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Udacity Business Model

udacity business modelUdacity is a freemium educational platform offering open courses that are available to anyone for enrolment (MOOCs). It is an American edtech for-profit educational organization that was founded by Sebastian Thrun, David Stevens, and Mike Sokolsky. The platform offers massive open online courses to all students or professionals around the world. Their major aim is to provide online courses that allow their customers to switch or enhance their careers and skills respectively. With the growing digital involvement of students for studies, edtech platforms like Udacity are witnessing a huge surge of interest. This surge had boosted major changes on the platform amidst the global pandemic. Today, we’ll be exploring the Udacity business model in detail. Readers will get their in-depth answers to their most demanded questions- “How does Udacity work?” and “How does Udacity make money”. By explaining the Udacity origin, Udacity business model canvas, investors’ details, and its revenue model, one can get in-depth knowledge about the company. So, let’s get started!

Udacity- The Beginning

The concept of Udacity grew out of the free computer classes that were offered in 2011 through Stanford University. These classes gave inspiration to Thrun and Peter (who were the instructor of the classes help at Stanford University at that time) to start up with their platform to provide online education. Udacity was then proclaimed at the 2012 Digital Life Design Conference. In 2012, the venture capital firm, Andreessen Horowitz showed a keen interest in this startup and led to an investment of $15 million in Udacity. Udacity was also funded by Charles River Ventures and around $200,000 was invested by Thrun himself out of his money.

In 2013, a year later, Thrun announced in a company article that Udacity is a lousy product and its service was to focus more on vocational courses for professionals and “nanodegrees”. The Udacity company creates its nanodegrees in cooperation with some other corporations and educational institutions.

Finally, in 2014, Udacity successfully gained 1.6 million users in their total 12 courses and 26 free coursewares. This was the first major milestone achieved by the company. In October 2017, Udacity along with Unity launched their “Learn ARkit” program whose aim was to help out developers in improving their AR application building skills. In that particular month, Google partnered with Udacity to launch a scholarship initiative for all aspiring Web and Android application developers.

Udacity- The Current Statistics

Udacity, a platform that popularized the concept of Nanodgrees in artificial intelligence, programming, autonomous driving, and cloud computing, has recently (in 2020) secures $75 million funding in the form of a debt facility. The company says that this funding will be used for their business customer targeting. They mentioned that a part of the company has been growing very fast and said that customers in their business segment include, “five of the world’s top seven aerospace companies, three of the Big Four professional services firms, the world’s leading pharmaceutical company, Egypt’s Information Technology Industry Development Agency, and three of the four branches of the United States Department of Defense” (As per the reports of Techcrunch). These companies have been involved with Udacity in creating tailor-made courses that are built for their specific needs.

Udacity’s CEO, Gabe Dalporto, has claimed that the company has been witnessing huge demands from enterprises as well as the government side. He said that the Fortune 500 companies and government organization is coming up to the company and are wanting to work with Udacity. So after receiving the funding, they are set to build up a sales team to go after them.

This funding might come out to be a turning point for the company which has been less successful in some years as it found challenging to land on a profitable business model and compete with the growing competition in the edtech world.

In the beginning, Udacity started up by offering university-style courses which would otherwise cost very high but now, the platform is highly focused on providing vocational courses for professional development to learners because this plays an important role in cracking job interviews and tests.

Udacity Business Model

The Udacity Business Model is completely based on charging the customers a monthly or one-time fee for attending their courses i.e., it works on a subscription-based model.

It is a freemium EdTech platform that offers Moocs (courses that are open to anyone for enrolment). The company partners up with other private or government companies and universities to offer nanodegrees (a short-term online education program that focuses on specialized skills in computer science such as artificial intelligence, cloud computing, programming, and autonomous driving). The user can either pay a monthly fee or a one-time fee to access the courses offered by Udacity.

The freemium business model adopted by many other edtech platforms is seen as an amazing way to grow the business while reducing the risk for both organizations as well as the customer.

Udacity Mission

The prime focus of the company is to “train the world’s workforce in the careers of the future.”

Udacity fulfills this by partnering with leading technology companies of the world to learn the role of technology in transforming these industries and teach such skills that companies are looking for in their workforce. With the wide range of courses available on the platform, learners can prepare themselves to work in the most in-demand job roles.

Udacity Mentorship

Each student/ professional taking membership on Undacity for a nanodegree program is assigned with a dedicated mentor who is always ready to provide one-to-one support to the student or professional. The platform also provides each paid user with the access to student community and tools to help prepare them for the jobs.

Udacity Freemium Business Model

Similar to other edtech platforms, Udacity focuses on the freemium business model to keep up with the competition. This freemium membership gives students free access to introductory courses which allows them in evaluating if they are comfortable with the platform and the courses without any financial commitment. Freemium membership plays an important role because no one wants to invest in courses where they are not compatible so, an introductory class gives them quality exposure to the platform. Then, it is up to them to decide on investing in these courses.

Udacity Business Model Canvas

Let’s discuss the Udacity Business Model Canvas to get in-depth information about the working and revenue generation of the company. We’ll cover various Udacity key partners, key activities, value propositions, customer relationships, customer segments, channels, key resources, cost structure, and finally its revenue streams. So, keep reading and exploring the Udacity Business Model.

  1. Key Partners

The key partners of Udacity include leading technology companies, educational institutions, high-level universities, technology partners, developers, and the members of the association, with whom the company partners up for the advancement of nanodegree programs.

  1. Key Activities

The key activities of Udacity are:

  • The content generation for the developed courses
  • Data infrastructure establishment
  • Backend
  • Software development
  • Digital Marketing
  • Innovation
  • Management
  • Business Development
  • Management
  • Product management
  1. Key Resources

The key resources of the Udacity platform are its e-learning platform, catalog, staff members, content partners for content generation, seed fundings from venture capital firm Charles River Venture.

  1. Value Propositions

Now, let’s list out the various reasons that why customers turn to Udacity over any other ed-tech platform in its value propositions.

So, the reasons behind this are:

  • Udacity has a partnership with UCSC Silicon Valley Extension, the educational arm of the University of California, Santa Cruz, which is one of the country’s most well recognized higher education institutes.
  • It is working to standardize education.
  • Udacity offers innovative technologies that are available to the global community of learners to learn and implement.
  • It gives free access to massive open online courses (MOOCs) that are focused primarily on vocational programs for technology professionals.
  • It offers the right courses to professionals who want to attain technology credentials for their career progression.
  • It gives a feeling of sell-dependency and self-empowerment in learners through online learning that can be accessed anytime, and anywhere.
  • Udacity also provides an additional place for companies to identify talents and employ them in their companies to increase the talent pool.
  1. Customer Relationships

The platform provides a new and advanced type of online university to its customers i.e., students, professionals, or more specifically saying, learners. It provides them with a flexible and engaging alternative to get a learning experience from top universities without paying huge fees to those institutes. The platform is not only affordable but also an engaging way to learn nanodegree programs that are highly in demand today. The courses offered are very interactive and if the customer is having any query regarding the course or platform, he/she can reach out the customer care. They respond to queries, quickly.

  1. Customer Segments

The group of people that Udacity aims to reach out to and provide them with its services are:

  • Academic learners/ students who wish to get education from top universities at little to no cost.
  • Software engineers
  • Data analysts
  • Software Developers
  • Computer Programmers
  • Technology companies
  1. Channels

This is the most critical part of the business model canvas. Let’s explore the various ways how the Udacity company communicates and reaches its customer segments:

  • The Udacity Website
  • Desktop
  • Mobile Websites
  • Mobile applications
  • Udacity Courses
  • Nanodegree programs
  • Online FAQs and support tutorials
  • Discussion boards
  • API
  • Github
  • Social Media
  • The New York Times
  1. Cost Structure

Here is the list of costs and expenses the company incurs in operating its business model:

  • Development and maintenance of the Udacity platform
  • Content generation for the Udacity courses
  • Certification and testing for the subscribed users
  • Management of partnerships with various organizations and institutions
  • Recognition of its workforce
  1. Revenue Streams

Finally, let’s move on to the various streams through which Udacity makes its money:

  • Freemium membership business model
  • Although much of the content is available free of charge on the platform but to gain full access to course materials, certificate upon completion, and community membership, a subscription fee has to be paid.
  • Tuition fees from Degree programs available on Udacity

Who are Udacity’s investors?

According to Crunchbase, Udacity has 13 investors in total and the most recent investors of the company are, Asas Capital and Hercules Capital. These investors include Asas Capital, Hercules Capital, Bertelsmann, Andreessen Horowitz, Baillie Gifford, Drive Capital, GV, CRV, Emerson Collective, Valor Capital Group, and some more. Out of these, 4 are lead investors of Udacity.

The data shows that the company has successfully gained $235 million in funding from its investors in a total of 6 funding rounds. Their latest funding was from a Secondary Market round on Jan 28, 2021. On March 1, 2017, Udacity acquired making its acquisitions count 1.

How does Udacity make money?

Udacity’s revenue model is completely based on a monthly subscription or one-time fee to access its courses. The udacity user can be a private consumer or a large enterprise. Most of the courses on this platform are free but the certificate after the course completion is received only when the user has a proper subscription to that particular course. The course is delivered to the consumer in the form of a nanodegee program. This program consists of a series of lectures with associated homework and project after each series.

The cost of a nanodegree program ranges from $718 to $2154 depending upon the title you choose.

Here is the complete list to check out the nanodegree program pricing:

Click here to check out the Udacity Nanodegree program pricing chart

Udacity is making money by selling its highly knowledgable educational courses to private consumers or enterprises. As said above that the content is delivered in nanodegree format. These nanodegrees can last from 2 to 6 months in duration.

Udacity has been inclined to price model adjustments in the past. The platform has witnessed some recent changes that reflect its strategy to provide high-quality educational content that includes expert mentors and dedicated career coaching.

How does Udacity work?

After exploring the Udacity Business model and revenue model in detail now it’s time to get started with the working procedure of the company to answer- “How does Udacity work?”. So, let’s get started.

Udacity, an online platform that provides educational courses to students and professionals for their development and professional enhancement. Most of the courses present on the platform have been created in collaboration with other leading companies, including Facebook, Google, educational institutions such as Standford University, and many other organizations and enterprises.

All these courses are delivered in Nanodegree format on this platform and these programs are composed of Capstone Project in the end to test the knowledge gained. The consumers who have used this platform say that most of the courses present here are based on the problems faced by the business world and that’s what makes the Udacity courses highly appropriate and practical. This feature ensures that learners use the certifications gained from the platform to switch their careers or gain a new position in the company.

To enhance the platform and ensure that learners get the maximum benefit from their courses, Udacity provides technical support mentors and personals mentors during the course enrollment who is always ready to provide one-to-one support to students or professionals.

Not only does the platform provide content and courses to students but also to other businesses. This allows the companies to train their employees to enhance employee productivity and knowledge and hence grow the company’s productivity.

The platform offers three major programs-

  1. For individuals- A program that aims to transform the career of students, professionals, or learners.
  2. For enterprise- A program that helps organizations or enterprises to transform their businesses by enhancing employee productivity and knowledge. It helps in addressing the skill gap that enterprises are facing in core and emerging technologies like, Data Science, Artificial Intelligence, Cloud Computing, and much more. In these courses, learners experience a combination of lessons and hand-on-project designed by experts that allow them to apply their newly learned skills and attain professional enhancements.
  3. For Government- A program to transform the government workforce. It is setting a great example of public-private partnerships by providing government-funded scholarships to their Nanodegree programs that are designed to upskill and reskill the workforce. It helps to reskill citizens for high-paid government jobs like software development and other tech jobs.

Ray for Edtech solution

We are all aware of the fact that there has been a drastic increase in the number of students studying online. Since the COVID-19 pandemic has struck the entire world, schools, colleges, and educational institutions have come up online.

Ronnie Screvala, the Chairman & co-founder of upGrad has rightly said- “Edtech platforms do have the power to transform the traditional graduation and post-graduation cultures from colleges.”

If you are willing to launch an edtech platform similar to Udacity.Our company has the right solutions developed by our capable and innovative workforce. We offer customized and innovative features as per your requirement to let you launch a successful edtech learning platform like Udacity Clone.

Here are some other informative articles explained by Ncrypted Technologies:

  1. How Does Hulu Work to Form a Repeatable, Scalable & Profitable Growth Streaming Business?
  2. 10 Startup News in 2017 That You didn’t Know!
  3. How can Competitive Benchmarking be Helpful for Your Startup?
Tejas Joshi
Tejas Joshi
Exploring Marketing World

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