ChatGPT and other services have radically changed how students approach homework, and the incumbents in the space are feeling the heat.
Homework help company Chegg has said that it’s laying off 388 employees. This represents 45% of its workforce. Chegg said that the “new realities” of artificial intelligence and diminished traffic from internet search have led to plummeting revenue. Chegg had earlier laid off 22% of its workforce in May this year, also citing the impact of AI on its business.
After the latest layoffs, Chegg said that “reduced traffic from Google to content publishers” have damaged its business. “As a result, and reflecting the company’s continued investment in AI, Chegg is restructuring the way it operates its academic learning products,” the company said.
Chegg helps students finish their homework and learn new topics. It connected students with human tutors from around the world, and took a cut from having these tutors help these students with their studies. But since the launch of ChatGPT in late 2022, students have been directly going to it and other similar services for help with their homework. This had resulted in Chegg’s internet traffic falling significantly, and had also coincided with a fall in its stock price. Chegg had gone public in 2013 and saw its stock price hit a high of $113.51 in February 2021, boosted by the Covid pandemic and a shift to remote learning. But since then, the stock has since lost 99% of its value. Its market cap peaked at about $14.7 billion, before falling to roughly $156 million.
And this is a story that might be repeated quite often in coming years. Chegg was impacted directly by the AI revolution, with students simply replacing its human tutors with AI. As AI matures, there will be more and more companies that could be similarly impacted as knowledge work rapidly moves to AI. There have already been plenty of layoffs in recent months, with companies like Microsoft, Amazon and Meta laying off employees, and this trend could only accelerate in the coming quarters.