Chegg, the publicly traded training know-how firm, has sued Google over its AI Overviews, claiming they’ve damage its visitors and income. The corporate mentioned that AI Overviews is “materially impacting our acquisitions, income, and workers.”
What Chegg mentioned. Chegg wrote:
Second, we introduced the submitting of a criticism in opposition to Google LLC and Alphabet Inc. These two actions are related, as we might not must evaluation strategic alternate options if Google hadn’t launched AI Overviews, or AIO, retaining visitors that traditionally had come to Chegg, materially impacting our acquisitions, income, and workers. Chegg has a superior product for training, as evident by our model consciousness, engagement, and retention. Sadly, visitors is being blocked from ever coming to Chegg due to Google’s AIO and their use of Chegg’s content material to maintain guests on their very own platform. We retained Goldman Sachs because the monetary advisor in reference to our strategic evaluation and Susman Godfrey with respect to our criticism in opposition to Google.
Extra particulars. CNBC experiences that “Chegg is price lower than $200 million, and in after-hours buying and selling Monday, the inventory was buying and selling simply above $1 per share.” Chegg has engaged Goldman Sachs to have a look at choices to get acquired or different strategic choices for the corporate.
Chegg reported a $6.1 million internet loss on $143.5 million in fourth-quarter income, a 24% decline 12 months over 12 months, based on a assertion. Analysts polled by LSEG had anticipated $142.1 million in income. Administration referred to as for first-quarter income between $114 million and $116 million, however analysts had been concentrating on $138.1 million. The inventory was down 18% in prolonged buying and selling.
The report goes on to say that Google forces corporations like Chegg to “provide our proprietary content material with a view to be included in Google’s search operate,” mentioned Schultz, including that the search firm makes use of its monopoly energy, “reaping the monetary advantages of Chegg’s content material with out having to spend a dime.”
Right here is extra from Chegg’s assertion:
Whereas we made vital headway on our know-how, product, and advertising and marketing applications, 2024 got here with a collection of challenges, together with the fast evolution of the content material panorama, significantly the rise of Google AIO, which as I beforehand talked about, has had a profound influence on Chegg’s visitors, income, and workforce. As already talked about, we’re submitting a criticism in opposition to Google LLC and Alphabet Inc. within the U.S. District Courtroom for the District of Columbia, making three most important arguments.
- First is reciprocal dealing, which means that Google forces corporations like Chegg to produce our proprietary content material with a view to be included in Google’s search operate.
- Second is monopoly upkeep, or that Google unfairly workouts its monopoly energy inside search and different anti-competitive conduct to muscle out corporations like Chegg.
- And third is unjust enrichment, which means Google is reaping the monetary advantages of Chegg’s content material with out having to spend a dime.
As we allege in our criticism, Google AIO has remodeled Google from a “search engine” into an “reply engine,” displaying AI-generated content material sourced from third-party websites like Chegg. Google’s growth of AIO forces visitors to stay on Google, eliminating the necessity to go to third-party content material supply websites. The influence on Chegg’s enterprise is evident. Our non-subscriber visitors plummeted to destructive 49% in January 2025, down considerably from the modest 8% decline we reported in Q2 2024.
We imagine this isn’t nearly Chegg—it’s about college students shedding entry to high quality, step-by-step studying in favor of low-quality, unverified AI summaries. It’s concerning the digital publishing trade. It’s about the way forward for web search.
In abstract, our criticism challenges Google’s unfair competitors, which is unjust, dangerous, and unsustainable. Whereas these proceedings are simply beginning, we imagine bringing this lawsuit is each needed and well-founded.
Why we care. Will Chegg win in a court docket in opposition to Google? Will Google must rethink its AI Overviews and discover higher methods to ship visitors to publishers and web site house owners? It’s onerous to think about however this can be the primary massive lawsuit over Google’s new AI Overviews.
