851: Knowledge Unlocked - with Gauthier Van Malderen, Founder & CEO, Perlego

Dr. Joe Sallustio: Welcome back everybody. It's your time to add up on the EdUp Experience podcast where we make education your business. This is Dr. Joe Sallustio back with you for somewhere around the 850th time. Not entirely sure, but I'm going to keep coming back no matter what to talk to amazing people all across the world about what's happening in and around higher education. The one thing I love about, I was just thinking about this the other day, the one thing I love about our guest list as we look at past episodes, we talk about our president series. We've interviewed over 260 something 270 presidents all across the world, but we've interviewed so many innovative ed tech companies serving higher education in different and unique ways that brings this ecosystem together on how we can serve students better because you can't just do it the same way all the time. We have to innovate and innovation is the key to unlocking opportunity.

And I love talking to companies that are innovating and doing things differently. And I'm happy to have somebody here with me to tell me about what he's doing with his organization. I'm going to bring him to the microphone right now. He's got one of the coolest names in the history of education. Ladies and gentlemen, here he is. He's Gauthier Van Malderen. He is the founder and CEO of Perlego. What's going on, Gauthier? How are you?

Gauthier Van Malderen: I'm good, thank you. How are you?

Dr. Joe Sallustio: Other than probably making your name sound way less cool than it actually is, I'm doing great. Great first name. Where does that come from? Gauthier. That's such a cool name.

Gauthier Van Malderen: Yeah. So it's French originally. But I'm from Belgium and in Belgium, it's a very weird country because you've got to speak three official languages, German, Flemish, which is like a form of Dutch and French. So, I'm a mix of all and then I lived abroad.

Dr. Joe Sallustio: French name, but Flemish background. French name, you grew up in Brussels?

Gauthier Van Malderen: Yep. Belgium. And now I'm in London.

Dr. Joe Sallustio: Exactly. Yeah. This is lunacy. That's a lot. That's a lot. All right. Well, good. So you're in London right now. What time is it over there?

Gauthier Van Malderen: I think it's something like, yes, five o'clock.

Dr. Joe Sallustio: Five o'clock. So no better way to end your day than to talk to me here at the EdUp podcast. Tell us about Perlego. What do you do? How do you do it?

Gauthier Van Malderen: Yeah, sure. So Perlego means the verb "to read" in Latin. I scan over. Funny anecdote. Actually, the name was founded by my co-founder's father when we basically had this idea for this company and he found the name. And basically it really came out of a personal pain point of ours, which was at the time, very expensive price of textbooks.

And I'm sure you've read about this - it's a huge problem for students across the world. Basically to cut a long story short, I buy an accounting book worth two, $300. I read two, three chapters of the book and never read it again. I was noticing that a lot of my friends were like downloading content illegally from pirated websites. A lot of my friends were using subscription models. I try and get my books from the library and it was never available. So what we built is kind of being branded by the press as the Spotify or Netflix for books.

Today we offer over 1.4 million eBooks from over 9,000 publishers, the best publishers in the world, Wiley, Cengage, et cetera. And you pay in the US, I think it's 15 bucks a month, and you get access to all these titles.

Dr. Joe Sallustio: Do you sell via subscription and you sell it to the individual? Do you sell it to the institution both?

Gauthier Van Malderen: We have kind of three models. So the first one is the consumer business. You pay a monthly subscription, you get access to everything and that's 60% of group revenue. The second kind of tranche, now that we have, we'll get to talk about this hopefully a bit in this second, we have the content, but we build a lot of tool set layers on top of the content. So you can aggregate, we built something called Workspace. You can bring external content into the Perlego ecosystem. So instructors is another big part of our business. And then the third big business for us is universities and institutions.

And as part of that in the US, we're seeing a big rise in equitable access as a movement. And it's a bit shaky right now with things going on in politics, but Perlego is fitting nicely into the equitable access programs for a lot of the big US campuses.

Dr. Joe Sallustio: That's fascinating. I wish I had something like this. I wish it existed when I was in school, right? Because you'd buy a book, you're right. Read a chapter and then now you have this book and it's going to sit on your shelf or in your desk forever until you what? Resell it, you throw it in the trash, you try to give it to your kids who have no interest in quantitative statistics or whatever it might be. So, there's a waste. It's almost like there's a waste reduction part of your business too. In a way. Have you thought about that? Do you think about that?

Gauthier Van Malderen: Yeah, totally. So it's interesting. You mentioned wastage. There's a huge amount of wastage in publishing, especially historically in print, right? Just to give you some numbers. In the US the print business is about a $9 billion business. Publishers lose about 1.8 billion to piracy. So students downloading content illegally, and then just under 3 billion in secondhand book sales. I'm sure, you know, in your uni days, I would buy loads of secondhand books and instead of paying $200, I'd get them for 110.

Dr. Joe Sallustio: They're already highlighted in some cases.

Gauthier Van Malderen: Exactly. That's the best. So for publishers, it's a massive problem as well. And then of course, as you mentioned, right, there's this big movement around moving away from print, the sustainability element to it. It's not a core value prop, but for the younger consumer, it is an important thing to know that they're having more sustainable conscious decisions. And another thing we do is we also do carbon offsetting because, you know, some people say, yeah, it's all great to be digital, but actually your servers that run these readers are very expensive. So we've also had to find ways to make sure we're even more sustainable than just saying we're a digital solution.

Dr. Joe Sallustio: Do you work, talk about how this works? How's the model work? Do you deal license, you know, with the publisher? Because there's so many institutions today are looking at going OER, right? Open educational resources. It's an interesting movement because I find that there's a desire to go OER, but in some cases you do have faculty that love certain books and they just hold on to those books. How do you work with publishers to get 1.8 million, 2 million, 2.5 million books in your database?

Gauthier Van Malderen: Yeah, so the way we think about content is based on content coverage. So all the information around reading this data, book coverage, et cetera. Then we go to the publisher and we say, hey, look, today you're losing a lot of secondary, a lot of piracy. Let's do a digital distribution deal with you where we get your eBooks and we will give you back 65% of our revenue. And the way we pay back is based on consumption. So look, we're fair, we want to make this industry grow again. And the beauty for you, Mr. Publisher or Mrs. Publisher is today you're losing a lot of, there's a lot of inefficiency in your supply chain. You pay for print distribution, wholesale costs. There's the retail markup, right? So imagine Amazon, they might take 40, 50% on top. So why don't we go direct to the consumer?

Cut out all the middlemen and we give you all the data. And this is how you also create a recurring revenue line. So historically you'd buy your textbooks or your books in your first year of university. What we're seeing is students stay much longer in Perlego three, four years because you have everything in one beautiful space. You've got your notes, your highlights, et cetera. So that's another way how we can bring the industry back to growth.

Dr. Joe Sallustio: Amazing. Yeah, that was a summary. Exactly. Is there, how much artificial intelligence is built into this? I mean, it's so many companies that are aggregating data right now are using AI programs and analytics to produce exactly what you're looking for.

Gauthier Van Malderen: Yeah. So, in terms of AI, I think for Perlego, for me as the founder of the company, there are kind of two ways how I think about AI. One is driving operational efficiency in the business. So that's pretty important. Like maybe customer support, et cetera. We've managed to do a much better job there. The second is for us is learning tools and offering solutions, which make the lives of students or learners better. And in that we have kind of three buckets. First is personalization. So Joe, because you read these four books on VC or EdTech, we also can promote other books which are relevant to you. The second is we built something called semantic search. So this is a really thing. This is the thing I'm most excited about. It's coming out soon.

A lot of people like, go see it. They need to have a book on, you know, 1972 history in Alabama and the effects it had on inflation as an example. I'm making this up. And historically on our search, you'd be able to search on a chapter or a title level. Well, what we've done is we've taken all our content. We've built it through a vector search model. Now through what we call AI semantic search, you'll be able to search directly and it'll bring you to the passage and the chapter of the book.

So it makes the content so much more valuable. And then the final thing we're doing from an AI perspective is learning and study tools. But here you have to be very careful. I'm very scared about the impacts of OpenAI and education. What I'm seeing is a lot of people just cheating now and using that as a way to, you know, not necessarily learn. So what we're doing from learning tools is two tools, flashcards and study tools. So imagine like Quizlet, you can help study.

And then the other bit is through our workspace, we allow professors to create assignments so they could create homeworks and help them out from that perspective. So that's the general vibe on AI and how we think about it today.

Dr. Joe Sallustio: Tell them like it is. I like it. What's interesting about the model too, because this happens a lot in higher ed still for, well, first of all, let me ask you, where's your market? You have a global market, I know for sure. Any one country that dominates? Can you give us an idea of where you're most prominent?

Gauthier Van Malderen: U.S. is 60% of group revenue right now. And we've only been in the U.S. for three years, it's quite crazy.

Dr. Joe Sallustio: Yeah. That's insane.

Gauthier Van Malderen: Joe, if I may, the U.S. is much more expensive, right? In the UK or in Europe, college costs maybe nine, $10,000. In the U.S. it's much more and the pain point is much higher as well. Books are more expensive and average textbook prices are bigger.

Dr. Joe Sallustio: Yeah, so you get to reduce the cost to the consumer, right? And the institution's interested in that because if you can reduce the cost of books, they can communicate the increased affordability in the education. So it's a win-win for the institution for sure. And especially if you can do it online, you know, there's so much to be said about things in the palm of your hand, literally in the palm of your hand, if I can't do it on my phone, I'm so used to doing everything on my phone, I got to access things on my phone, I know you have an app. Do you see desktop versus app stats varying? How does that look? Cause you know what, everything I even find, I don't know if you do this, I've got like a 75 inch TV in my living room. And some days I just prefer to watch the show in a chair in a different room on my phone, on my Netflix. You know what I mean?

Gauthier Van Malderen: It's so funny you say that I'm exactly the same. So I have a TV at home and maybe it's laziness, but I just end up opening like my Netflix on my app. Then you fall asleep at night, maybe watching Netflix on your phone or something.

So for us, so this is strange. Mobile is about 38% of total consumption. Because desktop you're studying, you're highlighting, you're writing your dissertation, your essay. Desktop is still pretty important. However, in your third or fourth year, that's more on undergrad professors and more research kind of individuals that might feel phone driven. So they might be like on their commute or on the train, they'll use Perlego to read.

So it really depends on where you are in the market. US is a bit higher on the mobile penetration as well. So I think US is almost like a 50-50 split.

Dr. Joe Sallustio: Nailed it. Are you kidding me? No, I'm not. Gosh, when I was doing research today, was checking out and I just wish this existed in the past when I went to school. It would have made things so much easier and ease of use or reducing friction is a big part of what I think the student experience or the student demands as they're part of their experience today. Can you talk about the concept of frictionless and what it means to you, I don't know if that's the term you might use, but as you look at this from a consumer perspective, you must be thinking, how do we make it easy? How do we make it easy to get this information on the go or at home? You've got two kids hanging on your ankles. Maybe your book didn't come from Amazon when you ordered it, but you have an assignment due. I have to be able to have a resource to go to to say, I'm not going to do that anymore. I'm not ordering books anymore. I'm going here.

Gauthier Van Malderen: Yeah. So I think we remove friction in several ways. One click, you've got millions of books in the palm of your hand as you said, right? Think of this like as a, instead of going to live, you've got it all there. The second is in your readers, we've tried to create a lot of convenience. So if you have the chance to play around with Perlego, we've built a lot of toolset layers in the content layer. So a thing I hated as a student, I don't know if you had to do this, just all your like different referencing styles, citation styles. Well, through Perlego, you just click copy and we put it in your essay and we've referenced the book directly for you.

Over different, third, different styles. Then another big thing is what I'm noticing is even the act of reading sometimes is quite friction. And so we've now offered text to speech on all our books. Audio books is a big thing, but when it comes to textbooks or learning content, very few of them are available in an audio format. So using AI, we now offer all books, text to speech. Every book.

Dr. Joe Sallustio: You can do that with every book with AI?

Gauthier Van Malderen: Yep. Yep.

Dr. Joe Sallustio: Wow. It reads out loud.

Gauthier Van Malderen: It uses Amazon Echo Polly as the voice and it reads the book out loud. That was a big thing we did last year. Yeah. So that's some of the ways you remove friction. I think there's so much more you can do in the future. I think for universities, when we talk about it is the biggest challenge for universities is accessibility. Imagine you don't have equal access to all your books and accessibility also comes with price, right? I don't know if you saw these stats, but apparently some of the main reasons university students drop out of colleges. They're like, wow, this is just too expensive. Even the content cost me $1,200 a year. I'm going to drop out. And so that, if you can make it more affordable, easier to learn, that always helps.

Dr. Joe Sallustio: That's a fact. That's a fact. It is amazing that a $200 bill for a lot of students to buy these books that cost $150, $200, they will try to hack their way out of that cost. Whether it's trying to find it on the internet for free, it's going around, it's, you know, there are a lot of websites that aggregate content out there that is not directly from a publisher. It's somebody else's paper and a lot of plagiarism and those things out there. There is something to be said for a central repository of books that you can cite. You can cite directly and you can search right. I'm assuming you could search content. You can say, okay, find me, find me this. I've got this book. Maybe I should search for this piece or that piece of information that I need. That makes my research easier. It reduces my time to completion as a student. So I can spend more time with my family. So there's so many benefits to the consumer, the student. So that brings me to my, that was a long way of getting to my question. How do students feel about subscription models, right? Where they're paying this monthly fee versus I have this cost over this time, but now I'm committing to this every month because commitment is also something we have trouble with as humans. But I'm paying subscriptions for everything else. Why should my textbooks be that hard of a decision?

Gauthier Van Malderen: I'm going to just share something and I'll talk about it because I don't think the audience can see this, right? But these are exactly what you said. These are the biggest pirated websites, Z library, PDF drives, and these are the monthly visits about 140 million unique visitors a month to these platforms. So look, my biggest competitor in the market is free. There's nothing better than free as a student. And so the only way you're going to get people to use and buy your product is through what we've talked about - accessibility and affordability, but convenience, it's all there in two simple clicks. I need to search. I don't need to search 500 different websites for bad quality PDFs. So convenience is the most important thing. Now on subscription, if the overall arching basket value, let's say a student stays with us for four years and they pay three, $400 on Perlego in total. And in the traditional model, they were spending $1,200 on textbooks and prints. Then there's also a win-win. 

But another thing I really want to stress, I think, and a big thing we're trying to do is, and you've seen this in education through some of the people you talk to, lifelong learning. So you finished your undergrad degree, you might want to do GMATs, or you might want to learn the founding story of, so we're trying to extend our value, not just to university, but to lifelong learning, or you want to learn coding. I think that is going to be a big trend in education is maybe in 10 years, I want to reskill or upskill during my career. And maybe Perlego is a great way as well to find amazing content in that ecosystem.

Dr. Joe Sallustio: Interesting. What about individual books? What if I write a book? What if I've written a book and I want to have it in your database? Do I come to you as an individual book publisher? Do I have to have it through some giant publishing company?

Gauthier Van Malderen: That's a really good question. And it's actually one of mine. So today we already worked with a lot of the OER. So OpenStax is one of our best publishers. They're amazing. And they just, we did a direct deal, but a lot of faculty and a lot of professors are saying, Hey, Gauthier, I'm writing my own content and I don't necessarily want to go through a big publisher. So in terms of my vision of where Perlego is going, it won't just be that kind of Spotify or Netflix for books, but really a marketplace where you could find all your core learning material. Now, as a professor and a publisher, you could upload your content into Perlego and essentially become a micro publisher in effect.

Right now, however, there are few challenges around them. How do you ensure that you continue to have the quality controls that you get today from the best publishers in the world? Right. Being published through Harvard University Press and we do a deal with them is an element of quality control. So that's my biggest challenge is how are we to get around that? And I think the easiest way is if you, as a professor, want to upload your content on Perlego, we'll do a quick check. You know, generally you can find the faculty page and be like, okay, this makes sense. But yeah, it's part of the vision to extend that to self publishing in the future.

Dr. Joe Sallustio: I like that. That's another, that's another value that you can provide another revenue stream for your organization. Talk about the future of Perlego. What do you see for the future of your organization? Is it global penetration? Is it a certain amount of higher education users? How do you think about your long-term goals?

Gauthier Van Malderen: So my dream is to build a huge global company and that no matter your age, race or background, everyone has equal access to the content. And the way we organize the world is into four main markets. Our biggest market is North America, which is the biggest market, just over 20 million, 21 million higher education students. Another really big market for us is Latin America, Mexico is huge. Spanish is like killing it for us in the US. I think some of our popular books are actually Spanish versions of textbooks sometimes.

And from a product perspective, there's so many things I still want to do. I talked to you about the vision around the marketplace, but another thing I'm super excited about is I've come to realize that a lot of people also learn very well from their peers. So imagine if you could collaborate and work with your professors directly on the book, you could essentially build a community layer on top of the content layer. And so you don't necessarily have to go to college to finish your degree. You can maybe learn from others or peers and see what people are uploading. So you could do a private view where you read by yourself and you could do a public view where you could see and collaborate with people who are passionate about what you're studying as well.

Dr. Joe Sallustio: Almost like a what? Like a social media feed within a book?

Gauthier Van Malderen: Yeah. Think of this as the Google Docs experience in the book content and you're collaborating with professors, fellow students. So that's something I'm excited about. And then we've talked a bit about AI and the ability to create more personalization, et cetera. So yeah, so much more global, completely doubling down in the US, which we're doing really well right now. And then allowing that community layer to have the content there.

Dr. Joe Sallustio: I like your style, like my mind's spinning. But imagine taking a book that maybe is really popular and having that author annotate that book and talk about why they wrote these things the way they wrote them, right? And engage with the community, like almost like as a masterclass, an in-book masterclass. So you would actually see, you know, I'm, don't know who I can, I can't think of anybody off the top of my head, but you know, I'm Ken Blanchard. I'm a big business book writer. Here's what I was thinking when I wrote this. Here's why this concept is so important. Here's what I've learned since I wrote this book. And then having those social media feed, almost those comments from users, that would be super cool to read those, right? It'd be awesome to do something like that.

Gauthier Van Malderen: Exactly. You're exactly right. And you could go even further. You could say every six months, the author, you know, Ken Blanchard, super famous, could connect with their community. You can be like, I love your book. But for authors, this is something we really do for publishers is it's also really powerful to see how people are interacting with your content. One of the biggest challenges we have for our big publishers is very few students actually read a book from A to Z. You might only read one chapter or two chapters. So imagine if you're an author, you see, wow, everything is being collaborated or read in chapter 20. Then that allows authors and faculty to create even better content, which drive better learning outcomes.

Dr. Joe Sallustio: That's interesting, right? Here's the part of your book that's just not that good. Maybe improve it in your next version. So page by page access that tells you where the value of your book is as an author. Where do people really accessing? That's an interesting concept. What else do you want to say about Perlego? Tell me, an open mic for you. Anything else you want to say to this audience of higher ed leaders and transformational change agents?

Gauthier Van Malderen: Yes, good point. I think, look, when I started this kind of six years ago, no publisher wanted to work with us. And I'm so grateful for all the publishers who do now work with us. I think also from a faculty perspective, it's interesting during COVID, it kind of, I don't know if you saw the acceleration of remote work. I saw the acceleration of the use of digital in ed tech or education. Digital is very little in terms of the global education space. It's still like only 5, 10%, right? And so what I see is it's more the up and coming younger faculty professors who are more tech savvy and more keen to use technology for good. But we still have to have a bit more movement there. So if faculty could be more proactive and be more digital, I think that would also help massively. It's just so much better for the ecosystem.

Dr. Joe Sallustio: Tell me what you see for the future of post-secondary education or higher education, taking whatever way you want.

Gauthier Van Malderen: I think higher ed is going to become much more global. So, from a European experience, I think you might do, I'm just giving you an example. Imagine if you could study in the US for two years, one year in France, or in it's going to become much more like that. You're going to have much more of a blended approach where specific courses or classes will be in person, but intense for two, three weeks. And then the rest would be remote and that will drive more affordability generally. But for me at the end of the day, higher ed stands for me, kind of two big things, which I think are irreplaceable, is the experience, the university, you know, college experience is very important for your, I made some of my best friends at college. I don't know about you, if it was a big thing for you.

Dr. Joe Sallustio: Of course. Yeah.

Gauthier Van Malderen: And then the second is the quality of the brand of the institution and the quality of your professors and faculty, which again, I think is very important, which you can't get remote. In-person is so powerful to have a great lecture. So I'm still very bullish actually about in-person class lectures, more so than I'd say other people, which is strange, right? Because I'm essentially a digital product. But I actually really still believe in human connectivity and the importance of it.

Dr. Joe Sallustio: What do you make? That was supposed to be my last question. I'm going to ask you one more. What do you make of this anti higher ed movement that's out there? You don't need a degree anymore. You don't need to go four years. You don't need a degree to get a job. You just go get a job and these people you're going to be Elon Musk and, 10 months if you do this. There's a lot of ads out there about not going through higher education and being able to still progress through life at the same rate with the same money, with the same health benefits. When you look at this as an ed tech owner, what do you think?

Gauthier Van Malderen: Fascinating. I think interesting in terms of I agree to some extent disagree to others, depends on what you're studying. You can't say I'll be a doctor in 10 months. You need to do the proper degree. However, if the perception or the value you're getting from your university just doesn't make sense, if you're spending $150,000 in your $200,000 in debt and you don't get a huge uplift in salary, I'll use the MBA. The MBA used to be a path forward to get much more money. I don't see that as the case nowadays. So unless there's more value or more value creation, I do think you'll see a change there. But of course in professions like law, even history, academia, it's always going to be very important.

Dr. Joe Sallustio: Nailed it. You're right. It does matter. If you're to be an airplane pilot, can't just decide you're going to start flying planes tomorrow. You're not going to have it. You're not going to have me or Gauthier as a customer. That's for sure. But maybe for business. Yeah. Do you need to go to university for four years to college? I'm not sure. Right. Yeah. Well, there you have it, ladies and gentlemen, a really interesting company. I urge you to check it out because when you do, you're going to go, we need this. Our students need this. And there's a lot of ed tech companies out there. Some of them do similar things. It's very rare when you find one and go, our students need this. And it can help you create accessibility. It can help you reduce the cost to the consumer. And you've got a great person running it. So the partnerships are there. Ladies and gentlemen, here he is. He's Gauthier Van Malderen. He is the founder and CEO of Perlego. Gauthier, thank you for coming today, my man. And I hope you had fun along the way.

Gauthier Van Malderen: Joe. Love it. Thank you very much.

Dr. Joe Sallustio: Ladies and gentlemen, you've just ed-upped.