Chegg sues Google for hurting traffic with AI as it considers strategic alternatives

Core Viewpoint - Chegg has filed a lawsuit against Google, claiming that Google's AI summaries of search results have negatively impacted Chegg's traffic and revenue, a situation exacerbated by the rise of AI tools like OpenAI's ChatGPT [1][4]. Financial Performance - Chegg reported a net loss of $6.1 million on revenue of$143.5 million for the fourth quarter, marking a 24% decline year over year. Analysts had expected revenue of $142.1 million [3]. - The company anticipates first-quarter revenue between$114 million and $116 million, significantly lower than analysts' target of$138.1 million [3]. - Chegg's market valuation has dropped to less than $200 million, with stock trading just above$1 per share in after-hours trading [2]. Strategic Moves - Chegg is exploring strategic options, including potential acquisition or going private, as stated by the President and CEO Nathan Schultz during an earnings call [2]. - The company has engaged Goldman Sachs to assist in evaluating these strategic options [2]. Market Dynamics - Chegg claims that Google's monopoly power forces companies to provide proprietary content to be included in search results, allowing Google to benefit financially from Chegg's content without compensation [4][6]. - Chegg's subscription base has decreased to 3.6 million students, reflecting a 21% decline [4]. AI and Competition - Despite the lawsuit, Chegg is pursuing its own AI strategy, utilizing models from Meta, Anthropic, and Mistral, and has partnered with OpenAI, which it also views as a competitor [4]. - Google's AI Overviews are available in over 100 countries and have more than 1 billion users, which may further impact Chegg's business model [5].