Keeping an Eye on MOOCs

by Katie Sloan

Massive Open Online Courses have many pros and cons.


Tom ErrathMOOCs – Online Higher Education

The new ‘big thing” in higher education is called a MOOC, short for “Massive Open Online Course.” MOOCs are generating a great deal of excitement as a new and disruptive force in the staid world of higher education. These free online courses taught by top professors from the best universities offer top-flight academic courses to a wide variety of students and offer the potential to lower the cost of delivering a high-quality undergraduate education.

The value of a college degree is a hotly debated topic as costs have spiraled ever higher in the past decade with tuition doubling at most universities. A 2012 survey of 2,500 college board members from public and private universities found that a majority felt that higher education in general is too expensive relative to its value, but 62 percent of this same group felt their institution was priced “fairly” relative to its educational value. This “not in my backyard” attitude from the very people with the power to control costs suggests that the cost of higher education is unlikely to decline in the near future.

Professors and courses that were traditionally only available to the attendees of elite universities are now available to millions of students throughout the world via the MOOC education model. Online education via MOOCs and other university offerings is gaining traction and represents an interesting new phenomenon in higher education.

An MIT-educated electrical engineer, Salman Khan started providing video tutorials to mostly younger students on a variety of subjects via YouTube in 2006. Khan Academy has now delivered more than 164 million student lessons, essentially starting the free, online education movement. Then, in 2011, two Stanford professors provided a free online course in Artificial Intelligence. More than 160,000 students worldwide enrolled in this course, compared to the 30 Stanford students who were physically enrolled in the course in Palo Alto, Calif. 248 students out of 160,000 earned perfect 100 percent grades in the class, and interestingly none was a Stanford student. The popularity of this class jump-started the MOOC movement.

This online movement is viewed by some as a market-based response to rapidly increasing higher education costs. It has also demonstrated that entrepreneurial professors combined with readily available and affordable tools for disseminating their specific expertise via video capture, broadband Internet, and the use of social media, could create MOOCs. Although MOOCs are by necessity highly automated, with computer-graded assignments and exams, students can ask and answer questions through discussion formats including blogs and tweets. With participants spread all over the world, MOOCs promote independence among students, letting participants work at their own speed and interact with other classmates.

Several MOOCs began operating after the initial success enjoyed by the Stanford professors. (see chart below) Thus far, participation in MOOCs is free and no universities have yet agreed to give actual academic credit for completed courses. This may change, though, and with that change universities will have to figure out if they need to re-brand online degrees to avoid diluting the value and exclusivity of traditional diplomas. Universities will also need to determine a pricing model, a certification model, course administration, grading and many other aspects that go along with operating higher education academic classes.

Below are several of the leading companies in the segment:

School Students Institutions Sample Classes

Mountain View, CA


Brown, Cal Tech, Columbia, Duke, Johns Hopkins, Princeton, Stanford, Universities of Florida, Illinois, Michigan, Virginia, Washington

Principles of economics for scientists, game theory, calculus, finance, philosophy, Hollywood storytelling

Cambridge, MA

37,000 MIT, Harvard, University of Texas, California Berkeley and Georgetown Solid state chemistry, introduction to computer science, software as a service, artificial intelligence

Palo Alto, CA

400,000 Stanford originated and taught by Stanford faculty and
other professionals with specific expertise
Computer programming, artificial intelligence, software testing and introduction to statistics

San Francisco

500,000 Taught by subject matter experts who charge a nominal fee
for an online course with over 5,000 courses offered
Classes taught by experts on vocational topics such as excel, photoshop and i-pad applications

Some of these venture-backed companies providing MOOCs can only provide free content for so long, and so each has begun to try and monetize their content. Coursera’s approach is to offer interested employers like Twitter and Facebook access to its top students (for a fee) for potential job recruiting as talented people exist in the market who do not necessarily have a college degree but demonstrate the desired skills through their performance in these MOOC offerings.

At this point in their evolution, many questions remain surrounding MOOCs such as: (i) Who owns the intellectual property and access to students in these online courses, the professor or institution? (ii) If MOOCs are monetized, how will universities place a value on the cost to produce the content and the intrinsic value of the university’s brand? (iii) Will online students earn the same course credits as those paying full tuition to attend a university’s traditional classes? It is too early to tell the answers to many of these questions but clearly this MOOC model will evolve over the next several years.

Some of the advantages and shortcomings of the MOOC model are as follows:

• Best professors at top universities are gaining exposure to new student audiences and students are gaining access to top professors.
• Mass exposure to a specific academic topic which could lead to even more innovation and developed thoughts around the topic.
• Ability for students to proceed at their own pace and timing in a specific class.
• Classes are free but even in future will likely cost much less than traditional courses.

• No direct student contact with the actual professor.
• Cheating and or group collaboration is nearly impossible to monitor.
• Drop-out rates are high as the classes are free.
• Is a MOOC certificate a real college credential?

MOOCs have the potential to positively impact higher education with their ability to reduce costs by making universities understand that traditional classroom learning can be successfully supplemented with online content, provided that the content is of high quality and interest to its students. Many universities are starting to offer some form of online academic content. San Jose State University recently announced an agreement with Udacity to offer a series of remedial and introductory classes that will combine online offerings and tutors with actual professors in a classroom, all at a lower rate of tuition. Gov. Jerry Brown of California provided the impetus for this development as his state continues to struggle with budget constraints to fund public higher education.

We do not envision MOOCs replacing the traditional campus university learning experience and by extension impacting the off-campus student housing market, but we do believe that they represent a positive development for higher education.


i “College Prices, Costs and Outcomes”, Association of Governing Boards, 2012 Survey
ii Chronicle of Higher Education, December 4, 2012
iii New York Times, January 13, 2013

— Tom Errath is vice president and director of research and strategy at Harrison Street Real Estate Capital.

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