Chegg sues Google for hurting traffic as it considers alternatives

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Chegg sues

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for hurting traffic as it considers alternatives

Chegg seen at the New York Stock Exchange on Feb. 13, 2025. 

Danielle DeVries | CNBC

Chegg on Monday filed suit in federal district court against

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, claiming that artificial intelligence summaries of search results have hurt the online education company’s traffic and revenue.

The legal move come nearly two years after former CEO Dan Rosensweig said students engaging with OpenAI’s ChatGPT assistant were cutting into Chegg’s new customer growth.

Chegg is worth less than $200 million, and in after-hours trading Monday, the stock was trading just above $1 per share. Chegg has engaged Goldman Sachs and will look at strategic options, including getting acquired and going private, President and CEO Nathan Schultz told analysts on a Monday earnings call.

Chegg reported a $6.1 million net loss on $143.5 million in fourth-quarter revenue, a 24% decline year over year, according to a

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. Analysts polled by LSEG had expected $142.1 million in revenue. Management called for first-quarter revenue between $114 million and $116 million, but analysts had been targeting $138.1 million. The stock was down 18% in extended trading.

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forces companies like Chegg to “supply our proprietary content in order to be included in

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’s search function,” said Schultz, adding that the search company uses its monopoly power, “reaping the financial benefits of Chegg’s content without having to spend a dime.”

Despite the suit, Chegg has its own AI strategy. It has drawn on Meta’s open-source Llama, as well as models from privately held Anthropic and Mistral, Schultz said. Chegg has also partnered with OpenAI, which the education company views as a competitor, alongside

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. The company reported that 3.6 million students had subscriptions in the fourth quarter, down 21%. Subscriptions include access to AI-powered learning assistance.

AI Overviews, as

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’s artificial intelligence summaries are called, are available in the company’s search engine in over 100 countries, with more than 1 billion users, the company said in

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. They show up above links to other pages in search results.

With its collection of 135 million questions and answers on a variety of subjects, Chegg “depends on referrals from

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’s monopoly search engine for a large portion of the revenue that it devotes to producing original online content,” the company said in the filing.

A federal judge in August ruled that 

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 holds a monopoly in the search market. The ruling came after the Department of Justice in 2020 filed its landmark case, alleging that

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controlled the general search market by creating strong barriers to entry and a feedback loop that sustained its dominance.

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did not immediately respond to a request for comment.

WATCH:

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unrolls AI Overviews in six more countries

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#Chegg #sues #

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#hurting #traffic #considers #alternatives

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