Jane Applegate—Online College Sites Succeed Amid Internet Clutter

0

Despite the gloom generated by the demise of thousands of online businesses, the Internet still offers solid business opportunities if your business model is narrowly focused on a target market. Two small companies serving college-bound students looking for money appear to be flourishing, despite the downturn.

Tom Lubin of FastWeb Inc. and Patricia Adams of CollegeCapital.com both offer college-scholarship information to students but a deeper look reveals two very different business models. CollegeCapital.com sells scholarship information for a fee; FastWeb offers free information, but makes money by selling information about student users to advertisers.

“The future of the Internet is to disseminate information,” says Adams, president of Scottsdale, Ariz.-based CollegeCapital.com. “It’s easy to access, and it’s the best way to disseminate what you’ve got in a quicker, more efficient way.”

Pre-Internet, her firm sent students a printed binder filled with scholarship information.

“They’d fill out a questionnaire by hand, and we’d enter it into our database,” says Adams. “It took about two weeks to relay the information. Students paid $100, and we were still losing money.”

The problem with sending printed information is that “the minute you print it, it’s out of date,” says Adams. “We thought about creating a CD-ROM, but you have the same problem. Plus, our information wouldn’t all fit on a CD.”

Now, CollegeCapital.com sells annual subscriptions to students for $29.95. A subscription provides access to a database of 13.5 million scholarships (worth $8 billion), school information and internship opportunities all available online.

“We tried to price it so a working mother with three kids could still afford a subscription,” says Adams.

FastWeb, a Skokie, Ill.-based company, also provides online scholarship information, but it relies on a different model to make money. Instead of charging students a fee, FastWeb offers a free scholarship-matching service to students who register with the site. To register for service, students must complete a lengthy personal profile that includes detailed academic and demographic information.


Targeted advertising

FastWeb relies on these profiles to match students with 600,000 scholarships (worth $1 billion). Nearly 10 million students have registered since the site launched in 1995. FastWeb generates revenue by using the personal data collected from its users to create specialized, targeted advertising.

Both businesses have revenue models that are based on selling information. In FastWeb’s case, it is selling the information about its users to advertisers. In CollegeCapital’s case, it is selling the information about scholarships, internships and colleges directly to its users.

CollegeCapital has invested heavily in its database, which also features information about 35,000 schools and numerous internship and “study-abroad” opportunities. Its site, which launched in August 2000, has won more than 50 industry awards. Information is updated on a daily basis.

“My feeling is that if we do it right, they will come,” says Adams, who is still waiting to see if her model will be profitable. She declined to discuss first-year expenditures or revenues.

Adams openly objects to Lubin selling information about students to advertisers, even if it is aggregated information.

“You mean he admits that he’s selling these kids’ information?” she asked. “I just can’t believe he’d do that. If I were doing that I’d be hiding my head.”

But Lubin is not hiding his head. Rather, he appears proud to be running a profitable Internet-based company these days.

“We’re providing a service that’s very valuable to students,” says Lubin. “It’s free to students and free to schools with scholarships. We’re filling an essential need.”

FastWeb didn’t start out with the advertising-supported revenue model it uses today. The company was founded in 1995 by Leon Heller and sold printed scholarship information to students by mail for a $70 fee. By late 1995, the business had switched direction, moved online and began offering its service to subscribers at no charge.

Up until 18 months ago, FastWeb also sold banner space on its site, but has since eliminated those ads.

“Banners are a great annoyance to users,” says Lubin, “and they disrupt the user experience.”


Leads for advertisers

FastWeb makes money by providing its advertisers with qualified leads. FastWeb’s advertisers describe exactly the type of student they want to reach including geographic information, age, grade point average and so on.

“Sophisticated advertisers are used to paying a fixed fee for each lead. They know what the value of a customer is to them,” says Lubin. “One of the keys to our success is we can provide very accurate, in-depth information. At Napster (the embattled digital-music site), for example, there’s no incentive for users to provide accurate information. There are a lot of people who cloak their identity on the Internet. On FastWeb, there’s a real incentive to give accurate information.”

FastWeb users can decline to receive targeted messages and advertisements, although once they complete the user profile, FastWeb retains the right to sell their information in an aggregate form. In Lubin’s eyes, he’s offering students a service, and he’s not worried about helping his advertisers reach them.

CollegeCapital.com, a much younger company, is still investing heavily in its infrastructure. Right now, it’s difficult to assess whether or not the public will choose to pay for information, or give up some privacy to receive it for free.

Reporting by Sarah Prior. Jane Applegate is a syndicated columnist, author and founder of www.sbtv.com, a new global online network for small-business owners. She is the author of “201 Great Ideas for Your Small Business,” and is founder of ApplegateWay.com, a multimedia Web site for busy entrepreneurs.

No posts to display