The office walls of Kno, a Santa Clara (Calif.) startup that wants to bring the e-book revolution to college textbooks, are filled with signs containing playful puns on its name: “Kno it All,” “Good to Kno.” Lately though, the mood around the company hasn’t been particularly lighthearted. Kno raised $80 million in venture capital in 2009 and 2010, but tried to do one of the hardest things in Silicon Valley: create consumer hardware from scratch. In April, as Apple (AAPL)’s iPad continued to dominate the tablet market, Kno decided to shelve plans to sell its own tablet specifically geared to the education market. It subsequently laid off a third of its employees.
Kno decided that if you can’t beat ’em, join ’em. It revamped as a software company and in June released an app for, yes, the iPad. The app lets students buy and read digital textbooks, and Kno now offers about 100,000 of them. However, due to new rules out of Cupertino, Calif., 30 percent of the revenue from books Kno sells through its iPad app must be passed along to Apple headquarters. That’s tough to swallow for both Kno and its textbook publisher partners, who are used to paying a 10 percent to 15 percent cut to brick-and-mortar retailers.
Now Kno is trying to wriggle out of Apple’s grasp—at least a little. On Aug. 10 the company announced that it will start selling its catalog through Facebook, whose users would access the books on a tablet or PC and connect to one another on the social network. Kno is also making its catalog available on its website, kno.com, and offering a number of new features, such as interactive quizzes.
One of Kno’s goals is to differentiate itself from other companies in the nascent digital textbook market. San Francisco-based Inkling, for instance, is also trying to create a new breed of interactive digital textbooks and has teamed up with several major publishers. Amazon.com (AMZN) recently started allowing students to rent textbooks on the Kindle. “Right now in the high education space there is still no de facto leader,” says Osman Rashid, Kno’s co-founder and chief executive officer. “It’s wide open for someone to come up with an innovative product and establish a pole position. We’re hellbent on it being us.”
Rashid knows the ins-and-outs of the textbook market. He was co-founder of Chegg, which allows students to rent paper textbooks in much the same way they can rent DVDs from Netflix (NFLX). Viewing the shift to digital books as inevitable, Rashid left Chegg in 2009 and enlisted the marquee venture capital firm Andreessen Horowitz to back his vision for an education-specific e-reader. The dual-screen, stylus-enabled Kno tablet, which was supposed to sell for $899, made its debut at the International CES in January and drew mostly skeptical feedback. By April, as the iPad gained momentum, Kno bowed to reality and shut down its hardware efforts.
Not all publishers are onboard with Kno’s reinvention as an app maker, and many are pushing their own products. Last September, Nature Publishing Group, working with Tata Consultancy Services in India, produced a totally rewritten and interactive version of its popular textbook, Principles of Biology. It works on smartphones, tablets, and desktops. “We are focused on totally rethinking the way textbooks are constructed,” says Vikram Savkar, publishing director for Nature Publishing. His company currently doesn’t sell any of its textbooks through Kno.
McGraw-Hill (MHP), one of the country’s largest textbook publishers, is hedging its bets: It licenses about a third of its 30,000-plus textbook catalog to Kno and has invested in Inkling, the Kno rival. It also has its own offering, Connect, a Web-based education service that guides teachers and students through course materials without relying on a book. “I don’t know that we’ll ever get to a point in this industry where what’s called an e-book is mainstream,” says Vineet Madan, head of learning ecosystems at McGraw Hill.
Rashid understands that Kno needs to do more than convert paper textbooks into electronic versions, and on Aug. 10 also announced new features for the company’s iPad app. One, QuizMe, automatically takes graphics and illustrations in textbooks and conceals elements of them for readers, turning them into quizzes. Another, Journal, takes important images, notes, and highlightings and collates them into a digital study guide. “We are trying to take what is familiar and comfortable and what professors understand, and extend that in a way that turns existing books into interactive texts,” Rashid says. “Education is not something you can change overnight.”