Udemy: The Rise of an EdTech Unicorn
The B2B pivot that took Udemy public: How diversification into enterprise learning secured the company’s IPO future
The Origins of Udemy
The establishment of Udemy traces back to early 2010, when Turkish entrepreneur Eren Bali partnered with Oktay Caglar and Gagan Biyani to establish an online learning platform. This nascent startup, named Udemy, was fueled by a vision to transform and democratize the realm of online education. Headquartered in San Francisco, Udemy sought to craft an accessible marketplace connecting learners and instructors from across the globe.
Unlike traditional educational institutions, Udemy adopted an open marketplace framework, inviting instructors from diverse backgrounds to share their knowledge. This digital learning hub thereby offered learners a rich buffet of affordable courses spanning an eclectic range of topics and skill sets.
Steady Growth in the Early Years
Udemy’s fledgling years saw gradual but steady growth. By 2014, just four years since its inception, the platform had garnered over 1 million learners.
While initially catering predominantly to individual consumers, Udemy forged its enterprise-focused Udemy for Business segment in 2015. This strategic move unlocked the lucrative corporate training market, enabling Udemy to serve organizational learning and development needs.
While the broader edTech sector held rosy prospects, Udemy’s specific appeal lay in its instructor-driven approach and vast course catalog spanning technical, business and creative skills. This positioned it as an attractive one-stop solution for self-development and upskilling.
Udemy’s diverse catalog presents a competitive edge compared to many niche players in the industry who focus solely on specific learning verticals.
Rapid International Expansion
Udemy focused on onboarding international instructors and learners, realizing that relevance and relatability would be the cornerstones of succeeding globally. By leaning into localization and contextualization, Udemy witnessed a meteoric rise in international users. This was further propelled by the COVID-19 pandemic.
In 2019, Udemy expanded its global footprint by rolling out Udemy for Business in key international markets like Brazil, India, Japan and Spain. This international thrust was in lockstep with the platform’s aim of democratizing online learning across the world. By 2020, over 60% of the company’s revenue was being generated outside the United States.
Surging Growth and Refining the Business Model
Buoyed by its international success, Udemy sustained its incredible growth momentum, reaching milestone user base figures like 20 million learners in 2017 and 30 million learners by 2019. This exceptional uptake demonstrated the draw and stickiness of Udemy’s online learning experience. 2018 was a standout year, with Udemy registering over $170 million in revenue. The company was clearly hitting its stride, more than tripling top-line growth over three years.
Regarding instructor revenue share for individual courses, Udemy pays out 37% of the net amount if the customers are acquired from Udemy’s marketing channel. If learners sign up through the instructors’ referral link, the instructor will keep 97% of the revenue.
Tightening Enterprise Focus
By 2019, Udemy’s course catalog had ballooned to over 100,000 courses spanning more than 65 languages. However, a key shift was the growing prominence of Udemy for Business within the company’s portfolio. While consumer learning continued to be a cash cow, the enterprise segment presented massive potential for high-value recurring revenue.
Recognizing this, Udemy doubled down on Udemy for Business starting in 2020. The corporate learning solutions segment became the prime vehicle for the company’s next phase of growth. By enriching capabilities like learning analytics, administration tools and customized portals, Udemy for Business witnessed skyrocketing demand from global enterprises.
Between 2019 and 2020, the enterprise segment’s revenue share rose rapidly from 18% to 24%. The COVID-19 pandemic only accelerated this demand, with organizations seeking online solutions for remote capability building. Udemy for Business revenue expanded by over 80% in 2020 alone.
This momentum continued through 2021 and 2022, with the business segment projected to account for 56% of overall revenue by 2023. Udemy was gaining reputation as a formidable corporate learning platform.
The Public Markets Beckon
Riding the high growth triggered by its enterprise solutions, Udemy took the plunge into public markets in 2021. The company debuted on NASDAQ in October 2021, being ultimately priced at $29, offering 14.5 million shares. The total proceeds from the offering were $420.5 million. The stock closed at $27.50, giving the company a market value of about $3.8 billion.
Udemy for Business was marketed as the prime value proposition for prospective investors. With net dollar retention of 121% in Q2 21, a gross margin of 66%, and a loyal customer base that invites comparisons to best-in-class SaaS providers, Udemy was no longer a fledgling startup, but an established learning magnate worthy of public market attention.
Backing up this narrative was Udemy’s continued revenue growth and global uptake. By 2022, the platform boasted over 59 million registered learners and around 14,000 enterprise customers in over 150 countries.
The Road Ahead
As Udemy embarks on its journey as a publicly traded firm, its growth charter seems lucid. The company is prioritizing investments to expand its enterprise segment, the crown jewel in its portfolio. Key focus areas include sales, marketing, product R&D and international growth of Udemy for Business.
Sprinkling some pixie dust on Udemy’s future is the vast market opportunity yet to be tapped. Corporate learning and upskilling form a multi-billion dollar industry ripe for online disruption. Udemy is sharpening its edge to maximize this potential in the years ahead. On August 1, Udemy announced that it would join the badge of competence trend and release its own badging offering.
On the consumer side, scope abounds for enhancing customer experience via personalization, localized content and adaptive learning technologies. Udemy has barely scratched the surface when it comes to using data, analytics and AI to elevate learning outcomes. Udemy’s management highlighted that AI and generative AI are driving users to its marketplace and demand for its platform.
Of course, the risks are significant, including increasing competition, rising customer acquisition costs, and the normalization of offline learning opportunities post-pandemic. But Udemy’s platform strength, brand equity and content diversity seem likely to shore up its leadership status in online education.
Its successful IPO and growing enterprise footprint are a testament to Udemy’s promising future. The company seems firmly aligned with its founding vision of democratizing online learning globally. As learners and organizations increasingly embrace digital education, Udemy stands well-poised to fulfil bold 21st century ambitions. The road ahead will likely see this trailblazer reinforce its stature as a transformative edTech phenomenon.
