Chegg's Struggling Business Model: Can the EdTech Giant Recover from ChatGPT Crisis?

The value of US-based edtech company Chegg has plummeted by 99% since its peak in 2021, wiping out an estimated $14.5 billion in market capitalization. The sudden decline in stock price and loss of over half a million paid subscribers have raised concerns about the company's ability to pay off debts.

According to The Wall Street Journal report, Chegg's steady growth and minimal competition were overtaken by the 2022 launch of OpenAI's ChatGPT, an AI chatbot trained on vast amounts of data and information available on the internet. Students flocked to ChatGPT for homework help, citing its convenience, accuracy, and speed as major advantages over Chegg.

Chegg, which began as a student messaging forum in 2000, had built its business model around providing pre-written answers to frequently asked homework questions. However, the rise of ChatGPT disrupted this model, reducing demand for Chegg's services and leading to a significant decline in revenue.

In an effort to adapt, former CEO Dan Rosenweig met with OpenAI frontman Sam Altman to develop a new product called Cheggmate, which aimed to generate accurate answers by giving GPT-4 access to Chegg's vast repository of solutions. However, the initiative failed to stem the tide, and ChatGPT continued to erode Chegg's subscriber base.

With the appointment of new CEO Nathan Schultz, Chegg is now offering more AI-assisted answers along with live counselling sessions, targeting students who need help beyond freely-available, AI-generated answers. While this move aims to revitalize the company's business model, analysts remain concerned about its ability to compete in a market dominated by free AI tools.

As the edtech industry continues to evolve, Chegg's struggles serve as a reminder of the importance of innovation and adaptability in the face of disruption. Will the company be able to recover from this crisis and reclaim its position in the market? Only time will tell.