Chegg executives talk life after IPO [CES 2014]
Chegg's stock has been on a bumpy ride since the company, primarily known for its textbook rental service, went public in November. Its stock fell as much as 22.6% below its initial $12.50 IPO price during its debut as many questioned what would happen should an online retail giant like Amazon.com move in on its space.
CEO Dan Rosensweig, however, optimistically stated that setting the company up for future success was the most important thing to focus on. That's where the services beyond the 180,000-title textbook catalog come into play, including those that match high school students with colleges and scholarships.
To learn more about how these offerings work, as well as the company's post-IPO plans, we caught up with Chief Business Officer Anne Dwane and VP of Corporate Communications Usher Lieberman Wednesday at International CES 2014.
EDUCATION DIVE: Chegg is primarily in the business of renting textbooks, but what is the full scope of the company's offerings?
ANNE DWANE: So, we offer print and digital textbooks. Basically, we want to be a place where students can find the content they need in any format. What’s interesting, though, is that in the past couple of years, Chegg has expanded our services way beyond that. So we really think about students in high school, from the time they’re thinking about where might be a good fit to go to college and how to go through the admissions process, which can be kind of confusing; how to pay once you’ve been accepted and decide where you’re going which courses should you take, what majors might be interesting, how to get materials like textbooks at the lowest possible price, how to succeed in your classes, and, finally, how to get internships and make the most of it.
USHER LIEBERMAN: So the textbooks are just a part of our business, ultimately. They’re a great customer acquisition tool for us. We can be very competitive on the price. We can save students a lot of money. Last year, we saved them $450 million, so it’s a great entry point to a relationship with students, as is our high school business. But ultimately, we don’t see our future as being a provider of print textbooks, because print textbooks won’t be around, probably, in 10 years.
DWANE: It’s funny because it all started—you probably know the history of the name is “chicken and egg.” It comes from the solution to a “chicken and egg” problem. It’s “Chegg.” There’s so many of those situations that students face, and, again, we really think about helping students make more informed choices about the investment in themselves that is education.
So, like I said, we’re growing from high school and all of these digital services. What a lot of people don’t realize is that, in high school, we’re helping students showcase themselves as more than a test score, to be matched with colleges and scholarships. And that, again, is very unique, because for a long time, students have had not very state-of-the-art ways to discover what life is really like on campus, and then what might be a good fit for them. There are books and other things, but how do you really get a sense, and then also put yourself out there with your interests and aspirations, and be “drafted” or be recruited by schools that are looking for people just like you? And they might even have scholarships for people just like you.
What’s Chegg’s primary focus in 2014?
ANNE DWANE: So we’re thinking about the future of digital, and then how we can be even more essential to students as they’re making these decisions, from high school to college, about what courses to take. We have over a million course reviews now, so that students can really go in there and say, “What’s that like?”
We’re also excited about Chegg Study, which is our service to help students learn and succeed. Those are step-by-step solutions to problem sets in many subjects, but especially in STEM courses like calculus or physics, where students might struggle. And then we have Q&A, where students who are stuck at 2 a.m. when the tutoring center is closed and their friends are equally stumped can actually go online and get some help to get unstuck and master the concepts.
This generation — all of us, increasingly — if you have a question, what do you do? You go to your mobile device and you type it in. We want to be that focused specialist that can actually help kids get unstuck and kind of explore it at their own pace, and then maybe connect to somebody who’s an expert — whether that’s a tutor or another student who’s been in the class before or something like that.
Around the time of the IPO, there was some focus on the textbook aspect of your business and what happens if a company like Amazon moves in on that space, questioning what Chegg’s plans would be then.
DWANE: Well, what’s interesting is students have a lot of choices for textbooks. They can go to the bookstore, they can go online. What we try to think about is sailing our own race, putting the students first, and saying, “How do we best serve the students?”
Unlike Amazon, which is focused on the consumer, we’re focused on the student. What exactly do they need? And also, we understand what the supplemental materials are, besides the textbook, that could be helpful — like the study guide or step-by-step solutions. So we can really put that together and then just be really thoughtful about putting options in front of students at the right time for that student. Like, if we know that you’re taking a certain course, we know the popular Q&A that’s going on around that, so we can actually service that to you.
We think that students, recently, see Chegg as more than just textbooks, but a better place to help them save time, save money, and get smarter.
LIEBERMAN: The truth is, we’re already competing with Amazon. Amazon is in the textbook space, and we’re very competitive with them. What matters to us is the student and how we can help them over the course of their lifelong learning, really. It’s a very different interest than what Amazon is trying to do. Amazon is the world’s greatest fulfillment center. If you know what you want, they can get it to you, but in terms of learning outcomes and what students actually need on a day-to-day basis, it’s very different. And that’s what we’re trying to serve.
And that falls in line with what CEO Dan Rosensweig was talking about during the IPO. I’m paraphrasing here, but he said the important thing at that moment was setting the company up for future success. Can you elaborate on that?
DWANE: That’s right. So, the reason we went public is we had lots of investors, and they were lots of different types of investors who had different time horizons and different interests. And what we’re interested in is building a great, valuable suite of services for students. And so we went public, and now we have a very clean balance sheet, very simple. And now we can get back to just focusing on the business. Markets go up and down, but at the end of the day, if you build a really valuable service for students that’s essential, we think the market rewards that.
How does Chegg monetize the other services you mentioned?
DWANE: You know, it’s interesting because many of our services are free — flash cards and the scholarship matching, internships and things like that. In some cases, we’re paid by a college or university that wants to do outreach to students. We also have brand partners that want to reach students, and that helps us also underwrite or sponsor to make those services free.
LIEBERMAN: For instance, universities spend $6.5 billion a year in marketing to high school students and transfer students. What we’ve done is we’ve given [high school] students an opportunity and the ability to create a profile, let us know about them and what they’re interested in studying, and then we show them colleges we think would be interested in them. If they select — they have to proactively say, “I want to hear from that school” — we can then sell that lead to the school, so we do monetize that service. But we’re not monetizing it via the student.
Again, the student’s the most important part of the equation, and we think something like that should be free to them. And universities are willing to pay for access to those students. So we do monetize a lot of these services, but not necessarily through the student. If we all know one thing from having been students, it’s that students don’t have a whole lot of money.
DWANE: Right, and our whole ethos is helping them save money. We’re very careful about that.
LIEBERMAN: And it is important to help students make better upfront choices, particularly in high school. Because you look at the numbers and 1 in 3 students will transfer before finishing their degree. And 50% of students have told us that they wish they had chosen a different major or a different school. Those are really significant factors, and they’re very expensive — not just for the student, but for the school and for society as a whole. And we think we can help them make better upfront choices by giving them more information.
Technology allows us to really condense the data and make it consumable and put students in control, and that’s really what we’re all about. If you look at the entire higher ed sector, when Chegg came on the scene, really there was no one who was thinking about the student first and really making them the ultimate consumer. Making them the most Important part of the equation. And that’s really set us apart.
We’ve built a business by just saying, “You know what? Students should be primary. What are their interests? How can we help them?” And trying to see the world through their eyes. In the process, we’ve been able to build a business that’s been able to go public, that saved students $450 million last year — and these are really big things, and it’s really just the beginning. We’ve only scratched the surface on what we think we can do.
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