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& DESIGN Home Page Architecture Brand Equity Auto Design Game Room SMALLBIZ Smart Answers Success Stories Today's Tip INVESTING Investing: Europe Annual Reports BW 50 S&P Picks & Pans Stock Screeners Free S&P Stock Report SCOREBOARDS Hot Growth 100 Mutual Funds Info Tech 100 S&P 500 B-SCHOOLS Undergrad Programs MBA Blogs MBA Profiles MBA Rankings Who's Hiring Grads | | JULY 21, 2000 TRENDS Helping Hands for Homework Tutor.com sees profits in assisting America's kids with their studies. And it's not alone
If George Cigale, a soft-spoken 31-year-old graduate of New York City's public schools, succeeds in his vision, panicked parents and students -- with credit cards handy -- will soon bring their most puzzling problems to Tutor.com. "Anytime, anyplace, any subject, we want to make it possible for you to find somebody online that will teach you something," says Cigale, explaining the company's philosophy during a recent interview in his cramped lower Manhattan offices. The site now boasts a searchable directory of 18,000 tutors in 375 subjects. And although it has logged fewer than 5,000 study sessions since going live in February, Cigale predicts the number will swell to several hundred thousand by yearend. Tutor.com works like this: Students peruse profiles that tutors have written describing themselves and their areas of expertise. If a match is made, both parties move to a "virtual classroom" where they can send instant messages and draw on a "white board." Tutor.com plans to offer two-way voice communication this fall. CUSTOMER DEMAND. But before you rejoice over not having to struggle with the math yourself, bear in mind that on-call homework help comes at a price. Tutors set their own fees, ranging from $10 to $150 an hour, payable by credit card. Tutor.com takes a cut from the tutor of $1, plus 10% of the total fee. In addition to the tutoring fees, Cigale and his staff hope to profit from dozens of partnerships they're establishing with educational and research sites. Cigale comes to this online venture after eight years with test-prep publisher Princeton Review. As first conceived, Tutor.com was to be a referral service, connecting tutors and students in the same geographic area for face-to-face sessions. But on the first day the site was up, in June, 1999, Cigale received 20 e-mails inquiring about the possibility of tutoring online. So, for the next six months, the staff, which grew quickly from 4 to 25, scrambled to create the "virtual classroom," linking it to a billing system and tutor-evaluation form. Cigale started looking for venture capital, raising $1.8 million from Internet.com, Northstar Capital Partners, Garage.com, and others. Last month, the company received an additional $11 million from investors led by Wit SoundView Ventures. That ability to raise funds is due, in part, to good timing. With venture capitalists wary of e-tailers and content sites dependent on elusive banner ads, the marketplace model has come into vogue. "It's not based on, 'We'll get eyeballs and figure out how to make money later,'" says Daniel DeWolf, director of venture-capital funds at Wit SoundView. DeWolf also likes that fact that Tutor.com doesn't need expensive warehouses or a ton of staff, making it closer in concept to eBay than Amazon. Also, "every time someone goes online to be tutored, that's a transaction," he points out. GIANT MARKET. Moreover, analysts see huge growth potential in the e-education field for grades K-12 and college. While no one is sure precisely how big the online tutoring niche will be, consider the potential market: 56 million school children, whose parents now spend about $19 billion annually on educational books, games, and software. "The opportunity is enormous," says Keith Gay, who tracks the e-education field for San Francisco-based investment banking firm Thomas Weisel Partners. "We're just starting to see a few companies get traction." The toughest challenge is figuring out what will make students and parents return again and again -- credit card in hand. Though still fragmented, the field is growing increasingly crowded. AOL offers free homework help through chat rooms. And online sites such as TopTutors.com offer similar "virtual classroom" formats with a few key differences. TopTutors has a much tougher screening criteria for its instructors: They must be certified teachers, hold a college degree, and pass a background check. Tutor.com has no minimum requirements for teachers, who fill out profiles listing their qualifications. Also, Tutor.com doesn't require background checks, although tutors can pay for their own security check and then add that information to their profile. There are pricing differences, too. TopTutors sells packages of tutoring sessions. With them, eight 45-minute segments on basic math costs $228. Tutor.com lets students use the service as often as they want, on a pay-per-use basis. Tutors can charge any hourly rate they like above a minimum of $5. Tutor.com says its average online session lasts at least 30 minutes. 800-POUND GORILLAS. Yet neither TopTutors nor Tutor.com sees the other as its chief competitor. Instead, all eyes are on Sylvan Learning Centers and test-prep giant Kaplan. "Any smart person is worried about competition," says Cigale, acknowledging the two companies as the 800-pound gorillas on the horizon. Sylvan, which operates the largest chain of tutoring centers in the U.S., plans to launch its online tutoring arm sometime this fall. Under the URL educate.com, the company will offer an online version of its standard program, which includes about 36 hours of testing and instruction and costs $1,200 to $1,500 per student. According to Chris Hoehn-Saric, CEO of Sylvan Ventures, a subsidiary formed to invest in new technology, the company plans to invest in online tutoring "in a very substantial way." Kaplan plans to launch an online math tutoring service in October through its subsidiary Score! Learning Inc., which operates 105 tutoring centers across the U.S. In the end, Cigale sees the competition as beneficial. "If I've got Sylvan or Kaplan doing huge subway ads saying online tutoring is great, that benefits us," he says. Once they get that idea in their heads, Cigale is hoping students and parents looking for help type in the obvious -- Tutor.com.  By Julie Fields Edited by Robin J. Phillips  | | |
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