CheggMate

The anticipated AIO-pocalypse hasn’t occurred, at the very least not within the type we anticipated.

As a substitute of a meteor influence, it seems extra like local weather change: slowly elevating temperatures that trigger pure disasters. Chegg is likely one of the first victims.

Chegg is an ed-tech firm that gives college students homework assist, textbook leases, on-line tutoring, and profession sources. Based in 2005. IPO in 2013.

In 2024, it reported 6.6 million paying subscribers, and its income is down -14% YoY. The offender: AI.

The massive query I reply on this article is whether or not Chegg is an outlier (spoiler: it’s not) or the primary of many. Extra firms are bleeding. And a few direct opponents to Chegg are surprisingly thriving.

It’s best to learn this Memo if you wish to perceive:

1. 1. The nuance behind Chegg’s decline.
   2. Who else is impacted by AI.
   3. How you can inform for those who’re in danger.

1. How you can construct up immunity towards AI.

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AI Overviews Are Not The (Solely) Drawback

Chegg filed a lawsuit towards Google for abusing its monopoly place in Search to drive firms to supply content material that it repurposes for AI solutions or Featured Snippets.¹

The accusation has legs. Exhibiting solutions within the search outcomes straight competes with Chegg’s enterprise mannequin.

Chegg claims (rightfully) it can not decide out of them with out chopping off very important natural visitors and calls Search a “Hobson’s Selection”: you both block Google and lose all natural visitors or don’t, and Google takes your content material to provide solutions within the search outcomes.

Up up to now, I agree.

What we’re witnessing is the outdated ecosystem of Search falling aside. The generational deal was that web sites would create good content material and permit Google to crawl it.

In return, Google sends them web sites and exhibits adverts to searchers. Now that clicking on web sites is redundant in some circumstances, this deal is falling aside.

In my meta evaluation of AI Overviews, I confirmed how AI Overviews scale back click-through charges, however additionally they present up a lot much less typically and extra for informational queries than after they first began.

Skeptical

However this isn’t the entire puzzle of Chegg’s drawback. Months earlier than the lawsuit, Chegg’s CEO stated AI, not AI Overviews, is consuming into subscriber development (as I discussed in my Q1 Marketplaces Deep Dive):

“Rosensweig stated on a Could earnings name that ChatGPT had begun consuming into subscriber development. Chegg pulled monetary forecasts for the remainder of the 12 months, and its inventory dropped 48% in a day.”²

The article goes on:

“However inside months, Chegg’s inner information confirmed college students have been more and more turning to ChatGPT as a learning help. Staff discovered a number of the solutions supplied by GPT-4, the know-how behind ChatGPT, scored increased on inner evaluations than solutions from Chegg’s human consultants.”

The issue goes past AI Overviews. College students around the globe are utilizing AI as a substitute of internet platforms. And you may see it within the numbers as nicely.

Picture Credit score: Kevin Indig

If you take a look at how a lot estimated visitors Chegg acquired from search outcomes exhibiting AI Overviews, you discover it was solely ~20% in December 2024, at its peak, and 15% in January 2025. Painful, however not sufficient to tank an organization.

In accordance with Semrush, Chegg’s natural visitors truly elevated after Could 2024, when AIOs launched, and solely began tanking in October 2024.

In accordance with Similarweb, whole visitors declined earlier than ChatGPT launched in November 2022.

Picture Credit score: Kevin Indig

Declining model search quantity is an indication of shrinking model consciousness, product/market-fit and consumer retention.

The truth that model search quantity has been shrinking since 2020 and searches for cancellations have peaked earlier than AI entered the mainstream makes me imagine that the model already had points.

Picture Credit score: Kevin Indig

Chegg’s engagement metrics declined over the past 3 years, which isn’t good for search engine marketing and never good for the enterprise.

Backside Line

Chegg struggled earlier than AI. AI simply accelerated the decline.

So, why doesn’t Chegg sue OpenAI & Co as nicely? Perhaps, as a result of AI Overviews and their influence are simpler to measure.

Or, possibly as a result of Chegg’s case might construct on the lawsuit DoJ vs. Google, which already dominated Google a monopoly. The timing would match, for the reason that cures are popping out in August.

Chegg might at the very least block LLM crawlers of their robots.txt.

Don’t get me unsuitable – Chegg’s lawsuit has a robust level. However I additionally see it as a narrative for traders: Chegg needs to sign that it must take the corporate personal or promote (proper name) due to a structural change to its enterprise mannequin that it’s not liable for. The truth that the announcement was made throughout an earnings name helps that concept.

Picture Credit score: Kevin Indig

Symbolic: AI homework helper outranks Chegg for “homework assist,” considered one of its most necessary key phrases.

Who Else Is Impacted By AI

Chegg is a harbinger. I checked out different ed-tech websites that lean closely on search engine marketing and located that the majority of them noticed vital visitors losses since ChatGPT got here out:

• CourseHero.
• Brainly.
• Studocu.
• Quizlet.
• Numerade.
• Wyzant.
• Khan Academy.
• Codepen.
• Research.com.
• W3schools.
• Stackoverflow.

The visitors information is supported by analysis exhibiting that college students underwent vital habits modifications (first two quotes from the WSJ article linked above):

“A survey of school college students by funding financial institution Needham discovered 30% supposed to make use of Chegg this semester, down from 38% within the spring, and 62% deliberate to make use of ChatGPT, up from 43%.”

“Researchers on the College of Illinois at Urbana-Champaign performed a examine within the spring final 12 months to see how ChatGPT had influenced dishonest in an introductory programming course. They discovered college students had overwhelmingly moved to ChatGPT from what the researchers known as “plagiarism hubs” akin to Chegg.”

“A survey of 1,000 college students – each home and worldwide – discovered there had been an “explosive enhance” in the usage of genAI up to now 12 months. Virtually 9 out of 10 (88%) within the 2025 ballot stated they used instruments akin to ChatGPT for his or her assessments, up from 53% final 12 months.”³

ChatGPT & Co. destroy the worth of on-line tutoring and examine instruments.

Purple Flags

Chegg and the opposite affected websites present what pink flags to be careful for:

1. > 80% natural visitors.
2. Younger goal audiences.
3. Data websites, particularly marketplaces.

The businesses that have to be most cautious are overexposed to search engine marketing, supply info as a product, and promote to younger individuals.

Different industries that match the invoice and could possibly be subsequent on the checklist: Gig economic system, On-line Q&A, Quotes, lexica, encyclopedias, dictionaries.

Over 80% of Chegg’s visitors comes from search engine marketing (Picture Credit score: Kevin Indig)

How To Construct AI Immunity Cells

Not each ed-tech firm is within the pink. Scribd, Coursera, Udemy, Pearson.

Pearson is very fascinating as a result of it’s the UK equal of Chegg. Although income is down -3%, and its CEO acknowledged “digital studying developments” (a.ok.a. AI) as a problem, visitors is flourishing.

Why? As a result of it’s higher diversified: 65% of visitors comes direct, 18% from natural. It doesn’t need to be that little.

Every firm I listed at first of the paragraph is both much less reliant on search engine marketing visitors or affords content material that’s exhausting to repeat (e.g., programs).

Turning round structural declines, the place consumer habits and the market considerably shift, is tough. Generally, unimaginable. I’ve realized my very own justifiable share of classes when Shopify went by means of the COVID hangover.

So, what can Chegg do besides discover a time machine and return 10 years to repair its overexposure on search engine marketing?

First, taking the corporate personal to show it round is an effective first step. The stress of quarterly outcomes makes a robust pivot unimaginable.

Second, Chegg is already engaged on two good pivots:⁴

1. Get away from content material that’s straightforward for Google to repeat/synthesize and give attention to interactive instruments and expertise. The corporate already affords instruments like a quotation supervisor or a plagiarism checker, however it might do much more right here.
2. Discover associated market. Chegg launched Busuu, a language studying service, and Chegg Expertise, a pilot program to coach college students in business-relevant abilities and join them straight to companies. However can it compete with Duolingo and Babbel? And, are new markets fruitful sufficient?

I’m rooting for Chegg. I would like it to be a turnaround story. Godspeed.

¹ Supply, Supply

² How ChatGPT Introduced Down an On-line Schooling Large

³ UK universities warned to ‘stress-test’ assessments as 92% of scholars use AI

⁴ Chegg Reviews 2024 Fourth Quarter and Full Yr Monetary Outcomes

Featured Picture: Paulo Bobita/Search Engine Journal