeacademy

IntelligentHQ. (2021). eLearning Trends in 2021. Newstex.

Johnson Hess, A. (2020, 13 July). Google announces 100,000 scholarships for online certificates in data analytics, project management and UX. CNBC. https://www.cnbc.com/2020/07/13/google-announces-certificates-in-data-project-management-and-ux.html

Lawton, D. (2020, 13 May). AI is molding the future of eLearning: how will it impact 2020 and later? Retrieved 20 April 2021, from https://elearningindustry.com/artificial-intelligences-impact-on-elearning-2020

Lynley, M. (2010, August 31). Teaching site Udemy struggled for funding, but now it’s raised $1M. Retrieved 17 April 2020, from https://venturebeat.com/2010/08/31/online-teaching-platform-udemy-raises-1m-still-too-cool-for-school/

Thompson, J, Scott, M. J. & Martin, F. (2017). BUS512 Business Strategy and Policy, Module 1 Week 1: Understanding strategy and strategic management [PowerPoint slides]. Excelsia College. https://learn.excelsia.edu.au/course/view.php?id=5669

Udemy, Inc. (2021, Apr 02). Private Company Research Reports https://search-proquest-com.excelsia.idm.oclc.org/wire-feeds/udemy-inc/docview/2507926912/se-2?accountid=32565

Udemy, Inc. (2020, November 11). 2021 workplace learning report: the skills defining the future of work. Retrieved 21 April 2021, from https://about.udemy.com/udemy-news/2021-workplace-learning-report-the-skills-defining-the-future-of-work/

Viktor. (2021, March 20). The Udemy Business Model – How Does Udemy Make Money? Retrieved 17 April 2020, from https://productmint.com/the-udemy-business-model-how-does-udemy-make-money/

Len Peralta

About the Author

Len Peralta is the creator of LCM Digital Training. Her goal is for digital learning to be engaging, interactive, and cost-effective. . Follow her on Twitter @AskLenPeralta