Chegg has ruled out 22% of its workforce (22% of its employees), closed offices in the US and Canada, becoming the latest victim of AI disruption.
The move is part of a drastic restructuring effort as students are increasingly abandoning traditional learning platforms in favor of AI tools such as ChatGpt.
The move is part of a larger cost-cutting effort to simplify operations and address what Chegg calls a fundamental change in the way students find academic help. You’re skipping traditional platforms and moving directly to free or low-cost AI tools that provide answers right away.
Chegg lays out 248 employees when students abandon old fashioned Edtech for AI
Chegg has been feeling the effects for several months. Web traffic is hit and the company doesn’t expect things to turn around anytime soon. It warned investors that trends could get worse before they get better.
“Chegg said on Monday that around 22% of its employees (about 22% of its 248 employees) would reduce costs and streamline operations as students rely more on AI-powered tools such as ChatGpt via the traditional Edtech platform,” Reuters reported.
Chegg is one of many search-driven businesses affected by AI. Google’s AI-generated summary provides answers directly at the top of the search results, pulling information from a variety of sources without necessarily sending traffic. Whether it’s a search platform, media outlet or a reference site, websites that rely on search visibility are seeing a decline in visitors as Google’s AI keeps users on their own pages.
For Chegg, the impact is serious. The company has lost about 90% of its market value since its publication in 2013, and after the lawsuit was announced, its shares fell another 24%, immersing its shares above $1 per share. Chegg has introduced Goldman Sachs to explore options, such as potential sales and becoming private, Schultz told analysts in a revenue call on Monday.
According to Chegg, some of the responsibility goes to Google. Search Giants use pushes to keep their users on their own platform, especially AI overview and Gemini, which means fewer students will click on third-party sites like Chegg. The company also points to Openai and human fingers, both actively courting scholars by providing free access to AI tools.
Cheg’s collapse? The AI threat causes mass layoffs and subscriber exit accounts
The layoffs were no surprises. In 2023, Startup lost 40% of its value after admitting that ChatGpt was hurting the online education business.
Chegg has closed its US and Canada offices by the end of the year, reducing its marketing, product development and general operations. The restructuring costs the company between $34 million and $38 million, most of which will appear in the second and third quarters of this year.
But Chegg bets that the changes will pay off. We expect it will save up to $55 million in 2025 and double that in 2026.
Still, the numbers aren’t pretty. The company said its total subscriber declined 31% in the first quarter to 3.2 million. Revenue fell 30% to $121 million, while subscription revenue fell to $108 million.
In February, Chegg sued Google, accusing it of damaging the original content creators and accusing the publisher of undermining the competitive ability of its publishers by providing AI-generated overviews. This led to a decline in visitors and paying users, according to the lawsuit.
Chegg ended last year with 1,271 employees. That number is currently undergoing sharp cuts as the company becomes one of the more visible casualties of AI rises.
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