This article analyzes the recent Chegg case thoroughly & what went wrong. It covers the full story with responses from Chegg and its CEO’s take on the same.
What is Chegg?
Chegg, California based, is an ed-tech company which provides e-education solutions. Their services include homework help, digital and physical textbook rentals, textbook solutions, online tutoring, etc.
The company has reported sustained growth from the very beginning.
Chegg also carried out various acquisitions on its way up. The latest one was of WriteLab, which uses AI to analyze text & suggest improvements. Little did Chegg know that the same Ai will be so advanced in the future that will be their prime competitor.
What went wrong?
In late 2021, AI started emerging as it developed further and is now able to automate various tasks on its own.
This posed a serious threat to a lot of sectors globally and e-learning was no different. As time passed and servers become more capable of handling traffic, AIs like ChatGPT became more accessible.
It didn’t take long for users to realize that they can get answers to their solutions and can efficiently learn concepts; that too for free.
And this marked the beginning of a harsh era for subscription-based e-solutions, like Chegg. It was so because all you have to do is copy and paste the question and wait for 8 to 10 seconds roughly.
So long story short, Chegg was losing its consumer base to AI.
How it impacted Chegg?
Shares in online learning company Chegg plunged after it was one of the first organizations to admit that AI affected its business model. Chegg recognized that students were turning to OpenAi’s ChatGPT for help. The AI alternative hurts Chegg’s financial situation as its shares fell nearly 50% on 2nd May.
This all happened as Chegg released their recent earnings to the market.
Chegg shares tumbled 48% to $9.08. The stock traded above $100 in early 2021 as most students were still stuck at home attending class online during the pandemic.
What was CEO’s Response?
Chegg CEO Dan Rosensweig told investors on a conference call Monday that early in the year, the company was meeting expectations for new sign-ups for its educational services. But that shifted in recent months.
“Since March we saw a significant spike in student interest in ChatGPT,” Rosensweig said. “We now believe it’s having an impact on our new customer growth rate.”
Rosensweig said students who normally pay for Chegg’s service around midterms or finals were reluctant to pay for subscriptions when there was a free site for them to use.
But everyone knew it was CEO’s way to persuade that ‘everything’s fine’. He tried to soothe market impulse, but this didn’t make any difference.
How Chegg responded?
As days passed, Chegg’s share went on descending, on the other hand, AI was advancing with new releases like ChatGPT-4 and other plugins.
Chegg’s management came up with chatbot plans of its own. In April, the company announced “CheggMate” — an AI chatbot that they built in partnership with OpenAI and using ChatGPT’s technology.
In response to the new reality, the company started CheggMate, a service created with ChatGPT-4 to offer tailored content via AI.
How can Chegg respond?
I also was a Chegg user earlier but I switched to other platforms later on. I also got to know about alternates with minimal prices and better user experiences like Quizlet, Studocu, and Scribd to name a few.
- In markets other than the US, Chegg makes it difficult for their customers to avail of the services due to gritty payment channels.
- Chegg also does not let you share your account with more than 2 devices which also became a red flag.
- Absence of proper customer support. At least in India, solving grievances over call is more appreciated than chatbots.
- A tricky user interface like adding or removing a payment mode is something users always struggled with.
Chegg is working towards a comeback and redemption of its long-held market share. They are including AI in their interface for a better user experience.
It is still a great study partner to millions globally. I hope this pioneer doesn’t fail and rebound back stronger with new strategies.