Chegg takes legal action against Google for revenue loss due to AI tool

In the United States, Chegg, an educational technology group based in California, has filed a lawsuit against Google's parent company, Alphabet. The complaint was lodged on Monday, February 25, 2025, amidst growing concerns about the impact of artificial intelligence on traditional educational businesses. Chegg alleges that Google's AI tools, specifically the Google AI Overview which summarizes search results, have significantly reduced visitor traffic that once directed users to Chegg’s services. This has directly influenced their revenue and overall business model. The CEO of Chegg, Nathan Schultz, claims that such practices are unfair and detrimental, causing the company substantial financial harm. As a result of these claims, Chegg is now reassessing its business strategies. In a public statement, Schultz mentioned that the adverse effect on revenue has led the company to consider several alternatives, including potential acquisition opportunities. This comes at a time when Chegg has already suffered severe financial setbacks, notably a 22% drop in their stock prices immediately after the lawsuit announcement. Just over the past year, Chegg’s stock value has plummeted by over 80%, indicating deep-rooted issues within the organization. The educational technology sector is facing unprecedented challenges, primarily due to the rise of free generative AI tools. Investment in edtech has significantly decreased, falling to its lowest level in a decade, exacerbated by the COVID-19 pandemic's aftereffects. Investors are currently wary, and Chegg has already taken drastic steps, including workforce reductions, to cut costs. In previous announcements, Chegg reported a 14% annual decline in total net revenues and mentioned a 21% fall in service subscribers, further intimating a shrinking user base. Market competition is also intensifying, as other AI-driven educational platforms emerge, such as OpenAI’s ChatGPT Edu and Google’s LearnLM. Chegg must navigate this shifting landscape that increasingly favors AI-driven solutions. The lawsuit against Google highlights broader industry concerns regarding how technology companies are reshaping the accessibility and monetization of educational resources. As Chegg moves forward, the company must devise strategies that not only address these immediate challenges but also ensure sustainability in an evolving market where AI tools are becoming the norm.