Yesterday Udemy’s founder and CEO Eren Bali sent out an email to the instructors using the course marketplace to inform them about upcoming changes in the revenue share structure. From November 1st on the revenue share is going to be based on the source the student comes from. If Udemy brings a student to a course, the revenue share for instructors drops from currently 70% to 50%. If the student comes through the instructor, the revenue share increases from currently 85% to 100% for the instructor.
The reasoning behind these changes are growth. Bali and the team at Udemy believe that through the new structure they are going to be able to invest more resources into marketing, the platform and an affiliate network.
Is 50% commission fair to instructors?
Coming from the instructor’s side of the table I had my fair share of ranting about high commissions on platforms in the past. On the other hand, I totally understand that a platform like Udemy needs to make enough revenue to not only cover cost but to grow, especially when it raised significant venture funding.
And Udemy did something really clever here. I think, it was in the first interview I ever did for EDUKWEST in which Jon Bischke, back then founder & CEO of eduFire, said that marketplaces are a shared effort. The marketplace and its sellers need to work together in order to get customers. And that’s OK as long as the marketplace is actually delivering its promise of promoting the courses / lessons of its instructors in the first place and not relying on their instructors to do all the work themselves.
Attracting top instructors
This led to a killer argument: if you are doing all the work anyway, you can also host and sell your courses on your own. And that’s what top instructors usually did – or they sold their courses to platforms like Lynda.com that offered cash in advance. Udemy’s new revenue structure leaves top instructors who do their own marketing with no good reason not to use Udemy, to the contrary.
Besides getting 100% of the revenue for every student they point to their own courses there is a good chance of winning new customers through the platform and still earning 50%. Instructors also don’t need to care about setting up and maintaining a LMS on their own, don’t need to worry about the payment methods and they get a customer care team for free, as well. Sounds like a pretty compelling offer to me.
The new revenue share also leaves additional percentage points that Udemy can use to attract more affiliates who are generally used to commission between 50% to 75%. But the problem is that at the moment the really interesting courses don’t seem to be on the affiliate list. I dug into the vast back catalog, which is a daunting task in itself due to the huge amount of courses offered on Udemy, yet wasn’t able to find the courses I would be interested to promote.
Issues to solve
Maybe more quality courses will show up in the affiliate section when the new revenue share kicks in but this brings us to the biggest problem Udemy is facing to my mind: quality control. There is a certain waypoint in a marketplace when crappy content outnumbers the good or great one. I feel Udemy is past that point and it gets harder and harder to find good courses via the platform itself. Sure, if the entry point is the website or social profile of an instructor, the way to purchase is pretty straight forward. But if they land on Udemy and have to skim through tons of courses on the same topic, read the ratings and compare the prices it’s a different situation.
But that’s what Udemy needs to achieve, especially under the new revenue share model. Students who buy one course through a lead coming from an instructor need to buy at least one more course from another instructor on the marketplace for Udemy to generate revenue. That’s the advantage of controlled platforms like Lynda.com. They have control over the inventory, all courses have a certain standard of quality and there are not dozens of courses about the same topic.
Other marketplaces like eBay had to deal with this problem and came up with intelligent filters that learn about your preferences and only show you relevant content at a glance from which you can dig deeper if you like. I feel Udemy either needs to implement quality guidelines and curation before courses go live or work on filters that trim down the noise and come up with the courses that are most relevant to a student or affiliate.
And then there is still the question whether Udemy will be able to break out of its core market and enter new verticals, another essential step in order to reach their goal of teaching 10 million students, let alone 100 million. I feel, the team needs to go back in the trenches and seed new verticals like they did in the early days of their marketplace, getting in touch with instructors outside of the tech / startup ecosystem.