If reminiscing about Chegg evokes a sense of dread reminiscent of your school days, there might be a silver lining for you: the once-dominant company, recognized for its textbook rental services and homework assistance, is now struggling to stay afloat. The alarming decline in Chegg’s stock price—down an astonishing 99% from its peak in 2021—has resulted in a staggering loss of $14.5 billion in market value. Compounding the issues, the company has hemorrhaged approximately half a million paid subscribers, prompting serious concerns over its ability to meet forthcoming debt obligations amidst a persistent decline in revenue.
Chegg has likely become a familiar name to anyone who attended college in recent years. The company began its journey in the 2000s by offering textbook rentals, subsequently diversifying into a broader range of online educational tools including study guides and eventually a platform that provided pre-written responses to frequently asked homework questions.
Tragically, the advent of ChatGPT has almost completely dismantled Chegg’s traditional business model. For years, Chegg employed thousands of contractors tasked with writing answers across every major academic discipline, a labor-intensive endeavor fraught with uncertainty regarding the accuracy of the provided solutions. In stark contrast, ChatGPT has assimilated an expansive wealth of information available across the internet, easily handling inquiries that span the entirety of historical subjects with impressive proficiency.
As reported by the Wall Street Journal, the arrival of ChatGPT catalyzed a mass exodus of students from their $20 monthly Chegg subscriptions, who instead opted for the immediacy and accessibility of the AI chatbot:
Despite Chegg’s attempts to innovate by launching its own AI products, the company is grappling with the challenge of proving its ongoing relevance to customers and investors in a landscape irrevocably altered by ChatGPT.
“It’s free, it’s instant, and you don’t really have to worry if the problem is there or not,” remarked Jonah Tang, an M.B.A. candidate at Point Loma Nazarene University in San Diego, highlighting the key advantages of using ChatGPT for homework assistance over Chegg’s offerings.
A survey conducted by investment bank Needham revealed that only 30% of college students intended to utilize Chegg this semester, a decrease from 38% in the spring, while those planning to use ChatGPT surged to 62%, up from 43%.
At this juncture, the path forward for Chegg is shrouded in uncertainty. Over the summer, the company initiated layoffs affecting 441 employees, amounting to a quarter of its workforce. The new CEO is focusing on appealing to what he describes as “curious learners” by providing enhanced, AI-assisted answers alongside live consultations to improve user engagement.
Perhaps most disheartening is the fact that, according to the Journal, employees had proactively requested resources as early as 2022 to begin developing AI tools aimed at automating answers. The surge in demand during the pandemic created an urgency for the company to deliver answers rapidly, highlighting the missed opportunity to adapt during a pivotal time.
Chegg’s leadership declined to support the initiative to construct AI tools until after the release of ChatGPT, yet even then, some within the organization expressed confidence in the company’s ability to withstand competition due to the chatbot’s notorious tendency for inaccuracies.
However, akin to the challenges associated with platforms like Wikipedia, it has become evident that students are willing to embrace a certain level of risk for the sake of convenience. While they are advised not to fully trust Wikipedia, many still use it as a reference tool, often turning to the citations section for credible sources. Chatbots like ChatGPT, while convenient, lack a genuine understanding of complex subjects, producing answers that may seem accurate but can often be misleading. It resembles relying on a calculator with an accuracy rate of only 50%. In disciplines such as history, the responses generated by chatbots may be somewhat reliable, but they still necessitate careful verification.
The question remains: could Chegg do more to illuminate this reality for its users? Unfortunately, it appears that the vast majority of students are indifferent to such nuances, and the clock is ticking down for Chegg as it faces an uncertain future.
**Interview with Jonah Tang, M.B.A. Candidate at Point Loma Nazarene University**
**Editor:** Thank you for joining us today, Jonah. With Chegg’s stock plummeting, can you share your perspective as a current student on the changes in educational resources?
**Jonah Tang:** Thank you for having me. It’s a bit of a wild time in the education space, especially with the emergence of tools like ChatGPT. Many of us students appreciated Chegg’s services for years, but the immediate and free nature of ChatGPT has changed how we approach learning and homework.
**Editor:** Can you elaborate on what specifically has driven you and other students away from Chegg?
**Jonah Tang:** Absolutely. Chegg was a reliable resource for textbook rentals and homework help, but ChatGPT offers answers instantaneously and at no cost. It’s hard to compete with that. I can ask ChatGPT a question, get a response right away, and it often covers more ground than what Chegg offers. Plus, there’s no subscription fee involved.
**Editor:** It sounds like accessibility is a key factor. Has this shift impacted how you approach studying or your perception of educational tools?
**Jonah Tang:** Definitely. ChatGPT feels more like a collaborative partner rather than just a resource. It’s easy to use and widely accessible, which means it doesn’t feel like a chore to utilize it. In contrast, Chegg’s subscription model felt like an added financial burden, especially when many of us are already strapped for cash as students.
**Editor:** Given this shift, what do you think Chegg needs to do to reclaim its market position, if that’s even possible at this point?
**Jonah Tang:** That’s tough to say. They are trying to innovate and introduce AI products, but it seems they need more than just that. Chegg has to fundamentally rethink its value proposition. It needs to demonstrate how its tools can offer something uniquely beneficial compared to free alternatives. Maybe focusing on interactive and personalized learning experiences or integrating AI in a way that enhances understanding rather than just providing answers could help.
**Editor:** Interesting points. Looking ahead, do you see a future where traditional educational companies like Chegg can coexist with AI solutions, or is it a matter of one displacing the other?
**Jonah Tang:** I think there’s potential for coexistence, but it will require adaptation. Traditional companies will need to embrace technology and evolve their products in alignment with students’ changing needs. It’s a crucial moment for them, and how they respond could determine their survival in this new landscape.
**Editor:** Thank you, Jonah, for your insights. It’ll be fascinating to see how this all unfolds as both students and companies navigate these changes.
