Textbook rentals have grown exponentially over the past few years. So much so that Amazon, which has long taken a bite out of new and used textbook sales on campus, entered the rental market last August. Now three rental leaders begun by students as an affordable alternative to buying textbooks—Chegg, Rafter, and CampusBookRentals—have begun to change their models, which were originally adapted from Netflix. In fact, Chegg launched in 2005 under the name Textbookflix.com. In March 2012 BookRenter changed its corporate name to Rafter, in reference to the beams that support a roof, reflecting its support for institutions.
Renamed in 2007, Chegg (a combination of “chicken” and “egg”) continues to be the largest book renter in the country. It also has the most financial backing—$211 million in venture capital over the past five years. It used the funds to create an educational platform for high school and college students through acquisitions like Zinch, which connects prospective students to scholarships, admissions officers, and each other; Cramster, for homework help; CourseRank, for picking classes; Notehall, for lecture notes; and Student of Fortune, for online tutorials. The company is being talked about as potentially the next big thing, and it was #34 on the Wall Street Journal’s list of the top 50 start-ups in 2012.
What distinguishes Chegg is its emphasis on students. So much so that its new headquarters in Santa Clara, Calif., which opened late last year, resembles a dorm. “The thing most people have missed in the last five years is who the customer is. It’s the actual end-user,” said CEO Dan Rosensweig, who sees the challenge as taking Chegg from being a hot company to a company that can be around for the next hundred years. To do so, Chegg has transitioned from a rental company to “a connected learning platform. We’re trying to make it easier for students. The goal is this [content] shouldn’t be hard [to find] and it shouldn’t be expensive,” he said.
The company continues to create new partnerships to make textbooks more affordable, most recently with Open Stax College and 20 Million Minds, for open-source e-textbooks that can be read with its HTML5 e-textbook reader. Although digital textbooks haven’t caught on in a big way yet, that’s one area where Chegg is poised to compete. It offers 100,000 e-textbooks and provides a free digital text, publisher permitting, for students to use while they wait for their physical books to arrive. Although Chegg operates in China through Zinch, Rosensweig sees international as the next area of expansion.
“We had a wonderful year, and we’ve definitely grown beyond rentals,” said Rafter CEO Mehdi Maghsoodnia, who has overseen BookRenter’s transformation from the first book rental company, in 2006, to an education technology firm. But rental continues to be an important part of what Rafter does; it was About.com’s readers’ choice for 2012 Best Site for Renting Textbooks. And it continues to raise venture capital—$36 million to date (with debt and other investments, $66 million).
Like Chegg, Rafter cares about the student experience. But its primary focus is helping institutions—and their stores— and the company takes what Maghsoodnia terms “a holistic look” at how schools serve students across content. Currently 500 campuses use Rafter for everything from rental to pricing and scan-and-pay checkout with smart phones or tablets. “We figure out the pricing. [The schools] tell us what they paid. We control the price on rental and tell them what new and used prices should be. We speak to the whole cycle. Rafter Discover is for teachers to know what content’s out there and who publishes it. We allow educators to use our platform to adopt for their classrooms. It’s a diverse market, and the institutions want flexibility and choice,” said Maghsoodnia. To provide that, Rafter continues to look for new acquisitions like last summer’s Hub.edu.
Six-year-old CampusBookRentals in Ogden, Utah, serves students at nearly 6,000 colleges and operates in-store kiosks at 100 bricks-and-mortar college stores at schools like New York’s NYU, UNC at Chapel Hill, N.C., and Oregon State University in Corvallis, Ore.Cofounder and CEO Alan Martin began the company in his basement in 2007 and shipped books out of his garage. Two years later, CampusBookRentals was the first rental company to partner with a school store. “Our goal,” said Martin, “is really to make school stores the first choice for students. They had been the last.” That attitude and the innovation around it pushed the company to the #31 spot on Forbes’s list of “America’s Most Promising Companies” in 2011.
In February, CampusBookRentals is looking to forge an even closer relationship with college stores when it rolls out a point-of-sale system that is currently in beta. Eighteen stores have signed up to use the final system, which will include store-to-store inventory sharing and trading, as well as rental modules to enable stores to rent up to 100% of their textbook inventory. With the POS, stores will be able to sell excess textbook inventory directly into online marketplaces, and it will facilitate bookstore participation in RentBack.com, a student-to-student and student-to-store rental platform that CampusBookRentals introduced in December. Under RentBack, students retain ownership of their textbooks and can rent them to other students, rather than selling them back. Every time the book gets rented, the student is paid.
Like his colleagues, Martin sees textbook sales eroding from the encroachment of rental and digital texts. But he still expects schools to be able to sell half of their textbook inventory and to be the place where students look for content. He calls digital textbooks “a bad value” for now, but when that changes, stores will be able to deliver digital content through CampusBookRentals’ platform. To ensure that the company maintains its campus store focus, CampusBookRentals is in the midst of creating an advisory board of bookstore managers to guide future development.
Expect even more transformation in the textbook market in the coming year. As Maghsoodnia pointed out, “this is a complex market in the early stages.”
