From $14 Billion to $125 Million: What Killed Chegg

I had a Chegg account for years. For my electrical engineering classes, I would check my  own homework solutions using Chegg before handing them to students, just to double check my work. It was a good tool and worth the money at the time.

Then one night I tried Google Gemini on the same kind of problem. It gave me the answer, walked through the steps, and did a better job explaining what was going on. I sat there for a minute and thought, why am I paying for Chegg? I cancelled the next morning. These days Gemini is what I lean on for problem solving in my classes.

Turns out a lot of people made the same call. Chegg was worth around $14 billion in 2021. Today it is worth about $125 million. The company laid off almost half its remaining staff last October. Revenue last quarter dropped 42% from the year before. The CEO points the finger at ChatGPT and at Google's new AI answers that show up right at the top of the search page. Students get their answer before they ever click through to a paywall.

Khan Academy is a different story but feels some of the same heat. It is a nonprofit, so there is no stock price to watch. A few years back they rolled out Khanmigo, an AI tutor, and got it in front of more than 1.4 million students. On paper, big win. In April, Sal Khan admitted most students barely touched it. The reason is not hard to figure out. Free AI is already open in another tab. Kids are not going to switch over to a separate tutor when help is right there.

Both companies were built to sit between a student and an answer. AI now sits closer to the student than either of them. When that happens, the middleman business gets thin in a hurry.