Chegg, the online education platform, announced it will lay off approximately 22% of its workforce, impacting 248 employees. This significant restructuring is a direct response to the growi…
Chegg, the online education platform, announced it will lay off approximately 22% of its workforce, impacting 248 employees. This significant restructuring is a direct response to the growing influence of AI-powered tools like ChatGPT, which are increasingly favored by students over traditional edtech platforms.
The company has been experiencing a decline in web traffic for several months and anticipates this trend will persist before any potential improvement. The company's challenges are compounded by the expansion of Google's AI Overviews, which keeps web traffic within its search ecosystem and directs searches to its Gemini AI platform.
Additionally, Chegg noted that other AI companies, including OpenAI and Anthropic, are offering free access to subscriptions for academics. In response to these shifts, Chegg plans to close its U.S. and Canada offices by the end of the year and reduce marketing, product development, and administrative expenses.
The restructuring is expected to incur charges of $34 million to $38 million, primarily in the second and third quarters of 2024. However, Chegg anticipates significant cost savings, projecting between $45 and $55 million in 2025 and $100 to $110 million in 2026. These measures aim to streamline operations and adapt to the changing landscape of the edtech industry.
Accompanying the announcement, Chegg also revealed its first-quarter results, showing a 31% decline in subscribers to 3.2 million and a 30% drop in revenue to $121 million. The subscription services revenue specifically fell by nearly a third to $108 million. Notably, Chegg had previously sued Google in February, alleging that Google's search engine was negatively impacting demand for original content and undermining publishers' ability to compete with its AI-generated overviews.