3 takeaways from Udemy's initial public offering

3 takeaways from Udemy’s initial public offering


Last week, Udemy became the latest education technology company to go public, raising $421 million in its initial public offering. With shares selling at $29, the MOOC provider’s market value is estimated to be about $4 billion

Udemy saw demand skyrocket for its services during the pandemic, with revenue growing nearly 56% to $429.9 million from 2019 to 2020. 

In its prospectus, Udemy argued that it is meeting rising demand for lifelong training that traditional providers are failing to address. The company offers online courses to learners in two ways: through its direct-to-consumer platform and through Udemy Business, a corporate education service to help employers train workers. 

“Year after year, more enterprises are realizing the importance of upskilling employees and providing them with the learning and development opportunities to drive innovation and growth,” Sarah Blanchard, Udemy’s chief financial officer, said in a statement provided to Higher Ed Dive. “Our marketplace is the engine that drives our enterprise business and is disrupting corporate learning.”

The company counts more than 44 million learners worldwide and had over 201 million course enrollments in 2020. However, it is not yet profitable and reported a net loss of $77.6 million in 2020, up from $69.7 million the year before. 

Going public will help Udemy grow its business in several ways, according to the prospectus. It plans to expand Udemy Business by improving the quality of the courses it offers and creating deeper skills assessments. It’s also exploring offering different subscription packages for consumers who don’t have employers sponsoring their education. 

Other MOOC providers have also been making big moves. Coursera went public in March, raising $519 million. And 2U, a company that helps colleges launch and run online programs, announced plans this summer to acquire edX for $800 million 

Udemy’s filings with the SEC offer insight into trends that are playing out within the alternative credential and online learning markets. Here are three takeaways from Udemy’s IPO and what it means for the rest of higher ed. 

Interest in MOOCs is running high

The first year of the coronavirus pandemic was a banner period for MOOC providers. One-third of all learners who ever registered on a MOOC platform did so in 2020, according to data from Class Central, a search engine and review site for online courses. 

Investor interest also grew in such companies. Coursera raised $130 million from investors in 2020, while Udacity raised $75 million through debt financing. Much of that energy has carried over into 2021, which saw Coursera go public and edX get snapped up by 2U. 

“If you go public now, then you can take advantage of everything that’s happened during the pandemic,” said Phil Hill, a partner and ed tech consultant with the firm MindWires. 

Yet it’s not clear whether the current zeal for online education will last. In its prospectus, Udemy warned the level of demand seen from learners during the pandemic may fade as vaccines become more widely distributed and coronavirus restrictions lift. 

“If we fail to grow or maintain the number of learners and instructors engaging with our platform, the value of our platform will diminish and our revenue will decline,” it stated. 

MOOC providers are looking for business models

The promise of MOOCs — to offer classes for free or at a low cost to the masses — has always made the business side of things tricky. MOOC providers have expanded their services in recent years as they look for a solid financial foothold. 

While Udemy is betting that direct-to-consumer subscriptions and corporate education will help it eventually turn a profit, Coursera and other companies are taking a different tack. 

Along with standalone online courses, Coursera also offers degree programs with partner colleges. These programs brought in revenues of nearly $30 million in 2020, up from about $15 million the year before. The company also launched a service in 2019 called Coursera for Campus, which lets colleges use its content in their own courses. 

“The MOOC did not work as an educational platform.”

Daniel Pianko

Co-founder and managing director, University Ventures

Still, in an SEC filing earlier this year, Coursera noted it doesn’t expect to be profitable “for the foreseeable future” as it expands its platform and improves its technology. 

EdX, on the other hand, will help its new owner, online program manager 2U, learn about students’ interests and recruit them into online degree programs. 2U officials predicted earlier this year that the acquisition will save the company between $40 million and $60 million in marketing costs over the next two years. 

These recent moves signal a change in MOOCs’ original business models. 

“The MOOC did not work as an educational platform,” said Daniel Pianko, co-founder and managing director of higher ed-focused investment firm University Ventures. “Instead, the MOOC has become a lead generation funnel for traditional universities and OPM providers.”

Udemy is a threat to other MOOC providers and traditional higher ed

Udemy stands apart from these other MOOC platforms in one key way. While Coursera and edX have both been working with colleges and universities to offer courses, certificates and even degree programs, Udemy eschewed collaborations with traditional higher ed providers. 

Instead, the company has focused on its consumer and corporate businesses, said Hill, the partner at MindWires. “They never pretended or looked at doing any kind of degrees or any direct competition with higher ed,” he said. 

But the company does share some similarities with Coursera and other MOOC providers. 

“The more learners you attract, the more you’re able to pay people to develop courses,” Hill said. “The more people that develop courses, the more you can attract learners. It just sort of builds on this flywheel.” 

“There’s sort of this arms race between these companies to get big and take advantage of as much scale as they can.”

Phil Hill

Partner, MindWires

Udemy has created a network of expert instructors, some of whom elect to charge for their courses. Udemy paid them $161.4 million in 2020, according to Securities and Exchange Commission filings. 

“There’s sort of this arms race between these companies to get big and take advantage of as much scale as they can,” Hill said.

Udemy may also threaten colleges’ revenue prospects.

“They’re not going to threaten the enormous credentialing role colleges and universities play,” said Fiona Hollands, a senior researcher at Columbia University Teachers College. “But they may be sort of siphoning off some of the revenue that colleges and universities can obtain by offering things like professional training.”


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