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Case Study: Finding the Right Price for a Hot Product

Luke Skurman's quirky college guides were a big hit. The problem was getting readers to pay. What if he gave the content away?

Ross Mantle

BIG MAN ON CAMPUS Luke Skurman at his alma mater -- where, according to College Prowler, a "lopsided male/female ratio is hard for both sexes"

It was 5 o'clock on a crisp October morning, and Luke Skurman was wide awake, on edge, and restless. It wasn't the first time he had awoken that way. His company, College Prowler, was stuck in a revenue rut, and after months of mulling the problem, he felt that radical changes were needed. Skurman tossed and turned a bit more, then dragged himself out of bed and headed to a nearby Starbucks, hoping that a change of scenery and a strong cup of coffee might jump-start some creative thinking.

As Skurman sipped his coffee, he made a list of the reasons he had started College Prowler. First, he wanted to create great content about colleges and universities. He also sought to help as many people as possible make the right college choices. Finally, he wanted College Prowler to be financially successful. Looking over the list, Skurman came to a bitter conclusion: He had succeeded at the first goal but failed at the other two. The only glimmer of hope was an idea he had been pondering to change the business's revenue model. For the third time.

Skurman founded College Prowler in 2002, after graduating from Carnegie Mellon University. His idea was to create college guides written entirely by the students. "When I was in high school, I was obsessed with finding the perfect college," Skurman says. "I used every resource imaginable. But I still didn't feel like I knew what the kids were like, or anything about the food and the dorms."

So he decided to give prospective collegians the real inside skinny. Student authors would distribute surveys to their peers, who would rate their school on a variety of criteria -- including academics, dorms, and food, as well as Greek life, the drug scene, and (of course) the hotness of the girls and guys. In the spring of his senior year, Skurman wrote a business plan and a 37-page prototype for Clark University and entered Ernst & Young's Enterprise Creation Competition. He was chosen as a national finalist.

After graduation, a former professor gave Skurman and three co-founders (none of whom remain with the company) a bit of office space in a nearby biotech incubator, and two angel investors invested $5,000 each in exchange for 2 percent of the company. By September, College Prowler had produced guides to nine schools and was ready to debut its products at the National Association for College Admission Counseling trade show in Salt Lake City. Skurman and his colleagues chatted up guidance counselors and admissions officers and nailed down their first two orders. "We made $240," Skurman says, "but we felt like we had validated our idea."

College Prowler soon began attracting coverage in Publishers Weekly, The New York Times, and The Washington Post, and on CNN, all of which responded to the guides' honesty and irreverence. "Alcohol seems to be the drug of choice for most students and just about everyone knows that guy who sits in his room and smokes pot all day," according to the guide to Carnegie Mellon. "We at the University of Arizona are not 'everyday people.' We are beautiful and hot," a U of A student wrote. More good news followed. A new investor, Glen Meakem, now the co-founder of Meakem Becker Venture Capital in Sewickley, Pennsylvania, put $500,000 into the company in August 2004. The country's largest book wholesaler, Ingram, agreed to distribute College Prowler's guides, which helped get them into major bookstore chains like Barnes & Noble and Borders. Revenue hit about $500,000 in 2005. Soon, the company was publishing guidebooks for 220 colleges.

But one day Skurman came to a sobering realization: He did the math and concluded that even if he could get 1,000 retail stores to carry a rack of 60 books at $14.95 apiece -- an all but impossible goal -- College Prowler's revenue potential was still less than $1 million. So Skurman began selling ads on the books' inside covers and on the company's website. Wachovia signed on as an advertiser, with a six-figure deal that included book and Web banner ads, plus sponsorship of an online scholarship contest. The revenue needle was moving, but Skurman was still not satisfied. He decided to experiment with a subscription model. Skurman and his team digitized 50,000 pages of College Prowler's content on more than 250 schools and, in March 2007, offered it online for $39.95 per year. The site mimicked the format of the books, with student-generated ratings for a variety of campus experiences.

The company turned a small profit in 2007, but revenue stubbornly remained below $1 million, and Skurman began to second-guess the strategy. He knew he had to do something. The marketplace for college information was changing. Not only were universities beefing up their websites, but a new competitor called Unigo had launched a free student-generated site. Meanwhile, just as Skurman was preparing to renew College Prowler's contract with Wachovia in June 2008, the bank announced massive losses and layoffs. Though the bank (which was acquired by Wells Fargo late last year) would continue to advertise, the deal was scaled back. That's when he started losing sleep.