Problems at Chegg (CHGG)
Chegg (NYSE: CHGG — $1.28 billion) describes itself as “the leading student-first interconnected learning platform, which is on-demand, adaptive, personalized, and backed up by a network of human help.” Chegg’s primary business is selling students monthly subscriptions for homework help. The Bear Cave believes that rapidly growing new competition powered by AI is destroying Chegg’s key student market and the company is playing increasingly desperate games to stem a student exodus. In short, The Bear Cave concludes that Chegg is a billion-dollar company headed to zero.
Before mainstream AI adoption, the Chegg value proposition went something like this: a student would have a textbook problem, Google the problem and find a Chegg article, see the answer behind a Chegg paywall, and sign up and pay Chegg monthly for answers to their homework problems. This practice was accelerated by the pandemic and online classes, sending Chegg stock to an all-time high in February 2021.
Today, the market for homework help is markedly different. A student may see a TikTok for a homework helper powered by AI, start asking it questions and get answers immediately, and then pay a modest amount for unlimited and instant homework answers.
In addition to ChatGPT, other rapidly growing AI players in the homework help space include Caktus AI, Cramly AI, Jenni AI, Numerade, Photomath, PicSolve, and many more.
While Chegg previously had a near-monopoly on homework help, now it is a commodity player.
Of equal concern, many students seem eager to move on from Chegg.
In the comments of one viral TikTok about AI and Chegg’s disruption, students railed against Chegg with top comments saying:
“Chegg was trynna rip us off, that’s what they get [for real].” (65,800 likes)
“Chegg on their downfall? I used to pray for times like this.” (4,453 likes)
“Thanks for reminding me to cancel my Chegg subscription.” (16,200 likes)
Other comments appeared to also share frustration about Chegg’s now-discontinued practice of working with colleges to expose students who used Chegg to cheat on assignments. Below is a screenshot of the TikTok comments about Chegg:
Chegg has partially acknowledged the disruption caused by AI. On the company’s May 1, 2023 Q1 earnings call, Chegg CEO Daniel Rosensweig said, in part,