Chegg Lays Off 388 Employees, Restructures Amid AI Competition

UPDATE: Chegg is laying off 388 employees, representing 45% of its workforce, as the company restructures in response to fierce competition from AI technologies like ChatGPT. This urgent move comes just days after the company confirmed significant declines in traffic and revenue, directly attributed to the rise of AI and reduced visibility on Google.

On November 2022, Chegg’s stock plummeted by 99% from its peak, wiping out $14.5 billion in market value. The once-thriving educational platform, which saw a 345% increase in stock price between March 2020 and January 2021, is now grappling with the realities of a digital landscape transformed by AI advancements.

A company representative stated that “the new realities of AI and reduced traffic from Google to content publishers” have severely impacted Chegg’s business model. The surge in AI tools has rendered Chegg’s traditional services less appealing. In a bid to adapt, Chegg introduced its own chatbot, but it failed to recapture user interest.

In February, Chegg filed a lawsuit against Google, claiming that its proprietary content was utilized in Google’s AI-driven features without compensation. This legal battle highlights the ongoing struggle for content creators in an era dominated by AI technologies.

The company has reinstated Dan Rosensweig as CEO, marking a return to leadership from a time when Chegg flourished. This decision comes amid discussions about potentially going private or exploring sale options, although Chegg has opted to remain a public entity.

The layoffs will predominantly affect the U.S. workforce, as many of Chegg’s experts based in India are not counted among permanent employees subject to layoffs. As Chegg attempts to navigate this challenging landscape, the future remains uncertain.

With these significant changes, Chegg is taking drastic steps to adapt to a rapidly evolving education technology market. The urgency of these developments suggests that students and investors alike should stay tuned for further updates as the company seeks to redefine its strategy in the face of AI competition.