Chegg, the online education platform, has faced significant challenges in recent months due to the emergence of ChatGPT, a chatbot that generates high-quality answers using natural language processing and deep learning. The chatbot, created by OpenAI, has gained popularity among students seeking instant and accurate answers to their homework questions. As a result, Chegg has seen its share price plummet by roughly 50% in the beginning of this month, and its market capitalization has dropped to $1.07 billion.
Chegg's business model relies on charging students a monthly subscription fee to access its database of expert answers and other services, such as tutoring and test prep. However, with the availability of ChatGPT, students no longer need to pay for Chegg's services, as they can get similar or better results from a free chatbot. This has led to a significant drop in Chegg's revenue and user base, as well as a loss of trust from investors and analysts.
Chegg's CEO
Dan Rosensweig has
acknowledged the threat posed by ChatGPT and said that the company is working on developing new features and products to differentiate itself from the chatbot. Impact of AI and ChatGPT can also be seen in a latest announcement from
IBM about replacing 7800 human jobs with AI.
Despite the challenges, Chegg remains optimistic about its future. The company believes that the use of generative AI and large language models will have a positive impact on education and society. Chegg has also introduced CheggMate, an educational tool that utilizes the power of ChatGPT to make learning more personalized, adaptive, accurate, fast, and effective.
The tool is a blend of AI technology and human-based support that aims to build trust, ensure accuracy and relevancy, and reduce content costs. The beta launch of CheggMate is set to take place later this month, and the company aims to expand access throughout the year.
Chegg has also added non-academic content to its subscriptions with improved retention, and it expects to add more offers in the future. Despite the introduction of new features, some investors and analysts remain cautious about the company's future given the impact of
ChatGPT. The company will need to continue innovating to remain competitive in the rapidly changing education technology landscape.
The free fall of shares continued even though the company has announced strong Q1 results above their guidance on total revenue and adjusted EBITDA. The impact of ChatGPT on the business was clearly seen by the investors which resulted in this erosion.
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