UniversityTutor Revenues Fall By 50%

In: Education| Updates By: Brian Armstrong

27 May 2009

This entry is part 15 of 17 in the series UniversityTutor.com

As you might have seen a few weeks ago, I posted about how the new UniversityTutor.com business model wasn’t working very well. Revenue has fallen by about half during this time.

Also, it’s not just the summer time effect. There are still a fairly large number of contacts going through the site (see below). Even taking this into account, it does not look good.

I’ve been thinking long and hard about it over the last week, and I’ve decided it’s probably time to cut my losses on the “online payments” business model and go back to the subscription model I was using before. Adoption of the online payment system has been very low – and most people aren’t using it (probably a combination of the fact that is less convenient, and also to avoid the fee).

At least I know that my previous business model was working fairly well and growing steadily – and this test to see if I could beat it has just about reached it’s conclusion (2 months).

I surveyed some of the tutors this week to get their feedback, and you can read some reactions there.

Also, here are a few emails I’ve written to people over the last week which summarize my thought process:

Just had a big realization: if it was me, I don’t think I would use the online invoicing either. I would be cool with it when I saw it and probably have every intention of using it. Then I’d go do a session, and the person would say, well shall I just write you a check? And I wouldn’t know what to say say because it was my first time meeting them, and it would almost be rude not to, so i’d just say ok. Then afterward, I’d go read about the benefits of getting paid online and think about it…but now that I’ve already accepted the higher amount of money once…it would be really hard to go back and give up the extra money next time especially when nothing bad happened from the first time I did it, so I’d probably just say forget it and keep doing it the same way unless the parent didn’t show or something and I had to get paid later.

So yeah…when I just went through the whole process in my mind like I was a new tutor signing up, I realized that I probably would not use the invoice thing. That is a bad sign if even I wouldn’t do it.

The argument for it being summer is a valid one, but not really. I’ve been watching the number of daily contacts going through the site. Last semester it was averaging about 60 per day and right now it is still doing 40 per day so it really hasn’t dropped that much. Even if I take this into account (30-50% drop), it doesn’t make up for the lack of adoption.

I’m also thinking about split testing $5/month vs $10/month to see which is more profitable. I realized also that offering a yearly subscription with a discount to the tutor is common online and could really help cashflow (since you get more up front).

After reading this I’m starting to think the price point of $10/month might be wrong.

http://www.techcrunch.com/2009/05/23/free-to-use-pay-to-play/

I also need to include an option to pay yearly instead of monthly. There is good research this improves conversions and helps cash flow to get the money up front.

Maybe give the option of $5 per month or $45 per year. Something like that where it’s a no brainer to sign up. I’d have to test it…but to me I’d def sign up for $5 per month whereas $10/month I’d hesitate and have to think about it. If I remember right, the conversion rate for $10 per month after people’s free account ran out was about 10% so at $5/month it would have to be at least 20% to make it worthwhile.

Closing thoughts…

On the one hand it is sort of depressing to do all the work to launch a big feature like this, and NOT have it work. Worse still, the number of subscribers has fallen by about half since I launched the feature. That means it will probably take at least several months to get it back to where it was previously revenue wise. It’s also hard not to think about where it could be right now if I had just left it instead of changing things :)

But on the other hand, this is the reality of business. If you don’t test then you will never know. And a failed test is much better than staying stagnant with your business. You have to look at things over a longer time frame (say 5 or 10 years) where losing $1000 in revenue early on is nothing, but getting the right business model in place could translate into millions of dollars down the road.

So in short, I’m glad I did it, but it’s still not easy to admit defeat and realize your idea didn’t work. Such is the life of an entrepreneur – you gotta stay mentally tough and get back on the horse after every setback.

Hey, if it was easy – everyone would be a millionaire, right? :)

Until next time, keep breaking free!
Brian Armstrong

This post is part of a series on: UniversityTutor.com

Tags: Education

10 Responses

College Town Menus (CTM)

May 27th, 2009 at 3:15 pm

Great idea on offering the yearly option with slight discount. Yes, that will certainly help your cashflow and increase number of tutors. Students at school spend more money on beer than this website, so yes, to the savy business student, this “should” be a no brainer. Spend $10 (or whatever) and get $30 for 1 session, plus multiple sessions? Done deal! I should look into this approahc for my site in terms of getting restaurants on board.

I agree, it’s hard realizing your mistake and cutting your losses. I spent a good amount of money developing feature X which I still think is and will be a good feature once I get CTM to be the way I want it to be. But as far as immediate useage and revenue, it hasn’t been used once “yet” – hopefully will change soon though.

Yes, it’s hard thinking the “what if”. For me, it’s like “what if I used the money to pay off my car, max out my Roth IRA, or invest in more dividend paying stocks now and see my large returns since the market picking up lately?” – more tangible actions instead of an intangible website that produces nothing yet (for me).

But I agree, thats the fun of being an entrepreneur. Not afraid of taking the massive risks, remaining passionate, taking a look at the big picture, and planning your next strategic move, all in hopes to make your money back, or even a few pennies of profit.

Thanks Brian!

Brian Armstrong

May 31st, 2009 at 10:45 pm

Agreed…we can’t focus too much on the past and wonder what if, it’s not productive :)

Chuck Cohn

May 27th, 2009 at 5:44 pm

Brian,

Have you thought about having a model in which tutors list for free and get notified that they’ve received an inquiry and then have to pay to view the contact information? For instance, parent attempts to contact tutor through your site. Tutor gets an e-mail that says “You’ve received an inquiry: Jane S. has contacted you. Her message says: “I need a calculus tutor in the New York City area. Please contact me”. Contact info: 212-XXX-3454. To view Jane S.’s contact info, login to UniversityTutor.com and pay $5.

The difference here is that tutors have an immediate incentive to pay is the inquiry interests them. They can pay $5 and immediately get $20+. The value proposition is more apparent especially to a college student that is hesitant to part with $10 per month for money that they won’t receive for a few weeks.

Hope this gets the wheels turning.

Chuck

Brian Armstrong

May 27th, 2009 at 7:58 pm

Hey Chuck…good idea. I think you are spot on with the idea that you should avoid asking for any money until AFTER you’ve delivered the value whenever possible. So asking for $10/month up front is harder than them getting paid and leaving a bit for you after. The closer you can make it the better.

That being said, I’m a little hesitant on your idea specifically for a few reasons:

1. I think they did this on match.com and the big problem was people kept trying to circumvent it, so tutor’s would put in their profile “don’t use contact form just email me directly” or a myriad of other ways, and it becomes a game of cat and mouse at that point

2. parents may get frustrated sending out contacts and often getting no response (this was again a problem on match.com)

What do you think?

Chuck Cohn

May 27th, 2009 at 8:07 pm

All relevant points. Why not try it in a single market (like Boston or wherever)? I’m not sure how converting tutoring inquiries to sales compares to converting Match.com inquiries to whatever it is users at Match.com are seeking, but I bet that tutoring inquiries have a higher conversion rate.

Erica Douglass

May 28th, 2009 at 5:52 pm

Thoughts: The web hosting industry commonly uses a $5/month or $50/year model (or $10/$100.) I wouldn’t go lower than that for the annual price.

Also, the difference between $5 and $8/month shouldn’t be that much. It’s the psychological jump to 2 digits that’s getting people. (I have tested this; but YMMV.)

Offering $9/month + a 10% coupon also converts better than just $8/month.

-Erica

Brian Armstrong

May 31st, 2009 at 10:46 pm

Hi Erica…thanks for the tips. I think you’re right. $9 sounds about the same as $5. I may test that one as well next. Thanks!

Dan Sharp

May 30th, 2009 at 5:10 am

Brian,

I’m sorry to hear that online payments didn’t work out. Your analysis, though, seems spot on… it’s just too bad it wasn’t so obvious beforehand. I think the beauty of online payments really only shines through when the entire transaction/experience is online. With tutoring, as you mentioned, the actual experience is offline, so managing the financial aspect of it solely online is problematic.

I wonder, though: would there be a market for online, video conference style tutoring? Using Skype/Yugma and maybe desktop sharing or shared whiteboarding? Something like that, if it worked, would be a better candidate for online payments because the whole tutoring session would be online anyway.

I do agree with you on your final conclusion: if we aren’t willing to try, then why bother with it at all? Being an entrepreneur means trying things. Most of the famous ones failed quite a bit before they succeeded. We just usually hear only about their success.

BTW, I have taped onto the middle of my laptop, where I look at it all the time, the following quote I got from a fortune cookie:

“I would rather attempt something great and fail than attempt to do nothing and succeed.”

It’s been a mantra of sorts to me recently.

So consider your attempt and failure merely another stepping stone on the path of success!

-Dan

Brian Armstrong

May 31st, 2009 at 10:49 pm

Great points Dan…I think you’re right that it would work better for online tutoring. Tutor.com is doing some of this with a proprietary app they built. It’s successful. I’m interested in exploring the online tutoring market…although I haven’t found a great technology which fits it well yet. It works well for some subjects (translation, editing papers, etc) but not for most thinks that use math or science (it’s drastically slower to input math stuff unless both participants have a tablet pc, then there are always network/latency problems, etc).

But I love your quote about attempting something great. Most people are afraid to fail..thanks for the reminder and keep me updated on your projects as well!
Brian

Mononucleosis

June 1st, 2009 at 10:19 pm

Even though I graduated from the University, English is still my weakest due to the fact that I’m hearing impaired. I struggled a lot. I wanted to know how others find a good English tutor.

Breaking Free

UniversityTutor Revenues Fall By 50%

10 Responses

Leave A Comment

About this blog

Sponsors

Most Popular Posts

Brian on Twitter...