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BookRenter sees 725% jump in revenue

Online textbook-rental market is booming and BookRenter is cashing in

Financial trends and news by Faith Merino
September 1, 2010
Short URL: http://vator.tv/n/1189

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It's quite unfortunate that college students - who budget their limited funds to avoid asking parents for money - find themselves in a cash crunch when it's time to shell out money to buy their required college books.

At that point, a choice must be made: ask parents for money, or start waiting tables. But a number of online book rental businesses are swooping in to save college students from having to make that choice by offering textbooks for rent at a fraction of their shelf price. One startup, BookRenter, is reaping the rewards.  BookRenter announced Wednesday that its revenue has grown by 725% since September 2009.

According to the company’s press release, customers rented more books from BookRenter this August than the last two years combined.  Furthermore, another 45 college and university campuses adopted the BookRenter platform to launch their own online stores, bringing the total number of campuses using BookRenter’s platform to 260.

Vator’s Bambi Francisco spoke with BookRenter CEO Mehdi Maghsoodnia back in June, shortly after the San Mateo, Calif.-based startup raised $10 million in series B funding, led by Norwest Venture Partners and Storm Ventures, bringing its total financing to $16 million.  In the interview, Maghsoodnia explained how the company works and how it differs from competitors like Barnes & Noble and Chegg.

“We have a very different business model.  We are not a typical book company, per se.  We are really a platform for rental, and we partner deeply on both sides.  We partner with bookstores on the customer acquisition side, so bookstores can actually deploy a branded store on top of our platform,” said Maghsoodnia.  On the delivery side of things, BookRenter has also partnered with major book distributors like Amazon, Nebraska Book Company, and Follett.

According to Maghsoodnia, the textbook market brings in about $7 to $10 billion, and the online rental market accounts for some $200 million, about 30 percent of which, says the CEO, is going to BookRenter.  But the online textbook rental market is growing by about 300 percent annually.  Chegg is expected to rake in approximately $130 million in revenues this year alone.

Other book retailers are scrambling to compete.  In July, Borders announced that it would be offering a discount of up to 90 percent on used textbooks via its newly created Borders Textbook Marketplace, launched in partnership with Alibris.  The marketplace contains over 1.4 million titles, and tops off the discount with a textbook buy-back option, though the company made no allusions to the possibility of a future book rental service.

So that leaves the obvious question: how will BookRenter adapt to the growing market for digital textbooks?

According to Maghsoodnia, the market for digital textbooks is growing at a rate of 20-percent a year, and it could be another 10 or 15 years before digital textbooks outsell rentals.  The CEO believes that this is due, in part, to the fact that many students still want a physical book, a pattern which he likens to Netflix’s sales.  The online DVD rental company offers a number of titles digitally, but the bulk of its revenue comes from physical DVD rentals because, says Maghsoodnia, many people still want the physical product.

BookRenter will likely be taking a big lesson from the Netflix model since Netflix co-founder and former CEO Marc Randolph joined BookRenter’s board of directors back in May.  While most of its sales currently go to physical DVD rentals, there is a growing market for digital rentals and Netflix is meeting that demand by acquiring more new release titles and box office blockbusters for its Watch Instantly feature. 

A physics textbook is obviously a far cry from Iron Man, but nevertheless, the digital textbook market is taking off, and companies like Inkling are jumping in to meet the growing need for downloadable books.  Inkling’s digital textbook platform will allow users to not only download books onto their iPads, but share their notes digitally with their peers and professors from any location.  Users also have the option of downloading individual chapters. 

Could this be the future for BookRenter?  The company was not immediately available to comment, but e-book rentals (or even individual chapter rentals) could one day be the next step in the textbook rental market.

Image source: venturebeat.com


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BookRenter
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Description: BookRenter launched in 2008 and is dedicated to making education more affordable by allowing students to rent textbooks for u...

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