Chegg Shares Plunge Over 40% As ChatGPT Disrupts Business
Chegg, the popular online education platform, saw its shares plunge over 40% on Tuesday after the company revealed that ChatGPT is negatively impacting its ability to attract new subscribers. The sudden decline highlights how the meteoric rise of AI chatbots like ChatGPT threatens to disrupt established companies across the education technology landscape.
ChatGPT‘s Surging Popularity Among Students
During a conference call with investors on Monday, Chegg CEO Dan Rosensweig noted that the company saw no noticeable impact from ChatGPT on new subscriber growth in early 2022. But starting in March, Chegg noticed a sharp spike in students‘ interest in the AI chatbot.
As you can see in the chart below, Chegg subscriber growth had been strong over the past 5 years, increasing from 1.7 million in 2016 to 7.2 million in 2021. Revenue more than tripled in that timeframe from $255 million to over $776 million. However, early 2022 saw growth begin to slow before ChatGPT‘s rise kicked this reversal into overdrive.
Rosensweig believes this surge in ChatGPT‘s popularity is now directly impacting Chegg‘s new customer growth rate. Specifically, he said "We believe ChatGPT is having a material impact on our new subscriber growth."
The company also slashed its revenue guidance for Q2 2022 to between $175 million and $178 million. This is far below analyst estimates of $193.6 million and over 15% lower than Q2 2021, contributing to the massive 40%+ share price drop.
How Does ChatGPT Impact Chegg‘s Business?
As an AI expert, I understand the appeal ChatGPT holds for students. At its core, ChatGPT is a neural network trained on a massive amount of online data. This allows it to generate human-like responses to natural language prompts. Students are harnessing this to get customized explanations about concepts, check homework answers, and receive help formatting essays or solving problems.
Quotes from students shared on social media highlight the immense value many are getting from ChatGPT:
"ChatGPT is a life saver for me as a college student. I can ask complex questions about concepts I‘m struggling with and it explains topics very clearly."
"I‘m blown away by how ChatGPT can rewrite my essay drafts in a more clear and concise way. It‘s like having an advanced writing tutor for free!"
"As a student who struggles with math, ChatGPT has been a game changer. I can take a picture of a math problem, upload it, and have step-by-step guidance walk me through solving it."
You can see how such capabilities could reduce demand for Chegg‘s paid services like tutoring and homework help. While ChatGPT does have accuracy limitations currently, rapid improvements by OpenAI could make it an even bigger threat going forward.
ChatGPT‘s Emergence – A Double-Edged Sword
However, I believe the rise of ChatGPT cuts both ways. Developers are still working to address challenges around bias and misinformation. And there are concerns AI like ChatGPT could enable academic dishonesty on a new scale.
Educators will need to instill ethics and critical thinking skills in students to use such tools responsibly. Oversight methods like AI text classifiers could help identify AI-generated content. Overall, the age of AI will require a delicate balancing act to realize the benefits while minimizing risks.
Chegg and other education technology firms face risks, but also opportunities. As an expert in this space, I believe companies like Chegg need to respond by baking AI directly into their platforms. Rather than competing against external AI tools, integrating them into existing services via partnerships could help offset disruption.
There are creative ways to combine AI with human support that play to the strengths of each. This will require revamping business models, but represents a big potential growth area as AI becomes further entrenched in education.
Key Takeaways – Adapting to an AI-powered Future
The meteoric rise of ChatGPT among students highlights how AI will transform the education landscape. With the genie out of the bottle, companies like Chegg must adapt quickly to an AI-powered future.
Integrating such tools into offerings, while promoting responsible use, provides a path to evolve their business models. Educators similarly need to instill ethics when incorporating AI.
There will likely be ongoing growing pains, but with the right approach AI chatbots can expand educational opportunities for students and schools. This future is arriving faster than expected. Companies that effectively harness AI will be poised to help shape it.
