How does Chegg make money?

Initially a platform for renting textbooks, it now makes 90% of revenue from software subscriptiions

From January 2000 to June 2022, the price of college textbooks increased 162%, more than double the 74.4% inflation rate during that same time period. During the 2021-2022 school year, students were spending between $628 and $1,200 on average for books and supplies. And the price keeps increasing, growing by an average of 6% each year, doubling every 11 years. 

That's the problem Chegg was solving when it was incorporated in 2005, acting as A textbook rental service: calling itself the “Netflix for textbooks” it let students across 6,400 college campuses rent from a virtual bookstore containing 4.2 million books.

Chegg's initial business model revolved around renting textbooks to students: they could rent physical textbooks for a semester at a time as a more cost-effective alternative to buying new textbooks. In addition to rentals, the company also sells both new and used textbooks.

That, however, is not where the majority of its revenue comes from currently: Chegg has diversified its offerings to include a wide range of educational tools and services, which it offers on a subscription basis. That includes its Chegg Study, Chegg Writing, Chegg Math, and Busuu offerings.

Chegg Study offers AI tools created using the company's database of millions of explanations, and supported by subject-matter experts, which are designed to break the user's problems down step by step. They can see how to solve their homework problems with step-by-step explanations, so they learn the process the solution. They can also instantly find what they need in the company's library of solutions curated for their studies and supported by subject-mater experts. 

Chegg Writing, which is marketed to students who need help with writing assignments, offers services such as plagiarism detection, grammar and spelling checks, and writing enhancements, while Chegg Math provides step-by-step solutions to math problems, as well as the use of the graphing calculator.

Finally, Chegg's Busuu offerings come from its acquisition of the language learning platform in 2023; Busuu has reached over 120 million learners across more than 160 countries. Busuu provides courses in 12 different languages to over 500,000 paying subscribers.

In the second quarter of 2024, Chegg had 4.4 million subscribers, bringing in $146.8 million; that represented 90% of the total $163.1 million for the quarter.  

The other $16 million came from what Chegg calls its Skills and Other revenue, which includes revenues from Chegg Skills, Advertising, and any other revenues not included in Subscription Services.

Chegg also generates revenue through advertising and affiliate marketing. They partner with educational institutions, textbook publishers, and other companies, earning commissions or ad fees.

Chegg College Marketing is its digital learning platform that offers marketing options, such as digital, video, and mobile marketing, along with programmatic media, and consumer-initiated videos. Chegg Skills, meanwhile, helps companies helps build skills among their existing teams with programs in software engineering, data science, data dnalytics, UX/UI design, and digital marketing, as well as skills in artificial intelligence. 

Chegg began trading shares publicly on the New York Stock Exchange in November 2013, with an IPO price of  $12.50 that was reported to have raised $187.5 million, with an initial market capitalization of about $1.1 billion. It is currently trading at $2.05 a share with a market cap of $212.52 million. 

(Image source: chegg.com)