Chegg’s InstaEdu Buy: Looking to Bring 24-Hour Tutoring to Students
Earlier this month, Chegg, a company that pitches itself as “the student hub,” with services like textbook rentals and job and internship help, ponied up $30 million in cash to acquire InstaEdu, an on-demand tutoring marketplace.
Santa Clara, CA-based Chegg (NYSE: CHGG) already had its own product called Chegg Study, an outgrowth of an earlier acquisition of a company called Cramster that helped students master concepts and walk through textbook problems. But one-to-one tutoring offers more specific help “We believe it can make a huge difference,” says Anne Dwane, Chegg’s chief business officer. “Technology makes it more accessible and more affordable.”
Brother and sister team Alison Johnston Rue and Dan Johnston founded InstaEdu in San Francisco back in 2011, initially using Skype to match Stanford tutors with families who needed academic help. By the time of the acquisition, InstaEdu had tutors in more than 2,500 subjects, and offered students the chance to connect by video, voice, or text, at rates as low as $.40 a minute.
After an initial partnership, Chegg decided that the company was a natural fit for its mission—helping students with the academic and financial challenges of education. Chegg co-founder Aayush Phumbhra named the company after the chicken-and-egg questions that seemed to accompany his own education. How do you get a degree without having a job to pay for it? How do you get a job without a degree? To that end, Chegg now offers on-demand tutoring, its Study Service, a marketplace to buy and sell textbooks, textbook rentals, and career and internship help.
The company was founded back in 2005, and raised more than $250 million before it went public in November of last year.
I caught up with Dwane to talk about the acquisition, how InstaEdu fits in with Chegg’s future plans, and how education is changing in general. Here is a lightly edited version of our conversation, in person and via email.
Xconomy: With all of the tutoring options out there, why is this a space Chegg wanted to get into?
Anne Dwane: The tutoring market is really interesting. It’s one of those markets where the supply side is really fragmented. There are some really expensive private tutoring options. But they’re not really accessible to everybody. If you’re going to meet in person, you have to schedule a time. It’s not on-demand. This generation is convinced they’re the made-to-order generation. Which is to not to say you don’t have the opportunity to schedule recurring appointments [with InstaEdu], and many do that. You can schedule an appointment every Wednesday at 4 pm. But there’s an important option, which is “I need help now.”
X: Edtech is a huge market. Who do you see as your competitors and how do you differentiate yourself?
AD: What differentiates Chegg today is the same thing that has always differentiated us, and that is that we put the student first. Other companies have approached the EDU marketplace from different perspectives, seeking to solve the challenges faced by administrators, professors, parents, and others. Since Chegg was founded by a student with a problem, we approach everything we do from the lens of the student. It is a simple concept, but it has separated Chegg from others in the industry, built an intensely loyal student following (just look at our live Twitter stream) and allowed us to build a scale and reach amongst students that is unique.
X: How has this sector changed since Chegg was founded, and how are you trying to position yourself going forward?
AD: What we’re trying to do is ride and accelerate the disruptive trends happening in education. We really feel like we’ve seen students evolve as a consumer. They have more choice and more voice in what they can do, and they also can be choosy about ROI [return on investment]. Students are very conscious that they’re going to be spending a lot of time and money in education, and they should be getting a better deal. Whether that means picking the right school to make sure it’s a place they thrive, or making choices about majors and courses informed by employability. According to our research, 70 percent of students go to college to get a great job. There’s linkage between choosing what to study and where and the ability to pursue a career they’re interested in, and students are not making those choices as informed as they could be.
X: What’s the most interesting thing you have learned from your users?
AD: 52 percent of recent grads would choose a different major or degree if they could do it all over again. That is shocking and speaks to the fact that today’s students need more up-front coaching, before they make the big life decisions, such as where to go to school, what to study, and how to pay for it.
X: How do you respond to student needs, when they seem to be changing very quickly?
AD: Every company faces similar questions, as the needs of your customers are rarely ever static. Understanding what is on the minds of students is core to our business and we have invested heavily in our ability to listen to, analyze, and adjust our business to service those needs. For instance, we listened to our students when they told us that they are interested in finding a live tutor who could affordably work with them at their convenience—even if that means just 5 minutes, in the middle of the night). After seeing strong demand from our students, we quickly acquired InstaEdu because we recognized them as being the service that most closely aligned with the changing demands of students, had the best capacity to adjust to those changing needs, and of course was a company whose own vision and values aligned well with Chegg’s.