Reference no: EM132214402
The Price of Admissions
When Luke Skurman was a high school senior, he read all he could find about potential colleges, but he wanted more. “There just wasn’t enough good, honest information for me to feel confident about where I was going to spend the next four years of my life. I didn’t really know whom to talk to. The whole process felt like a giant crap-shoot,” he says. “In all my research, there were only two ways to get the information I wanted. The first was by physically visiting the campus and seeing if things were really how the brochures described them, but this was quite expensive and not always feasible. The second was the missing ingredient: the students. Talking to real students who actually attended the schools that I was interested in gave me the information that I needed so badly.” He was happy with his eventual choice of Carnegie Mellon, but still wondered …
During his junior year, Skurman did a business class project with partner Joey Rahimi about a company prospectus to gather school information from students across the country and publish it online. Their aspirations for an online business somehow morphed into print editions.
With the ink still wet on their business diplomas, Skurman and Rahimi put their business plan into motion with two other former classmates by launching College Prowler. Their “by students, for students” approach has been popular from the start as undergrads give firsthand accounts of campus life. Student authors distribute surveys to their peers, who rate their school on a variety of criteria—including academics, dorms, and food, as well as Greek life, the drug scene, and (of course) the hotness of the girls and guys.
Tom Russell, publisher of the Princeton Review, says that “one of the reasons Zagat guides are so popular is that people want to read about other people’s experiences at restaurants. It’s no different in this category, students want to hear from other students.”
The team received assistance from a former professor who gave them a bit of office space in a nearby biotech incubator, and two angel investors invested $5,000 each in exchange for 2 percent of the company. By September 2002, College Prowler had produced guides to nine schools and was ready to debut its products at the National Association for College Admission Counseling trade show in Salt Lake City. Skurman and his colleagues chatted up guidance counselors and admissions officers and nailed down their first two orders. “We made $240,” Skurman says, “but we felt like we had validated our idea.”
The trade show helped College Prowler begin attracting coverage in Publishers Weekly, the New York Times, and the Washington Post, and on CNN, all of which responded to the guides’ honesty and irreverence. “Alcohol seems to be the drug of choice for most students and just about everyone knows that guy who sits in his room and smokes pot all day,” according to the guide to Carnegie Mellon. “We at the University of Arizona are not ‘everyday people.’ We are beautiful and hot,” a U of A student wrote. More good news followed. A new investor, Glen Meakem, now the cofounder of Meakem Becker Venture Capital in Sewickley, Pennsylvania, put $500,000 into the company in August 2004. The country’s largest book wholesaler, Ingram, agreed to distribute College Prowler’s guides, which helped get them into major bookstore chains like Barnes & Noble and Borders. Revenue hit about $500,000 in 2005. Soon, the company was publishing guidebooks for 220 colleges.
Skurman was pleased and concerned at the same time. He reviewed the list of the reasons he had started College Prowler. First, he wanted to create great content about colleges and universities. He also sought to help as many people as possible make the right college choices. Finally, he wanted College Prowler to be financially successful. Looking over the list, Skurman came to a bitter conclusion: He had succeeded at the first goal but failed at the other two.
A sobering realization hit: Skurman did the math and concluded that even if he could get 1,000 retail stores to carry a rack of 60 books at $14.95 apiece—an all but impossible goal—College Prowler’s revenue potential was still less than $1 million. To generate more revenue, they began selling ads on the books’ inside covers and on the company’s Web site. Wachovia signed on as an advertiser, with a six-figure deal that included book and Web banner ads, plus sponsorship of an online scholarship contest. Skurman decided to experiment with a subscription model. They digitized 50,000 pages of College Prowler’s content on more than 250 schools and, in March 2007, offered it online for $39.95 per year. The site mimicked the format of the books, with student-generated ratings for a variety of campus experiences.
The company generated a small profit in 2007, but revenue stuck just under $1 million, and Skurman began to second-guess the strategy. He knew he had to do something. The marketplace for college information was changing. Universities were beefing up their Web sites. Most concerning was a new competitor called Unigo that had launched a free student-generated site. Skurman was preparing to renew College Prowler’s contract with Wachovia in June 2008, but the bank announced massive losses and layoffs. It continued to advertise, but the deal was scaled back. Now Skurman was really worried.
College Prowler had created great content, but in an age of social media and so much free information online, the question was getting people to pay for it. Skurman began to think that maybe he should stop trying altogether and begin giving it away. He had been toying with the idea since attending the 2008 National Association for College Admission Counseling (NACAC) conference. Strolling around the show, Skurman took a close look at the exhibitors and was surprised at how many of them were in the business of selling sales leads—that is, information about prospective students—to colleges. His contact at Wachovia, in fact, later told him that qualified leads were the single most valuable element of the bank’s relationship with College Prowler. Skurman wondered if lead generation could be a primary income stream.
Such a radical strategy shift would be risky, but did they really have a choice? Lead generation had some serious competitors such as College Board, which sells the names of students who take the SAT to colleges. Meakem, who had invested another $500,000 in College Prowler at the end of 2005 and now serves as chairman, encouraged the shift, but was it the right thing to do?
What are the advantages and disadvantages of giving content away?