Ask any US college student and they’ll tell you how expensive college books are. To come up with a working textbook rental model for this $10 billion segment of the book market is just brilliant for Chegg.com. At the back end Chegg.com has a Netflix type model for logistics. It even has former Netflix Chief Operating Officer Tom Dillon to manage the logistics and distribution (as of January 4, 2011) .
[ Note: This post was originally published on December 21, 2011. It was reviewed and updated for links and formatting on February 6, 2021. The textbook business has gone enormous changes particularly after COVID. Similarly, student behavior has changed a lot eg. younger folks are more on Instagram than Facebook as the video below suggests. Note that this post gives you a sense of how things were in 2011.]
In this video, Chegg CEO Dan Rosenweig explains some of the Chegg model. While Netflix founder Reed Hastings famously founded Netflix upon being charged a $40 late fee for a video cassette, for Chegg.com it is the college experience with high cost text books of founders Osman Rashid and Ayush Phumbhra that seems to have nailed the “customer need” part of this wonderful innovation.
The great recession with rising college costs and crushing student loans have turned the Chegg model to something of a social cause. By planting a tree for every book , Chegg has been able to align an environmental cause to its business model as well.
Apart from the logistics and distribution/return channel similarities with Netflix there is a major differences between Netflix and Chegg in terms of opportunities for the creators of content ( Movie makers for Netflix and College Text book writing industry for Chegg). Movie makers with a small audience or less clout with theatres would not be able to get the movie to the audience. Netflix was able to provide the long tail opportunity to such movie makers.In contrast, 80% of College Text books are produced by four publishers and upper level courses have small numbers but students have to get the books, in many cases with a financial struggle. With Chegg probably the students’ life will be easier.
Given the other social media type of approaches (sharing of schedules on Facebook including an iPhone app ) that Chegg is employing – the college textbook market is ready for disruption. Time for textbook publishers, their sales force and college text book stores to take a look at their business model.