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• The Billion Dollar AI Casualty 🪦

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The Billion Dollar AI Casualty 🪦

Since the dawn of school, students have found ways to get help on their homework. In recent times, one of the most reliable ways was Chegg.

But then, along came ChatGPT and Chegg has been on a rollercoaster since then. 

Not the fun ones at Six Flags though.

Casualties Reported

ChatGPT took the entire world by a storm when it was released in December 2022 and one of the clearest public company casualties of it has been NYSE:CHGG.

Chegg COO - Nathan Schultz said that the execs at the company had bet that an experience like GPT-4 wouldn’t be possible until at-least 2025. 

Thus, Chegg did not believe that OpenAI could eat its lunch. However, we all know that’s not what happened. 

But how bad really are things for Chegg?

Quite BAD.

Chegg’s market cap at the time of writing is $420M. To put that in perspective, that market cap is below its private market valuation of 15 years ago. Yes - 2009!

Talk about a throwback no one wanted.

AI To The Rescue?

Chegg is trying to pitch a strategic pivot to embrace the very technology that has brought about this turbulence: AI.

In the other words of Kelly Clarkson: What doesn’t kill you makes you stronger.

The company has partnered up with ScaleAI to rebuild its platform around proprietary AI technology. They want to develop their own LLMs to enhance student learning experiences. 

The initiative aims to integrate AI with Chegg’s content library to create personalized learning tools like practice tests and flashcards, targeting a reduction in student dropout rates. 

The BIG question is: Will it work?

That’s where Chegg is fighting an uphill battle. The AI wave presents a truly credible free product alternate experience. Foundation Model companies like OpenAI, Anthropic and Google are releasing more and more powerful models and giving them away for free. 

One potential goldmine for Chegg could be licensing their treasure trove of educational content.

With 100 million pieces of proprietary content – such as student questions and answers – there’s a lot of value there. They could strike deals with LLM makers, turning their data into dollars.

What’s your take on Chegg? 

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