Key Takeaways.
- Chegg sued Google for claiming AI Overviews lowered its traffic and revenue because it displayed answers directly in the search results.
- Chegg struggles financially. $6.1M in net loss, 24% drop in revenue, and a stock trading just above $1.
- Google denies any harm, claiming that AI Overviews increase traffic to sites. Users also find the feature useful for quick, reliable solutions.
Chegg, an edtech company that provides online learning resources, sued Google in federal district court. It claimed that Google’s AI-generated summaries have adversely affected its revenue and traffic.
The AI-generated summaries, or overviews, appear whenever you search for a query on Google. The intention of this feature is to combine the best pieces of information from multiple pages and present them to you so that it’s easier and quicker to find an accurate answer.
Chegg’s Accusations (19659008) Chegg believes, however, that this feature has transformed Google into a “answer engine” instead of a “search” engine. Google displays the data from platforms like Chegg at the top of the page (in overviews), preventing users from visiting the real websites.
Chegg claims that Google is not the only one who steals from them. In 2023 the then-CEO claimed the introduction of ChatGPT significantly reduced student engagement.
Chegg partners with Meta Llama Openai and Mistralin order to make its platform AI-savvy. In addition to renting and buying textbooks, it also offers AI-powered tools for learning.
According the evidence provided by the company’s AI overview feature, Google uses around 135 million questions from Chegg with no attribution. They also cited how this feature may be responsible for the platform’s lower search engine rankings.
Chegg referred to a federal court’s ruling last August which confirmed Google as the monopoly on search. This ruling was a result of a lawsuit filed by the 2020 DOJ, which claimed that Google maintains its dominance by making it difficult for others to compete.
Chegg’s Financial Situation and Its Frustration (19659013) When we examine the company’s constant decline, it becomes easier to rationalize Chegg’s claims. It reported a $6 million net loss for $143.5 million of revenue in the fourth quarter, which is a staggering 24 percent decline from last year. After the stock crash,
the company is trading for just over $1 per share. It was once valued at billions of dollars, but now its valuation is under $200 million because fewer students are signing up. This reduces demand for the paid services offered by the learning platform.
Let’s unpackwhy Chegg believes that Google isresponsible for its losses: It created a community of students and experts who could assist each other.
Chegg hired Goldman Sachs in order to explore the next steps. These would be to either sell the company or go private. Management predicted first-quarter revenues of $114-116 millions, falling short analysts’ $138.1-million target.
An Unfair Accusation?
Google Overviews correctly mentions the sites from which it pulls data
It would be unfair to say that Google Overviews do not credit the original content providers.
Overviews are helpful but they are just summaries of actual answers. The user will need to visit the source article for detailed answers. This article is a great benefit of its placement in Overviews.
From the user’s perspective, Google AI Overview isone of the most useful things AI has ever given usas it not only saves time but also provides reliable and verified data at the top. Google has not commented directly on the matter, but will be defending itself in court. Add Techreport To Your Google News Feed.
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Vlad is Techreport’s in-house Executive Editor. With over a decade of experience in tech content, he’s passionate about computer hardware, an advocate of online privacy, and strongly believes in the open-source, scarce-money nature of cryptocurrency. Read more
When he’s not working, he’s traveling with his partner and their cat, learning Python, or reading good books. He never owned a PC he did not build. Read less
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