Why Sharing Will Be Big Business

As you may have noticed, one of the central themes of this blog is the power of sharing. Mostly, I talk about non-rivalrous goods like software or music: here, sharing is a no-brainer, because copies can be made for almost zero cost, allowing everyone to share a digital resource. But what about the world of analogue *rivalrous* goods - the traditional kind of stuff we are most used to in everyday life?

Here, sharing is harder to arrange, since you need someone to lend something to another party, which requires organisation in the physical world. And where there is friction, there is a business opportunity in terms of making reducing that friction. Here's a perfect example of that:

Chegg may very well be the fastest-growing, most successful, second-generation e-commerce startup that you hardly ever hear about,except maybe for the fact that it’s raised more than $140 million. Chegg is the “Netflix for textbooks.” It lets students across 6,400 college campuses rent from a virtual bookstore containing 4.2 million books. Based on my analysis (which I get into more detail below), the company is on track to generate $130 million in revenues in 2010, up from $25 million in 2009, and $10 million in 2008. During the January, 2010 semester, I estimate the company made close to $1 million in revenue a day, up fivefold from $200,000/day the previous January, and it should double that this coming September. My analysis suggests Chegg will do close to $50 million in revenue this September alone. It is underappreciated, to say the least.

The article goes on to point out the larger implications of Chegg's success:

Chegg is disintermediating the $5B+ college textbook market by providing a low-cost, short-term, nationwide rental alternative to the high-priced university bookstore. This disruptive model will likely shrink industry revenues by half in the coming years, with Chegg in a leadership position to command 80%+ market share. The key questions, of course, are: 1) Is this a winner-take-all market, 2) What can Chegg do to fend off the likes of the major bookstore owners, Barnes & Noble and Follet, as well as Amazon and Apple, and 3) Is Chegg a harbinger of a new age of startup rental services?

In answer to that last question, no and yes: I don't think we should regard this as old-style rental over the Internet, but a new kind of sharing where people spread the cost of rivalrous goods. However you look at it, though, it is going to be big.

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