Chegg, the publicly traded education technology company, has sued Google over its AI Overviews, claiming they have hurt its traffic and revenue. The company said that AI Overviews is “materially impacting our acquisitions, revenue, and employees.”
What Chegg said. Chegg wrote:
Second, we announced the filing of a complaint against Google LLC and Alphabet Inc. These two actions are connected, as we would not need to review strategic alternatives if Google hadn’t launched AI Overviews, or AIO, retaining traffic that historically had come to Chegg, materially impacting our acquisitions, revenue, and employees. Chegg has a superior product for education, as evident by our brand awareness, engagement, and retention. Unfortunately, traffic is being blocked from ever coming to Chegg because of Google’s AIO and their use of Chegg’s content to keep visitors on their own platform. We retained Goldman Sachs as the financial advisor in connection with our strategic review and Susman Godfrey with respect to our complaint against Google.
More details. CNBC reports that “Chegg is worth less than $200 million, and in after-hours trading Monday, the stock was trading just above $1 per share.” Chegg has engaged Goldman Sachs to look at options to get acquired or other strategic options for the company.
Chegg reported a $6.1 million net loss on $143.5 million in fourth-quarter revenue, a 24% decline year over year, according to a statement. Analysts polled by LSEG had expected $142.1 million in revenue. Management called for first-quarter revenue between $114 million and $116 million, but analysts had been targeting $138.1 million. The stock was down 18% in extended trading.
The report goes on to say that Google forces companies like Chegg to “supply our proprietary content in order to be included in Google’s search function,” said Schultz, adding that the search company uses its monopoly power, “reaping the financial benefits of Chegg’s content without having to spend a dime.”
Here is more from Chegg’s statement: