Jakarta, Indonesia Sentinel — Chegg, the American company once synonymous with textbook rentals and homework help, is struggling to stay afloat as ChatGPT emerges as the go-to solution for students. The rapid adoption of ChatGPT among students has significantly impacted the educational support industry, including tutoring services like Chegg.
Founded in the early 2000s, Chegg initially made its mark by renting out textbooks before expanding into online study guides and eventually offering written answers to common homework questions. The platform became a staple for college students, providing solutions across various subjects through a subscription model.
However, the rise of ChatGPT has upended Chegg’s business model. For years, Chegg relied on thousands of contractors to manually generate answers for homework questions—a labor-intensive process that often couldn’t guarantee the exact solutions users sought.
In contrast, ChatGPT leverages extensive internet data, enabling it to address nearly any question a student might pose. Thus, the arrival of this AI-powered tool has diminished the need for Chegg’s services, leading to a sharp decline in its user base.
The Wall Street Journal reported a clear correlation between the launch of ChatGPT and a surge in subscription cancellations at Chegg. Typically, Chegg customers paid $19.95 per month for access to step-by-step answers and expert consultations, a services now easily replicated by AI.
As a result, the company lost over half a million paid subscribers, dealing a severe blow to its primary revenue stream. This downturn has caused Chegg’s stock up to November 2024 has plummet by 99% since its peak in 2021, wiping out $14.5 billion in market value.
The financial strain has been profound. As subscription numbers dwindled, so did Chegg’s quarterly revenues, raising concerns about its ability to service debt. In response to these challenges, Chegg laid off about 25% of its workforce, amounting to roughly 441 employees, earlier this year.
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Despite these setbacks, Chegg has attempted to integrate AI into its platform to win back customers and reassure investors. Although Chegg’s employees had proposed the use of AI-generated answers as early as 2022, the idea was initially dismissed by the company’s executives.
Chegg underestimated ChatGPT’s capabilities, initially believing the chatbot’s occasional inaccuracies would pose little threat. However, internal data soon revealed that students were increasingly turning to ChatGPT for study assistance.
The advanced capabilities of GPT-4, the technology behind ChatGPT, consistently outperformed answers provided by Chegg’s human experts, further accelerating the shift away from traditional online tutoring models.
With the educational landscape evolving rapidly, Chegg faces an uncertain future as it grapples with how to compete in a market dominated by AI.
(Raidi/Agung)
