Chegg

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Chegg, Inc.
Chegg logo.svg
Type of businessPublic
Traded asNYSECHGG
Russell 2000 Component
FoundedJuly 2005; 13 years ago (2005-07)
HeadquartersSanta Clara, California, U.S.
Founder(s)Aayush Phumbhra
Osman Rashid
Josh Carlson
Key peopleDan Rosensweig
(Chairman, President, & CEO)
Andrew Brown
(CFO)
Robin Tomasello
(Vice President & Controller)
IndustryEducation
Online retailing
ProductsOnline textbook rental
eTextbooks
Homework help
Course scheduling & review
Scholarships via Zinch
RevenueIncrease US$ 255.07 million (2017)
Operating incomeIncrease US$ -18.97 million (2017)
Net incomeIncrease US$ -20.28 million (2017)
Total assetsIncrease US$ 446.93 million (2017)
Total equityIncrease US$ 391.06 million (2017)
Employees893 (2017)
WebsiteChegg.com
[1]

Chegg, Inc. is an American education technology company based in Santa Clara, California that offers online textbook rentals (both physical and digital), as well as homework help, online tutoring, and scholarship and internship matching.[2] Chegg's core offerings target students attending high school and college in the United States. The company was created in 2001 by three Iowa State University students.[3] The name Chegg is a portmanteau of the words chicken and egg, based on the founders' experience after graduating from college; they could not land a job without experience, but could not get experience without a job.[4]

Chegg headquarters in Santa Clara

History[edit]

Originally called CheggPost, Chegg was founded by Osman Rashid and Aayush Phumbhra in 2003.[5] Rashid and Phumbhra initially believed the site would operate similar to Craigslist for college campuses, but it didn't gain significant traction outside of textbook sales.[5] In 2007, the company was restructured to focus on textbook sales only.[5] It gathered books from sellers at the end of the semester and then rented or sold them to other students at the start of a new semester.[5]

The CheggPost site was introduced in 2001 by Josh Carlson; it was used by scholars to post about furniture, sport material and books.[6] In 2003, Aayush Phumbra wanted to bring the company to a national level and he discussed the idea with his friend Osman Rashid, who became chief executive officer; shortly they had funding of $50,000.[6] In 2007, Phumbra and Rashid bought 2,000 textbooks and initiated a service called "textbookflix.com" for renting textbooks, based on the concept of Netflix. In 2007, the name was changed from Textbookflix.com to Chegg.com. Chegg company had difficulties to find capital, so it started financing the activities with credit. One of the strategies used by the employees was searching a copy of the book online, pay it with Rashid's American Express card and ship the textbook to the student.[6] In December 2008, Chegg raised $25 million in venture capital.[5]

In 2008, Jim Safka became the new CEO of Chegg; previous chief executive of Match.com. In 2008 and 2009, Chegg had 40 full-time and 40 part-time employees.[3] During this period, it had almost one million books for rent. The textbooks were rented during quarter or semester; the price was based on different aspects such as popularity and age.[3] The shipping fees was between $4 and $7. Students had to pay extra if they returned the textbook late. Safka left her CEO position in 2009 and Dan Rosenweig became the new CEO the following year.[3]

In 2011, Chegg improved the Web site with more than 4 million textbooks for renting. The goal was to make students spend more time on the site for other activities and not only use it for purchasing the textbooks.[3] At that time, Chegg was just spending money for making the Web site as a platform for renting textbooks. Most of the earning was based on textbooks, only 7% of the revenue came from other activities while 3% from e-textbooks.[3]

IPO[edit]

Chegg began trading shares publicly on the New York Stock Exchange in November 2013.[7] According to the San Jose Business Times, the IPO raised $187.5 million and gave it an initial market cap of about $1.1 billion.[8]

Growth and acquisitions[edit]

In 2010, Chegg acquired CourseRank, a service that allows students to review courses and plan their courses for upcoming semesters.[9][citation needed] CourseRank is used for revisions about professors and courses; class schedules and the textbooks required; students can check the courses chosen by their friends.[10]

That same year the company acquired Cramster, a provider of online homework help;[11] and Notehall, an online marketplace for purchasing or selling class notes.[12] Cramster is a community where students can work in groups and assist each other in various subjects; the goal of investing in CourseRank and Cramster is to help students save money and consume less time.[10] The company made several additional acquisitions in 2011, including, Zinch, a service that matches high school students to college recruiters.[13]

Despite the fact that the sales increased regularly from 2008 to 2012, there was an increment in the loses as well. Revenue in 2008, was $7.6 million compared to $213 million in 2012; but the net loss in 2008 was only $2.9 million whereas it rose to $49 million in the most recent year. There were 3.7 million transactions in 2012; almost 320,000 students used the Homework Helper service during the same year. Around 80% of the earning was made by the rental of print textbooks. CEO, Dan Rosensweig's income was $490,000.[14]

Chegg had earnings of $64.5 million in the second quarter of 2013, however, the net loss increased to $8.2 million. [15] Major acquisitions and partnerships in 2014 included InstaEDU Inc.,in June 2014, a website that connects students with tutors.[16] Chegg invested $30 million in order to get InstaEDU Inc.[15] In August 2014, Chegg entered into a partnership with Ingram Content Group to handle storage and shipping of its textbooks. The partnership was meant to reduce Chegg's overhead costs.[17][18] Ingram would be responsible for activities like shipping, returning and improving the service.[15]

In 2016, the company acquired Imagine Easy Solutions, which offers bibliographic and educational products.[19] In April 2017, Pearson partnered with Chegg to make higher education textbooks more affordable. This partnership operated on a "rental only" business model.[20]

In 2017, Chegg started providing assistance in Math by paying $15 million in cash to Cogeon GmbH, German math education provider. He uses artificial intelligence technology to solve students' weaknesses in math through an app called Math 42. Chegg also started support in nursing and chemical engineering.[2]

The company had an innovation, the new E-reader, in 2018. This service allows students to highlight text, add notes and get any other kind of assistance for free. Chegg's reader is accessible from every device as it is created in HTML5.[21] The same year, the company acquired WriteLab from Matthew Ramirez for $15 million. WriteLab is designed to improve writing skills.[22][23]

2018 data breach[edit]

In September 2018, Chegg discovered a data breach that occurred the previous April. The breach included the loss of user names, hashed passwords, addresses and e-mails but not financial data.[24] Fortunately, social security numbers and any kind of bank account information weren't stolen. The database was hacked almost six months earlier and it included 40 million users, some of these were inactive. This incident created some concerns about Chegg shares. Firstly, it leaded doubts about the revenues. Second, Chegg growth might be affected by the loss of users who can lose trust and stop renting textbooks from Chegg. When people discovered about the data breach, shares dropped 12%.[25]

Board of directors[edit]

As of December 31, 2018, the board of directors consists of:

Officers and other members[edit]

As of June 5, 2019

  • Andrew Brown
  • Nathan Schultz
  • Michael Osier
  • Esther Lem
  • Jenny Brandemuehl[26]

Business model[edit]

It is estimated that in 2009, college students spent an average of $667 on their textbooks.[27] A second estimate was $1,000 per year,[28] with signs that textbook prices were increasing faster than inflation.[28] Moreover, some college bookstores would offer to buy back the used books for a fraction of their original price.[5]

The founders began noticing the trend of online rental from the success of services like Netflix.[29] Consequently, in the summer of 2007, Rashid and Phumbhra re-positioned the company along the lines of Netflix as a way to rent textbooks to students.[5][30] Since Chegg had little money initially, when an order came in Rashid would buy the book using a credit card and have it shipped to the student until automation came later.[31] At one point, with a huge volume of traffic on his credit card, his credit card firm suspected fraud, but Rashid was able to persuade the credit supplier to extend credit using multiple numbers of cards.[29]

Books normally rent around half the retail price; for example, a macroeconomics textbook priced at $122 at a college bookstore would rent for $65 at Chegg.[29] But savings varied from book to book.[32]

Stories in campus newspapers helped spread the idea. One senior at Arizona State University calculated he would spend about half as much renting books than buying them for one semester.[29] The idea clicked. In 2008, the firm hired the former chief executive of Match.com, Jim Safka, to run the firm.[29] In 2008, revenues were about $10 million; in 2009, revenues in January alone were $10 million, according to Safka.[33] The firm has raised additional capital from venture capitalists. The company also started a campus representative program, which paid the enrolled college students per referral for purchases made by other college students.[29]

In January 2009, USA Today reporter Julie Schmit described Chegg as a "leader" in the "burgeoning arena of college textbook rentals."[30] The firm had 55 customer service reps at that point.[30]

Since many textbooks become out-of-date quickly, often replaced with new versions, a key to profitability will be how long a book can be re-rented, or recycled; in the market for rental cars, for example, firms such as Hertz and Avis buy new cars but sell them after about a year or two of service. But what is the useful life of a rented book? "The market can be tricky," said market analyst Kathy Mickey, because professors must use the same books for several semesters in order for book-rental companies to make money on the programs.[34]

Competitors[edit]

The college textbook market has a variety of competitors. While the main source of books for college students is college bookstores, there are an increasing number of options.[30] Bookseller Barnes & Noble, which owns 636 college bookstores, began its own textbook rental program in January 2010, largely patterned along the lines of Chegg's service. One report is that Barnes & Noble will rent books at about 42% of their original price, on average.[27] Students can also rent textbooks from their college bookstore or online, with orders shipped to their college bookstore for pickup, according to one Associated Press report.[27]

The U.S. Congress set aside $10 million to encourage college bookstores to rent textbooks,[34] so bookstores are starting an up rental programs as well. Follett Higher Education Group started up a rental program in 2009.[34]

Wall Street Journal reporter Peter King compared several options for textbook rentals in April, 2009.[35] He compared firms such as BookRenter.com, Campus Book Rentals, Chegg, and Textbooks.com which sells textbooks online but offers a guaranteed buyback later, making these books "quasi-rentals".[35] King compared offerings related to an expensive accounting textbook[36] and noted some confusion with book packages, with return labels differing from the firms which had been ordered from; figuring out that the original sources were Campus Book Rentals and Chegg required matching the shipping tracking orders with the email invoices.[37] A Chegg spokesperson said the firm sometimes uses "strategic partners" such as eCampus.com if a particular book isn't in its warehouse, but the reporter wondered whether the use of third party suppliers might cause confusion when books needed to be returned at the end of the semester.[38] Chegg was the "most expensive rental" and charged sales tax.[38] The least expensive alternative was Textbooks.com, although this firm required an upfront expense of $117.50; King surmised the upfront payout would mean college students had less money available during the semester.[38] In all cases, books had to be returned by the deadline to make the cost savings worthwhile.[39] The online alternatives were substantially better than buying the book from the college bookstore and selling it back to that bookstore at the end of the semester.[40] In a test using a different book, Chegg had the lowest price, while other firms did not even carry the book.[41] Textbooks.com, according to the report, does not offer buyback chances to all books it sells.[41]

Other competitors include Perlego, Rafter, Warehouse Deals, and Apex Media.[42][43]

As for Chegg's online tutoring platform, Chegg Tutors (formerly InstaEDU), there are several competitors, including Varsity Tutors, TutorMe, Skooli, Nerdify and Tutor.com.[44]

Finances[edit]

One report is that the firm first received $2.2 million in financing in January 2007, led by Mike Maples (through Maples Investments, now called Floodgate Fund) and Gabriel Venture Partners. In August 2008, Oren Zeev is believed to have invested $4.7 million,[45] then with Primera Capital, led the Series B round of $7 million, which included participation from prior investors Gabriel Venture Partners and Mike Maples.[46] One source suggests the firm raised $57 million in November 2009.[47] In 2010, the company raised $75 million from Ace Limited.[48] Another suggests total equity financing since inception, as of January 2010, is in the range of $150 million, primarily from venture capital funding.[49] Investors include Foundation Capital, Insight Venture Partners, Kleiner, Perkins, Caufield & Byers, Pinnacle Ventures, and TriplePoint Capital.[49]

Green marketing promotion[edit]

Chegg has an arrangement with American Forests' Global Releaf Program such that every book rented or sold means that one tree is planted. The firm claims that over five million trees have been planted.[50][51]

See also[edit]

References[edit]

  1. ^ "US SEC: Form 10-K Chegg, Inc". U.S. Securities and Exchange Commission. Retrieved March 3, 2018.
  2. ^ a b Sharma, Asit (2018-03-22). "Is It Time to Take a More Serious Look at Chegg, Inc.? -". The Motley Fool. Retrieved 2019-05-02.
  3. ^ a b c d e f Pederson, Jay P., editor. (2013). International directory of company histories. St. James Press. p. 115. ISBN 9781414482224. OCLC 833188977.CS1 maint: Multiple names: authors list (link) CS1 maint: Extra text: authors list (link)
  4. ^ Miguel Helft (July 4, 2009). "We Rent Movies, So Why Not Textbooks?". The New York Times. Retrieved 2010-01-26. ... calculated that his bill for books that semester would have been $334 with Chegg, far less than the $657 he paid. ...
  5. ^ a b c d e f g Miguel Helft (July 4, 2009). "We Rent Movies, So Why Not Textbooks?". The New York Times. Retrieved 2010-01-26.
  6. ^ a b c Pederson, Jay P., editor. (2013). International directory of company histories. St. James Press. p. 115. ISBN 9781414482224. OCLC 833188977.CS1 maint: Multiple names: authors list (link) CS1 maint: Extra text: authors list (link)
  7. ^ De La Merced, Michael (12 November 2013). "Chegg Prices Its I.P.O. at $12.50 a Share".
  8. ^ "Chegg stock stumbles after IPO tops targets".
  9. ^ "Chegg's First Acquisition: CourseRank".
  10. ^ a b Helft, Miguel (2011-03-24). "Textbook Renter Chegg Becomes More Social". Bits Blog. Retrieved 2019-05-01.
  11. ^ "Exclusive: Chegg Buys Cramster".
  12. ^ "SEC filing cracks the egg on Chegg's Notehall purchase".
  13. ^ "Chegg Buys Zinch in Another Move Toward a "Social Education Platform"".
  14. ^ "Chegg by the Numbers". Publishers Weekly. 260 (33): 6. 2013-08-19.
  15. ^ a b c "Gale - Product Login". galeapps.galegroup.com. Retrieved 2019-04-30.
  16. ^ Kolodny, Lora (2014-06-04). "Chegg Acquires Tutoring-On-Demand Site InstaEDU in $30M Cash Deal". Wall Street Journal. ISSN 0099-9660. Retrieved 2019-02-27.
  17. ^ Merced, Michael J. de la (2014-08-04). "Chegg Finds Partner to Handle Its Textbooks". The New York Times. ISSN 0362-4331. Retrieved 2019-02-27.
  18. ^ "Chegg Strikes Distribution Partnership With Ingram Books, Announces 15% Boost In Earnings From Digital Services".
  19. ^ Lardinois, Frederic. "Chegg acquires Imagine Easy Solutions, the company behind EasyBib, BibMe and Citation Machine". TechCrunch. Retrieved 2017-05-06.
  20. ^ "Pearson to partner with Chegg on textbook rentals | The Bookseller". www.thebookseller.com. Retrieved 2017-09-26.
  21. ^ "Chegg's new e-book reader is practical, comfortable, boring". VentureBeat. 2012-01-18. Retrieved 2019-05-03.
  22. ^ Sternlicht, Alexandra. "His Company WriteLab Was Acquired by Chegg Before He Turned 30". Forbes. Retrieved 2019-05-03.
  23. ^ "Chegg Cuts $15 Million Check to Buy AI-Feedback Tool, WriteLab - EdSurge News". EdSurge. 2018-05-16. Retrieved 2019-05-03.
  24. ^ "CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934". Security and Exchange Commission. Retrieved 29 September 2018.
  25. ^ Sharma, Asit (2018-09-27). "What Chegg's Database Breach Means for Its Stock -". The Motley Fool. Retrieved 2019-05-02.
  26. ^ "Chegg, Inc. - Sec Filings". investor.chegg.com. Retrieved 2019-05-03.
  27. ^ a b c Associated Press (2010-01-11). "Barnes & Noble starts textbook rentals". San Jose Mercury News. Retrieved 2010-01-26. ... Bookseller Barnes & Noble is launching a textbook rental program for college students, making it the newest entrant in a growing field. ...
  28. ^ a b Peter King (April 23, 2009). "A Textbook Case of Renting Books". Wall Street Journal. Retrieved 2010-01-26.
  29. ^ a b c d e f Miguel Helft (July 4, 2009). "We Rent Movies, So Why Not Textbooks?". The New York Times. Retrieved 2010-01-26. ... the inspiration was Netflix. ...
  30. ^ a b c d Julie Schmit (2009-01-12). "Chegg CEO Rashid applies Netflix concept to textbooks". USA Today. Retrieved 2010-01-26.
  31. ^ Miguel Helft (July 4, 2009). "We Rent Movies, So Why Not Textbooks?". The New York Times. Retrieved 2010-01-26. ... They would buy the book using Mr. Rashid’s American Express card and have it shipped to the student. ...
  32. ^ Miguel Helft (July 4, 2009). "We Rent Movies, So Why Not Textbooks?". The New York Times. Retrieved 2010-01-26. ... how many times a given book can be rented. The savings can vary from book to book. ...
  33. ^ Miguel Helft (July 4, 2009). "We Rent Movies, So Why Not Textbooks?". The New York Times. Retrieved 2010-01-26. ... Jim Safka, a former chief executive of Match.com and Ask.com who was recently recruited to run Chegg, ...
  34. ^ a b c Associated Press (2010-01-11). "Barnes & Noble starts textbook rentals". San Jose Mercury News. Retrieved 2010-01-26. ... because Congress last year set aside $10 million to provide grants for college bookstores to start rental programs...
  35. ^ a b Peter King (April 23, 2009). "A Textbook Case of Renting Books". Wall Street Journal. Retrieved 2010-01-26. To see how the process works, we ordered textbooks from three rental companies: BookRenter.com, Campus Book Rentals and Chegg; and one textbook seller, Textbooks.com, which doesn't rent books, but offers guaranteed buybacks on some texts, making those books a quasi-rental.
  36. ^ Peter King (April 23, 2009). "A Textbook Case of Renting Books". Wall Street Journal. Retrieved 2010-01-26. We decided to check prices and availability ...
  37. ^ Peter King (April 23, 2009). "A Textbook Case of Renting Books". Wall Street Journal. Retrieved 2010-01-26. ... Only by matching the shipping tracking numbers with our email invoices could we figure out these were the books we ordered from Campus Book Rentals and Chegg.
  38. ^ a b c Peter King (April 23, 2009). "A Textbook Case of Renting Books". Wall Street Journal. Retrieved 2010-01-26. A Chegg spokeswoman later told us the company sometimes uses "strategic partners" if the book isn't in its warehouse. ...
  39. ^ Peter King (April 23, 2009). "A Textbook Case of Renting Books". Wall Street Journal. Retrieved 2010-01-26. With book seller Textbooks.com, the book has to be returned by a set deadline to get the guaranteed buyback. ...
  40. ^ Peter King (April 23, 2009). "A Textbook Case of Renting Books". Wall Street Journal. Retrieved 2010-01-26. In contrast, buying a used copy at the ASU bookstore costs $125.25. Subtracting the bookstore's estimated buyback price of $55 would leave us with a net cost of $70.25.
  41. ^ a b Peter King (April 23, 2009). "A Textbook Case of Renting Books". Wall Street Journal. Retrieved 2010-01-26. ... We did a spot check of prices for the "Norton Field Guide to Writing" (list price, new: $48), which is widely assigned for English composition courses. Chegg would rent it for $9.99 for 60 days. ...
  42. ^ https://www.insidehighered.com/news/2013/08/16/amazon-restricts-students-bringing-certain-textbook-rentals-across-state-lines#sthash.OT8HiQCk.dpbs
  43. ^ http://tech.eu/profiles/13690/perlego-e-books/
  44. ^ "The Best Online Tutoring of 2016 | Top Ten Reviews". TopTenREVIEWS. Retrieved 2016-12-29.
  45. ^ http://www.themarker.com/technation/1.2098573
  46. ^ Savitz, Eric. "Chegg Raises Another $25 Million In Venture Funding". Forbes. Retrieved 2017-11-01.
  47. ^ "Book rental company Chegg raises $57M". San Jose Business Journal. November 19, 2009. Retrieved 2010-01-26. Online textbook rental company Chegg.com Inc. said Thursday it raised $57 million in a fourth round of funding. ...
  48. ^ "Chegg adds another $75M to textbook rental cash pile | VentureBeat". venturebeat.com. Retrieved 2017-11-01.
  49. ^ a b PR Newswire (2010-01-26). "Chegg.com Secures $112 Million to Fund Explosive Growth in Online Textbook Rentals". Reuters. Retrieved 2010-01-26. Chegg.com ... announced today that it has successfully closed $57 million Series D equity funding,...
  50. ^ "Ecofriendly". Chegg.com. Archived from the original on 2010-01-15. Retrieved 2011-03-29.
  51. ^ "Global Relief: Ecofriendly". AmericanForests.org.

External links[edit]