Textbooks face terminal disease with the advancement of technology, especially tablets and e-readers – Part 2

Rather than compete head-on with its larger, more established rivals, Chegg is trying to become a site where students will buy everything they need for school and, in the process, share ­information that Chegg can sell to marketers. The company has made five ­acquisitions, companies like ­Cramster (for homework help) and CourseRank (for picking courses), that allow it to sell other school-­related goods and services. With these investments Chegg hopes to make money during the entire year, rather than the six-week-long period when students rent and buy textbooks. Rosensweig wants Chegg to be an open platform, like Facebook is to Zynga, and take a cut of whatever revenue other companies generate from the 5.8 million registered users in Chegg’s database. “The print rental and textbook business is milk in the back of the store— everyone needs to have it,” says Rosensweig. “This has ­allowed us to get all of these students, plus their credit cards. It’s at the centerpiece of the student graph.”

Chegg got its start in 2000 as a side project for Josh Carlson, then a sophomore at Iowa State University. He built a site called CheggPost.com as a Craigslist for college students, who used it to buy and sell furniture, sporting goods and textbooks. Students paid nothing to post. Carlson planned to sell advertising once traffic picked up. He teamed up with Aayush Phumbhra, an Iowa State M.B.A. student, and in 2005 landed $50,000 in funding. But inventory was low and traffic remained flat. Carlson left, and in 2007 Phumbhra and a new team refocused entirely on renting textbooks. They raised more money and in 2010 brought on Rosensweig, 50, a former Yahoo exec who ran the Guitar Hero division of Activision, to run the company and create Chegg’s digital strategy.

Despite the acquisitions Chegg is still rooted in traditional textbooks. Only 3% of overall book rentals and sales come from e-books, and only 7% of total sales come from something other than books. According to Chegg, a year ago students spent an average of three minutes on Chegg.com. Today they spend only 30 seconds more and 15 minutes total on the other sites that the company acquired. Course­Rank’s users have risen from 50,000 to 400,000 since Chegg bought the site. Cramster’s user base has “more than doubled.”

Someday when Nike wants to launch a new golf shoe and needs to reach NCAA golfers who live a certain number of miles from a course, they would be able to target via Chegg, says Rosensweig. “That’s not something the big guys are going to do.”

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Posted by Usman Khalid on Jan 28 2012. Filed under Business, Sci-Tech. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.