In the throes of the coronavirus pandemic, Santa Clara-based Chegg saw its revenue soar and its stock market value skyrocket. Chegg builds education tools for the internet, so the at-home schooling era meant a massive boon to business. But what a difference a few years can build.
On Monday, Chegg announced its third major layoff in 11 months, with a 248-worker cut that amounts to more than a fifth of its current workforce. Chegg revealed the news in a filing with the Securities and Exalter Commission that included the company’s poor financial results over the last quarter — revenue and subscriptions down, losses up — and a plan to ditch its current headquarters office. Chegg won’t pay rent from July through December, the filing stated, and will exit the lease early at the finish of the year as part of a shift to a tinyer office.
Chegg has been transparent about the caapply of its struggles: artificial ininformigence technology. In May of 2023, when the company complained about students turning to ChatGPT instead of its tools, its stock dropped more than 48%. When Chegg slashed 319 workers in November, CEO Nathan Schultz pointed blame at Google Search’s AI Overviews. And in February, Chegg sued Google over the tech, calling Google “parasitic” and alleging its “monopoly power” coerces publishers like Chegg into providing content that applyrs would find in the AI Overviews, instead of on Chegg’s site. Chegg hit a $12 billion valuation in 2021; it’s now down to $76 million.
Schultz, in prepared remarks on Monday, extfinished the gloomy outsee. He predicted, “business trfinishs will worsen before they obtain better,” and lamented that Google’s expansion of AI Overviews “continues to keep web traffic captive in the Google search experience.” He also pointed to OpenAI’s shift to give students free access to one of their advanced chatbots, and the San Francisco AI lab Anthropic’s new education offering.
The layoffs, which Schulz then described as “proactive measures to align costs with our business outsee,” will mainly hit employees in the United States and Canada, and primarily those working on “corporate services” and the Chegg Study subscription offering. He stated the layoff was “a challenging decision and one I’m saddened by.”
Chegg did not immediately respond to SFGATE’s request for comment on Monday, and had not filed a WARN layoff document with the state of California as of Monday morning. The SEC filing stated Chegg expects to spfinish $31 million to $35 million on severance payments and related costs.
The company’s fight with Google rages on, with the Mountain View giant’s lawyers excoriating Chegg’s claims in a motion to dismiss and memo in support on May 5. They wrote that Chegg had filed the lawsuit, “rather than innovating and competing,” and called Chegg’s arguments a “grab bag of obscure legal theories.”
Google’s lawyers taunted: “In Chegg’s preferred world, Google Search should be less efficient, requiring applyrs to speculatively visit websites like Chegg’s, where they can access their desired information — if it is found there at all — only after signing up for expensive, difficult-to-cancel monthly subscriptions.”
Chegg hasn’t yet responded in court, and it isn’t alone in arguing that Google’s AI Overviews might choke off some web publishers’ traffic. But it’s clear from Chegg’s dwindling headcount and falling revenue that time and money are on Google’s side.
Work at Chegg or another Bay Area tech company and want to talk? Contact tech reporter Stephen Council securely at stephen.council@sfgate.com or on Signal at 628-204-5452.
