Biggest Online Tutor Bought By Barry Diller's IAC

Jan. 8, 2013 -- Online tutoring may become the next big thing with Barry Diller's IAC conglomerate adding Tutor.com to its stable of Internet and media companies, which already includes such familiar brands as Match.com and Ask.com.

Tutor.com, says founder and CEO George Cigale, is already the world's largest on-demand online learning service; but he and Diller mean to make bigger by bringing to bear IAC's marketing muscle. The purchase price, not disclosed by Tutor.com, was reported by the New York Times to be slightly under $40 million.

"We aim to grow by orders of magnitude," Cigale tells ABC News.

The online postsecondary education market overall--online courses and programs--stands at about $20.5 billion, says Adam Newman, founder and managing partner of Education Growth Advisors, a financial and strategic advisory firm whose specialty is K-12, postsecondary, corporate and lifelong learning.

The market for online tutoring is smaller. In the U.S., Newman tells ABC News, it's probably between $125 million and $150 million. Providers include Educate Online, Tutorvista and Straighterline (both owned by Pearson), and Tutapoint.

Tutor.com dominates the category. "We're by far the largest," says Cigale, "measured by the number of tutoring sessions we provide: 1.3 million in 2012, double our closest competitor."

What distinguishes Tutor.com from conventional, in-person tutoring, he says, is its on-demand nature: The user doesn't have to make an appointment. Tutors are available immediately, every day, around the clock, for as long as the user needs. Sessions are billed by the hour; most last about 25 minutes, says Cigale. Costs start at $39.99 an hour. "You get help in small chunks, the minute you need it, so you're ready for school the next day."

Through the site, users can access close to 3,000 tutors skilled in such subject areas as math, science, English and social studies. Subject offerings recently have been expanded to include college-level curriculum courses, Advanced Placement courses, and essay composition. Cigale hopes to expand further into statistics, economics, accounting and finance.

Though most users are kids in school looking for help with test-prep and term papers, adults use it too: "We've had business professionals get help proofreading their business plans," says Cigale. "We have career coaches reviewing resumes. It's not just 8th graders studying algebra."

Cigale sees adults--parents, specifically--as his new target audience, and he plans to reach them using IAC's marketing expertise. "We aim to grow very quickly," he says.

Right now, he says, about 95 percent of his company's revenue comes from institutions. Corporations, for example, contract with Tutor.com to provide tutoring as a benefit to their employees' children. The Defense Department has a similar arrangement with the company to make tutoring available to the children of service members. But Cigale sees a greater opportunity marketing his services directly to adult consumers. "There's a huge opportunity to bring this into the home, for parents to subscribe to for their children and themselves."

How big might the consumer market be? Newman says it's hard to estimate, but notes that in Japan, Korea and other nations with what he calls a "test-prep culture," 80 percent to 90 percent of families allocate a significant amount of their discretionary income to tutoring and to other supplemental educational services. "After food and shelter, money goes to the childrens' education," he says. In the U.S., the comparable figure is only about 20 percent--but it could grow.

Newman calls Tutor.com's prospects exciting. "It'll be interesting to see what IAC, with its strengths in the consumer market, can do, what level of success they can achieve," he says. "They're not investing in this to be a small, little business."