Udacity Business Model | How Does Udacity Make Money?

A startup in the education technology field, Udacity offers free access to massive open online courses (MOOCs) geared toward technology professionals’ professional development.

Udacity today emerged from a Stanford professor at the time named Sebastian (“Thrun”), then running the company and now its Chief Executive Officer, who offered an open, online Artificial Intelligence course 15 years ago. 

Several faculty members at the college, including Coursera’s co-founders Andrew Ng and Daphne Koller, offered the course as an open online initiative.

Udacity’s business model offers open courses (MOOCs) through its for-profit online education company. 

Udacity collaborates with universities and businesses to offer nano-degrees (specialized education courses for computer science). A user may choose to pay a one-time or recurring fee to access one or all courses.

What is Udacity?

Udacity is a publisher of predominantly online educational resources. The company collaborates with other businesses and educational institutions to develop its nano degree program. The goal of Udacity is to provide courses that allow clients to change jobs or advance in their current ones.

The Udacity business model relies on charging students a monthly or one-time fee for participation in courses. Udacity content is available both to private individuals and to businesses. Consumer courses begin at $718 and end at $1436.

Udacity was founded in 2011 by former Stanford professors and Google employees and has been a big success since its inception. Udacity’s website currently hosts over 200 courses, which educate 14 million students worldwide.

Udacity Mission & Vision

Udacity’s mission is to “prepare the world’s workforce for tomorrow’s occupations.”

Udacity accomplishes this by partnerships with “leading technology businesses to better understand how technology affects sectors and teach the vital technology skills that employers seek in their workforce.” 

Udacity’s solid, flexible digital education platform can prepare even the busiest learners for in-demand tech careers.

Udacity business model is geared toward supporting workforce changes as a result.

How Does Udacity Work?

Udacity (a portmanteau of audacity and university) is an online educational material and course provider specializing in Massive Open Online Courses (MOOCs). 

Almost all Udacity courses are developed in collaboration with other businesses, such as Facebook, Intel, Google, and educational institutions like Stanford University.

Udacity Business Model

Udacity offers these courses in a style known as a nano degree. Udacity Nanodegrees are divided into numerous courses and conclude with a Capstone Project.

Almost all courses on Udacity involve using real-life situations to teach the material, making it more accessible and relevant to students. The aim is to make sure that students can utilize their credentials to switch career paths or advance in their field.

Students can expect to receive technical support mentors and career counselors from Udacity throughout the course registration process to ensure they get the most out of the curriculum.

Programs at Udacity cover a wide range of subjects, including:

  • Software Development and Programming
  • Data Science
  • Cloud Computing
  • Business

….and several others. Udacity’s platform currently hosts over 200 online courses that serve 14 million users worldwide.

Udacity users have completed 1.5 million projects, and over 170,000 Nanodegree certificates have been awarded. Udacity announced that over 50,000 students would graduate in 2020.

Udacity offers courses to corporations as well as individuals. They can provide their employees with specific training at a fraction of the cost for dedicated training and certifications like the PMP.

Udacity Business Model

Udacity was founded to provide Massive Open Online Courses (MOOCs) to any student or employee interested in launching or enhancing their career in a sector they enjoy. 

However, to sustain operations and grow revenue, it shifted its focus from MOOCs to complete courses. 

Although the primary objective remained unchanged, it ensured that anyone with an internet connection could access the courses. It offers only university-level courses.

Udacity provides its courses as nano degrees, which consist of multiple topics and require students to complete a project upon completion.

Students at Udacity receive the highest-quality course content that is both practical and immediately helpful to their careers. You will even get a dedicated career coach and technical support mentor for each student.

Udacity also offers courses and certifications to businesses to educate their staff.

A fee is charged for students and businesses involved in the courses, lasting between two and six months. 

Several free courses remain available on the website, focusing exclusively on introducing concepts, and paid courses vary. 

Udacity’s business model is centered on the Freemium business model, and thus, it generates revenue via the Freemium model.

How Does Udacity Make Money?

Udacity earns money by selling educational materials to both individuals and businesses. The company offers these courses in a style known as a nano degree. 

Udacity’s Nanodegree programs include lectures, homework assignments, as well as a final capstone project.

It takes between two and six months for nano degrees to complete. You can subscribe to Udemy courses monthly or pay one time. Udacity Nano degrees cost between $718 and $1436.

Udacity adjusts its pricing models frequently. The company’s recent adjustments reflect its new goal to provide high-quality educational content and personalized career coaching.

Furthermore, a freemium model is a key component of Udacity’s future growth. Udacity offers free access to beginning courses and segments of its nano degree programs as a result. 

The user can determine the level of comfort they have with the learning environment and whether they have the time and the ability to complete the courses.

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Udacity Success Story

Sebastian Thurn, David Stevens, and Mike Sokolsky launched Udacity in 2011. Udacity was conceived when Thrun, a Stanford University professor of artificial intelligence, delivered a TED talk on self-driving cars.

At the same conference, he witnessed a speech by Salman Khan, the founder, and CEO of Khan Academy — a nonprofit organization that provides instructional content to high school and university students.

A conversation immediately ensued with Google’s director of research and Stanford’s co-professor, Peter Norvig. 

The company promised everyone a functional internet connection access to its “Introduction to Artificial Intelligence” course.

Thrun used $300,000 from his pocket to recruit Stevens (a colleague at Stanford) and Sokolsky (an assistant professor at Stanford) to join him as CEO (Thrun succeeded Stevens in 2012) and CTO, respectively.

A few weeks later, the course was opened to the public. The course quickly gained popularity,  and by the time it began, there were over 100,000 students.

A new name for the company, Udacity, was announced in February, along with two brand new  courses:

  • CS373: Thrun’s course on programming a robotic car
  • CS101: Professor David Evans teaches a course on building a search engine at the University of Virginia

Udacity’s launch was a success from the start, as more than 65,000 students enrolled in the two courses. An investment of $15 million from Andreessen Horowitz followed the following year.

Any startup’s subsequent years were not all sunshine and roses. A low completion rate led the company to abandon free MOOCs in 2014 to favor more restricted classes that required collaboration with other large companies and a significant price increase.

Thrun stepped down from his role as CEO in 2016 and was replaced by Vish Makhijani, who had previously served as COO and president. Makhijani had a brief tenure and resigned from his post in October 2018.

Additionally, Thrun implemented a 20% layoff of its staff, affecting 125 employees. Gabriel Dalporto (the former CEO of Lending Tree) has since been appointed the company’s new CEO due to the strategic move.

A change in the company’s policies appeared to be beneficial. Udacity’s revenue doubled to  $90 million in 2018. Udacity also employs approximately 300 employees across nine offices around the world. 

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What is the Funding and Valuation of Udacity?

Crunchbase reports that Udacity has raised approximately $235 million in debt and equity capital through five funding rounds. Some of the notable investors in Udacity are German media conglomerate Bertelsmann, venture capital firm CRV, and venture capital firm Andreessen Horowitz.

The most recent valuation of Udacity was disclosed in November 2015 at the company’s Series D financing. Udacity was valued at $1 billion at the time, making them a unicorn in the startup.

What is the Revenue of Udacity?

In 2018, revenue totaled $90 million, a 25% increase over the previous year. Additionally, the company’s enterprise accounts increased in size, increasing by 100% year over year. Things were quite different for Udacity in 2020 as it generated a 260% growth in annual recurring revenue.

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