Earlier this week I read a fascinating interview on the TED site between Khan Academy founder Salman Khan and Sebastien Thrun, founder of the MOOC platform Udacity.  The pair talk about the growth of their respective sites, and the possible future of education, both online and offline.

It’s well worth a read, but it also brought to mind a paper published recently exploring the impact, and indeed the effectiveness of MOOCs.  The paper, written by Meng Sang Chew and Kelly Grim, explores the effect of MOOCs on six key stakeholders – course instructors, course providers, students, parents, colleges and universities, and society, including the government agencies that subsidize higher education.

Whilst there have been glowing testaments to the potential impact of MOOCs on society, the paper is slightly less effusive.  It points out the high dropout rates, caused they say by an often distant relationship with teachers coupled with a lack of tutoring facilities provided.

The paper agrees with Thrun’s comments in his TED interview in that they don’t believe MOOCs will displace more traditional forms of education, but rather compliment them.

“I don’t really think MOOCS will be a revolution,” says Chew, “but universities will definitely need to keep an eye on MOOCS, how [this] evolves and how it can affect our current mode of teaching.”

The pair had studied MOOCs extensively and hoped that their paper would bring together the latest thinking on the topic.

“A lot of research has been done on this topic,” says Chew. “We tried to pull it all together. Millions of students have taken online courses just in the last 2-3 years. What does this mean? How does each stakeholder look at MOOCs?”

Several financial factors, say Chew and Grim, make MOOCs potentially attractive to society. These include the costs of higher education, which have been growing faster than the rate of inflation for 30 years, and budget constraints that are causing some states to curb support for higher education. If large numbers of universities offer credit for MOOCs, this could significantly reduce the cost of four years of college.

“For parents, MOOCs [could] seem to be the answer to the rising cost of higher education today, particularly if more colleges begin to accept MOOCs for credit,” they write.

They suggest that MOOCs have two main challenges to overcome if they are to continue their progression:

1. The drop out rate is stubbornly high, and efforts need to be made to improve that situation.  I wrote about steps Coursera are making to improve conversion rates, and the next 18 months will see the industry focus on this area.
2. The construction of a financial model for the industry that sees all stakeholders benefit.  This was also an interesting aspect of the TED interview, with Thrun and Khan debating their conflicting models (non profit vs commercial).

“Venture capital and philanthropy have thus far helped fund some providers,” the authors write, “but for the most part … providers and institutions bear their own costs. Given that it takes millions of dollars to fund a startup as a provider, it is logical that in the longer term, these providers must find a way to make a profit out of their investments.”

Thrun pondered a future whereby the same level of investment goes into a MOOC course as currently goes into a start-up.  It’s certainly an interesting prospect, and with Udacity already powering a MOOC version of a traditional masters degree, they are clearly making steps to commercialise their offering.

MOOCs have undoubtedly made a big splash in the past few years.  Now is the time for them to consolidate and develop their platforms based upon the considerable lessons learnt from the huge throughput of students over the past year or so.

One thing I feel that they must do better on is reaching out to new audiences.  By this I don’t mean new territories but rather to people who don’t already have a degree level qualification.  The infographic below was prepared for Moocs.com and shows that nearly 80% of people studying via a MOOC already have a degree or higher.  It seems that the vast majority of the market for MOOCs is being filled by people who clearly appreciate and value learning.  This is despite the free access to higher education style content that you would imagine by very attractive to those without access to such institutions.

If the platforms can do that whilst at the same time improving conversion rates, then we really will be onto something.