Chegg Lays Off Hundreds, Replaces CEO, All Because of AI

If you were a lazy college student during Covid, imagine a time traveler from five years in the future telling you that something kind of like Chegg is coming soon—but this thing lets you be even lazier. In fact, in five years, Chegg will restructure its company completely because it’s suffering so badly from competition with this new thing, this person says. You would probably ask Chegg to tell you why time travel is impossible, get an answer in fifteen minutes, and brush off this person as a lunatic.

But as we all know, that thing is ChatGPT, along with other AI products like Google’s AI overviews. A Chegg representative admitted as much on Monday, saying the “new realities of AI and reduced traffic from Google to content publishers have led to a significant decline in Chegg’s traffic and revenue,” according to Reuters.

Between March of 2020 and January of 2021, the stock price of Chegg went up by 345%, according to a Forbes article. That piece notes that Chegg had two secret ingredients at the time: a searchable collection of 46 million textbooks that students could use to access instant answers during at-home tests and other assignments, and a workforce in India of “70,000 experts with advanced math, science, technology and engineering degrees,” on call to answer queries from students within minutes. At the time, Chegg cost $14.95 per month.

But as of November of last year, the stock price had gone down 99% from its peak, a plunge that caused $14.5 billion to disappear. The cause was clearly ChatGPT—a fact so obvious that Chegg rolled out its own chatbot, but to no avail.

In February of this year, Chegg filed a lawsuit against Google over AI Overviews, claiming that it provided Google with “proprietary content in order to be included in Google’s search function,” only to have that content mined by Google’s AI function, all “without having to spend a dime.”

Now, Chegg is eliminating 388 roles—which is 45% of the company’s workforce according to the Reuters article, possibly because Chegg’s vast legion of India-based experts ostensibly do not count as permanent employees who are subject to layoffs.

The new CEO, Dan Rosensweig, is actually the company’s old CEO from its more successful era. Chegg also apparently conducted a review about the possibility of going private or putting itself up for sale, but it’s remaining public and bringing back its old CEO instead.

It sounds like it’s decided to live in the past and hope for a miracle.