Udemy Business Model: How does Udemy Earn Money?

Udemy, established in 2010, has emerged as a leading global online learning platform, offering a vast array of courses across diverse subjects. The company’s business model is multifaceted, generating revenue through various streams that cater to both individual learners and corporate clients.

Course Sales and Revenue Sharing

The primary revenue source for Udemy is the sale of individual courses. Instructors create and publish courses on the platform, setting their own pricing within Udemy’s guidelines. When a course is sold, the revenue is shared between the instructor and Udemy. The standard revenue-sharing model is as follows:

• Instructor Promotion: If the instructor promotes their course through a unique coupon or referral link, they receive 97% of the revenue, with the remaining 3% covering transaction fees.
• Organic Sales: For sales made through Udemy’s organic search or marketing efforts without instructor involvement, the revenue is typically split 50/50 between the instructor and Udemy.
• Paid User Acquisition: When Udemy invests in paid advertising to promote courses, the revenue share may vary, often favoring Udemy due to the incurred marketing costs.

This model incentivizes instructors to actively market their courses while allowing Udemy to benefit from its promotional activities.

Udemy Business (Enterprise Subscription Model)

Udemy Business is a subscription-based service tailored for organizations seeking to upskill their employees. Companies subscribe to this service, granting their workforce access to a curated library of top-rated courses. The subscription plans are typically structured as follows:

• Team Plan: Designed for small teams, this plan offers access for a specific number of users at a set annual fee per user.
• Enterprise Plan: Customized for larger organizations, this plan provides advanced features, including analytics, custom content integration, and dedicated support, with pricing tailored to the organization’s size and requirements.

Instructors whose courses are included in the Udemy Business collection are compensated based on course consumption. Each month, Udemy allocates a portion of the subscription revenue to an instructor revenue pool. Instructors earn a share of this pool proportional to the number of minutes their content is consumed by Udemy Business subscribers.

Personal Plan (Individual Subscription Model)

To cater to individual learners seeking broader access, Udemy has piloted a Personal Plan subscription model. Subscribers pay a monthly fee to access a wide range of courses. Similar to the enterprise model, instructors are compensated based on the consumption of their content by subscribers, with earnings drawn from a designated revenue pool.

Udemy Pro

Udemy Pro is a specialized subscription service aimed at professionals preparing for IT certifications. Subscribers pay a monthly fee of $19.99 to access premium content designed to help them achieve specific certification goals. This model provides Udemy with a steady stream of recurring revenue while offering learners structured paths to certification.

Affiliate Marketing Program

Udemy operates an affiliate marketing program, partnering with individuals and organizations to promote its courses. Affiliates earn commissions for each sale generated through their referral links. This approach expands Udemy’s reach and drives additional course sales, contributing to the company’s revenue.

Financial Performance

Udemy has demonstrated consistent revenue growth over the years. In the second quarter of 2024, the company reported total revenue of $194.4 million, marking a 9% year-over-year increase. The Enterprise segment, known as Udemy Business, generated $120.6 million in revenue, reflecting a 19% increase from the previous year. However, the Consumer segment experienced a 4% decline, with revenue totaling $73.8 million.

To enhance profitability, Udemy has announced a strategic shift to focus on larger enterprise clients, aiming to capture significant market opportunities and deliver accelerated profitability. This approach is expected to generate substantial cost savings and improve adjusted EBITDA in the coming years.

Conclusion

Udemy’s diversified business model, encompassing individual course sales, enterprise and personal subscriptions, specialized professional content, and affiliate marketing, has established it as a formidable entity in the online education landscape. By continually adapting to market demands and focusing on quality content delivery, Udemy not only generates substantial revenue but also contributes significantly to the professional and personal development of its global learner base.