While many companies are still exploring the impact of artificial intelligence (AI) on their businesses, online education company Chegg has become the first victim of AI's disruptive impact.
Chegg is an online platform that provides homework tutoring for students. It attracted a large number of users during the epidemic, and its stock price and user subscriptions reached historical highs.
However, since the advent of ChatGPT, Chegg's situation has taken a turn for the worse, losing more than 500,000 paying users, its stock price has plummeted 99% since the beginning of 2021, and the company's market value has evaporated by US$14.5 billion.
Image source: Chegg official website
Chegg relies on answers provided by thousands of Indian contractors year-round, and with the launch of ChatGPT, students suddenly have a free, instant AI tool capable of generating the answers they need without having to pay Chegg's $19.95 per month of subscription fees. As more and more students choose ChatGPT, the number of Chegg users continues to decline.
According to investment bank Needham’s survey data on college students, during this semester, the proportion of students planning to use Chegg dropped to 30%, a decrease from 38% in the spring semester; the proportion of students planning to use ChatGPT rose to 62%, significantly higher 43% in the spring semester. The student group's preference for more convenient and free AI solutions has put tremendous pressure on Chegg's revenue. It is clear that the challenges facing Chegg have changed from short-term competition to structural shocks.
Data source: Chegg official website Tabulation: Yan Lingkang
To this end, Chegg tried to respond to market changes by developing its own AI tools, launched Cheggmate, an intelligent assistant based on Scale AI cooperation, and transformed the website to use text boxes similar to ChatGPT for interaction.
After the company's new CEO Nathan Schultz took office, he made large-scale adjustments to the company: laying off about 1/4 of the company's employees and planning to expand overseas to open up new markets.
However, none of the above efforts have achieved significant results, and the loss of user subscriptions has not improved. Revenue in the second quarter fell by 11%, which was the largest year-on-year decline since 2017. Wall Street analysts expect Chegg's third-quarter earnings report to show a 15% year-over-year sales decline.
Chegg's management had to re-examine the priorities of its AI projects. Schultz said in an interview that Chegg is planning to provide more comprehensive answers and consulting services for "curious learners" to distinguish it from the service scope of free tools such as ChatGPT, hoping to attract users with greater learning needs, not just are students seeking answers.
Although Chegg says that 91% of its users are satisfied with its product, the actual loss of its paying users has dealt a serious blow to the company's business.
Take Ahmed Assalmi, a student at Taif University in Saudi Arabia, as an example. The answers he got after subscribing to Chegg showed that they came from AI models or Chegg's content library, rather than direct answers from experts, which made him deeply disappointed. Assalmi said that he prefers to use ChatGPT to complete the work and believes that Chegg's service does not meet the level promised.
The AI revolution faced by Chegg is testing its ability to find a foothold in the industry.