Chegg 2015 Annual Report Download - page 55

Table of Contents
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• changes in student sentiment about the quality or usefulness of our connected learning platform and our products
and services;
• technical or other problems that prevent us, or Ingram, from delivering our products and services in a rapid and
reliable manner or that otherwise affect the student experience on our website or our mobile application;
• concern from colleges about the ways students use our content offerings, such as our Expert Answers service;
• brand conflict between acquired brands and the Chegg brand;
• student concerns related to privacy and the way in which we use student data as part of our products and
services;
• the reputation or products and services of competitive companies; and
• students’ misuse of our products and services in ways that violate our terms of services, applicable laws or the
code of conduct at their colleges.
We intend to offer new products and services to students to grow our business. If our efforts are not successful, our business
and financial results would be adversely affected.
Our ability to attract and retain students and increase their engagement with our connected learning platform depends
on our ability to connect them with the product, person or service they need to save time, save money, and get smarter. Part of
our strategy is to offer students new products and services in an increasingly relevant and personalized way. We may develop
such products and services independently, by acquisition or in conjunction with developers and other third parties. For example,
in 2014, we acquired our tutoring and internships services in the acquisitions of InstaEDU and Internships.com, respectively,
and we developed Chegg Test Prep internally, which we launched in beta in November 2015. The markets for these new
products and services may be unproven, and these products may include technologies and business models with which we have
little or no prior development or operating experience or may significantly change our existing products and services. If our
new or enhanced products and services fail to engage our students or attract new students, or if we are unable to obtain content
from third parties that students want, we may fail to grow our student base or generate sufficient revenues, operating margin or
other value to justify our investments, and our business would be adversely affected.
In the future, we may invest in new products and services and other initiatives to generate revenues, but there is no
guarantee these approaches will be successful. Acquisitions of new companies, products and services create integration risk,
while development of new products and services and enhancements to existing products and services involve significant time,
labor and expense and are subject to risks and challenges including managing the length of the development cycle, entry into
new markets, integration into our existing business, regulatory compliance, evolution in sales and marketing methods and
maintenance and protection of intellectual property and proprietary rights. If we are not successful with our new products and
services, we may not be able to maintain or increase our revenues as anticipated or recover any associated development costs,
and our financial results could be adversely affected. For example, in 2014 we acquired a print coupon business, which we later
determined to no longer support or expand, and as a result, in 2014 recorded an impairment charge of $1.6 million related to the
write-off of intangible assets from that acquisition.
Our future revenues depend on our ability to continue to attract new students from a high school and college student
population that has an inherently high rate of turnover primarily due to graduation, requiring us to invest continuously in
marketing to the student population to build brand awareness and loyalty, which we may not be able to accomplish on a
cost-effective basis or at all.
We are dependent on the acquisition of new students from a high school and college student population that has an
inherently high rate of turnover primarily due to graduation. Most incoming college students will not have previously used
products and services like the ones we provide. We rely heavily on word-of-mouth and other marketing channels, including
online advertising, search engine marketing and social media. The student demographic is characterized by rapidly changing
tastes, preferences, behavior, and brand loyalty. Developing an enduring business model to serve this population is particularly
challenging. Our ability to attract new students depends not only on investment in our brand and our marketing efforts, but also
on the perceived value of our products and services versus competing alternatives among our extremely price conscious student
user base. If our marketing initiatives are not successful or become less effective, or if the cost of such initiatives were to
significantly increase, we may not be able to attract new students as successfully or efficiently and, as a result, our revenues and
results of operations would be adversely affected. Even if our marketing initiatives succeed in establishing brand awareness and
loyalty, we may be unable to maintain and grow our student user base if our competitors, some of whom are substantially larger
and have greater financial resources, adopt aggressive pricing strategies to compete against us. If we are unable to offer
competitive prices for our products and services fewer students may use our connected learning platform, products or services.