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Chegg buys online tutoring service InstaEDU for $30M

As Chegg continues its evolution as a "student hub," it gets into the online tutoring space

Financial trends and news by Faith Merino
June 3, 2014 | Comments
Short URL: http://vator.tv/n/3751

Textbook rental service Chegg hasn’t had an easy go of the stock market since going public last November. Shares have declined nearly 40% to $5.81. But that’s not stopping the company from expanding and redefining itself as a “student hub.”

In keeping with its efforts to become the one-stop-shop for all student-related needs, Chegg announced Tuesday that it has acquired online tutoring service InstaEDU for $30 million in cash. The deal is expected to close at the end of June.

“On-demand tutoring, anytime, anywhere, on any device is a very disruptive idea, and it’s about time that high-quality tutoring was made affordable and accessible for all students through technology,” said Chegg Chairman and CEO Dan Rosensweig, in a statement.

Online tutoring is a $60 billion market and Chegg has attempted to carve a spot for itself in that market with its own tutoring service, Chegg Study, which has acted as something of an automated tutoring service. Students can look up the titles of their books from their computer or mobile device and get online tutorials and little extras via Chegg Study.

Chegg Study launched in 2012 and had over 450,000 subscribers at the end of 2013.

The addition of InstaEDU will give Chegg more leverage in the space. Currently, InstaEDU offers on-demand tutors across 2,500 subjects, ranging from high school to advanced college material. The service starts at 40 cents a minute.

“InstaEDU's mission and values mirror those of Chegg, and their instant, online and device-agnostic tutoring offering fits within our mantra: putting students first,” a Chegg spokesperson told me.

Chegg’s focus on digital services appears to be paying off. Its Q1 digital revenue grew 66% year-over-year to $17.8 million. Print revenue still covers the bulk of Chegg’s total sales, at $56.6 million in Q1, but its growth rate is much slower—13%.

Last month, the company launched Chegg Career Services to help students explore different career options, find out what kind of skills they need for that career, connect with professionals already in the field, and even find online courses to give them the skills they need.

Interestingly, one-third of all Chegg members are using two or more Chegg services, and the company’s mobile user base grew 49% year-over-year in the first quarter while its digital user base grew 64%.

“Combining with Chegg instantly gives our on-demand tutoring platform access to Chegg’s network of 13 million high school and college students, and together we can move quickly to reduce the cost of learning and improve grades and graduation rates across the board,” said InstaEDU CEO Alison Johnston Rue, in a statement.

Johnston Rue will be staying on to lead Chegg’s tutoring service. 

 


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