Chegg Sues Google Over AI—Is Big Tech Crushing Competition?

Dear Reader,

Chegg, a dominant force in online education is fighting for survival. The company has filed a lawsuit against Google, alleging that its AI generated search summaries are diverting traffic, and undercutting its business. This legal battle could highlight growing concerns among content creators: Is AI giving Big Tech too much power over the internet?

For years, Chegg relied heavily on search engine traffic to drive student subscriptions and textbook rentals. But as Google expands its AI Overviews, which summarize search results at the top of the page, fewer users are clicking through to original sources. Chegg argues that this shift is devastating its business model.

Chegg’s Fight Against Google

Chegg’s lawsuit, filed in federal court, accuses Google of antitrust violations, claiming the tech giant is unfairly leveraging its dominance in search to stifle competition. The company argues that:

• Google forces businesses to provide their content for indexing but profits off AI-generated summaries that reduce clicks to original sources.

• AI Overviews pull directly from Chegg’s extensive 135 million-question database, presenting Chegg’s own information without attribution.

• Google’s AI is competing directly with publishers, using their own data against them.

Google, which faces ongoing antitrust scrutiny, denies wrongdoing and insists that its AI Overviews drive traffic to a “greater diversity of sites” rather than concentrating it among a few major players.

Chegg’s Struggles & Strategic Shift

Beyond legal battles, Chegg is struggling financially. In its latest earnings report, the company:

• Reported a $6.1 million net loss for the quarter.

• Saw a 24% year-over-year revenue decline, falling to $143.5 million.

• Lost 21% of its subscriber base, with just 3.6 million active users remaining.

• Watched its stock plummet 24% in extended trading, trading at barely $1 per share.

As a response, Chegg is now exploring major strategic changes. The company has hired Goldman Sachs to evaluate options, including:

• Potential acquisition by a larger firm.

• Going private to restructure away from public market pressures.

• Doubling down on AI, despite competition from Google and OpenAI.

The Bigger Picture: AI vs. Content Creators

Chegg’s lawsuit isn’t just about one company, it’s part of a larger debate over AI’s impact on traditional content businesses. Google’s AI Overviews aren’t unique, Microsoft’s Bing, OpenAI’s ChatGPT, and Meta’s AI models are all transforming how users access information. But publishers argue that these tools often extract value without proper compensation.

Legal experts say this case could set a precedent for how AI companies handle content ownership, determining whether AI-generated summaries are fair use or intellectual property theft.

What’s Next?

Chegg’s future is uncertain. If it wins in court, it could force major changes in how AI search results function. If it loses, it could become another cautionary tale of how fast-moving AI technology disrupts established industries.

For now, the fight between Chegg and Google is just beginning, and the outcome could reshape the balance of power in digital publishing.

Stay informed,
Street Fin Gazette