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The Future is Digital: Chegg Quarter 1 2014 Results

Former textbook rental giant turned student hub Chegg reported its Quarter 1 2014 results, and according to CEO Dan Rosensweig

“The first quarter was a strong start to 2014 with Chegg digital revenue growing 66% year-over-year.”

The combined revenue is up 22% from Q1 2013 and now at $74.4 milllion. Although the company still has around 180,000 titles in its print library available for rent, Chegg has clearly moved on from textbook rentals to being a service provider that aims to cater to student needs in various different areas.

Chegg today offers students free and paid services ranging from finding the right college over scholarship opportunities to which course to take, what materials are needed in that course and where they can fill their empty stomachs. Chegg estimates that it saved students and their families $222 million in Q1 2014.

Over the years EDUKWEST has reported on Chegg in a variety of articles, and when you browse these you will notice the company’s bet on digital has become more and more apparent over this period of time. Since 2010 we have seen a series of acquisitions prior to the IPO including Cramster, CourseRank, Notehall, Student of Fortune and Zinch that indicated a focus on the Student Graph and also the move away from physical textbooks toward digital textbooks and the launch of Chegg’s etextbook reader.

While some acquisitions, like Notehall for instance, did not seem to have made a big impact on the strategy, the acquisition of Zinch, now Chegg Admission Services, seems to pay off for the company. According to the quarter results, the service is used by 75% of college bound high school students today.

And Chegg is far from being finished with acquisitions, the latest one being Campus Special which will be turned into Chegg Campus Deals. Chegg’s strategy of adding more related services to campus life works as well. Currently 33% of members use two or more Chegg services, up 75% year-over-year.

Also, the move away from physical textbook rentals toward digital services has started to pay off. Although print revenue grew 13% in Q1 2014 compared with Q1 2013, the massive digital growth of 66% makes it look rather dwarfish.

Still, it is to mention that digital, albeit growing, only makes 24% of Chegg’s overall revenue. And as we all know margins in digital products and services are far from what brick and mortar players were used to. That said, digital services customers grew by 64% and mobile active users grew by 49% and Chegg estimates to grow the share of digital revenue to around 30% by the end of its fiscal year.

Chegg certainly is in for the long run to reposition the itself and offering several free services costs money rather than making the company more money. Nevertheless Rosensweig speaks of education as a $1 trillion market.
The above combined with a certain lack of patience have probably contributed to what some would call an underwhelming performance in Chegg’s stock market debut with the stock down 22.6% after the first day of trading.

And this trend of the stock being fairly unstable seems to continue with a share currently being traded at 5.90, after it had jumped around 12% just after releasing the Q1 results.

Further Reading

Chegg Reports First Quarter 2014 Results | Press Release

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Kirsten Winkler is the founder and editor of EDUKWEST. She also writes about Social Media, Digital Society and Startups at