Should Udacity prioritize creating more free courses to increase user acquisition or focus on premium content to boost revenue?

Introduction

The trade-off between creating more free courses to increase user acquisition or focusing on premium content to boost revenue is a critical decision for Udacity's product strategy. This scenario touches on the core of Udacity's business model and its approach to balancing growth with monetization. I'll analyze this trade-off by examining the product ecosystem, potential impacts, and key metrics, then design an experiment to inform our decision-making process.

Step 1

Clarifying Questions (3 minutes)

• Based on Udacity's current market position, I'm thinking user acquisition might be a priority. Could you share our current user growth rate and how it compares to our targets?

Why it matters: Helps determine if we need to focus more on acquisition or retention Expected answer: Growth is below target, indicating a need for increased acquisition efforts Impact on approach: Would lean towards creating more free courses if growth is lagging

• Considering our revenue model, I assume premium content is a significant driver. What percentage of our revenue comes from premium courses versus other sources?

Why it matters: Informs the potential impact of shifting focus to free courses Expected answer: Premium courses account for 70-80% of revenue Impact on approach: High dependence on premium content would necessitate careful consideration before prioritizing free courses

• Looking at user behavior, I'm curious about the conversion rate from free to premium courses. What percentage of free course users eventually upgrade to premium content?

Why it matters: Indicates the effectiveness of free courses as a funnel for premium content Expected answer: 10-15% conversion rate Impact on approach: A high conversion rate would support creating more free courses as a long-term revenue strategy

• Regarding our technical capabilities, how scalable is our current platform for handling a potential influx of new users from free courses?

Why it matters: Ensures we can support the increased load from new free courses Expected answer: Platform can handle 2x current user load without significant upgrades Impact on approach: Limited scalability might favor focusing on premium content in the short term

• Considering resource allocation, what's our current split of content creation resources between free and premium courses?

Why it matters: Helps understand the feasibility of shifting focus Expected answer: 30% free, 70% premium Impact on approach: A significant imbalance might indicate room for reallocation to free courses