Chegg's Survival Hangs in Balance: Ed-tech Giant Fights for Relevance Amidst ChatGPT Surge

The US-based edtech company Chegg is struggling to stay afloat amid a sharp decline in its stock price and subscribers, largely due to the rise of OpenAI's AI-powered chatbot ChatGPT. The company's estimated $14.5 billion valuation has plummeted by 99 per cent from its 2021 peaks.

Once a go-to platform for students seeking help with homework, Chegg saw its business model lose relevance with the launch of ChatGPT in 2022. The AI-powered chatbot provides instant answers to students' queries, including maths problems and science topics, without needing human intervention. This has resulted in over half a million paid subscribers deserting Chegg, with many opting for free alternatives.

According to a report by The Wall Street Journal, the surge in ChatGPT users is coinciding with a decline in Chegg's revenue. Analysts fear that the edtech company will struggle to pay its debts if it fails to adapt to the changing market landscape.

Chegg was founded in 2000 as an online messaging forum for students. It later pivoted to provide pre-written answers to frequently asked homework questions, generating significant revenue during the pandemic-driven shift to virtual learning. However, with ChatGPT's launch, the company found itself facing stiffer competition for its services.

CEO Dan Rosenweig initially questioned the immediate threat posed by ChatGPT, leading to a misstep in developing AI-powered solutions to address demand. Instead of embracing AI chatbots, Chegg released a product called Cheggmate, which was later deemed unsuccessful.

Despite attempts to pivot and adapt, Chegg's stock price continues to slide. The company has restructured its workforce, layoffs being part of the response to changing profitability expectations. However, under CEO Nathan Schultz, Chegg is now attempting to shift focus towards AI-assisted learning solutions, targeting a niche market beyond free tools.

The rise of ChatGPT and other AI-powered solutions raises questions about the future of edtech as it stands. It remains to be seen whether Chegg can regain its foothold in the market or if smaller competitors will emerge to claim the top spot.