On Monday, Chegg filed a lawsuit in federal district court against Google, asserting that AI-generated summaries of search results have negatively impacted the online education company's traffic and revenue. This legal action follows nearly two years after former CEO Dan Rosensweig indicated that student interaction with OpenAI's ChatGPT was adversely affecting Chegg's growth in new customers. Chegg is currently valued at under $200 million, with its stock trading above $1 per share during after-hours sessions on Monday. Chegg has enlisted Goldman Sachs to explore strategic alternatives, including the possibility of being acquired or going private, as noted by President and CEO Nathan Schultz during a Monday earnings call. The company reported a net loss of $6. 1 million on quarterly revenue of $143. 5 million, representing a 24% year-over-year decrease, according to a statement. Analysts surveyed by LSEG had anticipated revenue of $142. 1 million. Management projected first-quarter revenue between $114 million and $116 million, while analysts had forecasted $138. 1 million. Consequently, the stock saw a drop of 24% in after-hours trading. Schultz stated that Google compels companies like Chegg to "supply our proprietary content to be part of Google's search function, " alleging that the search giant exploits its monopoly power by "reaping financial benefits from Chegg's content without any expenditure. " In spite of the lawsuit, Chegg is pursuing its own AI initiatives. Schultz mentioned that the company is utilizing Meta's open-source Llama, along with models from Anthropic and Mistral.

Chegg has also formed a partnership with OpenAI, which it sees as a rival, similar to Google. The company revealed that it had 3. 6 million student subscribers in the fourth quarter, a 21% decrease. These subscriptions provide access to AI-driven learning support, in addition to textbook rentals and sales. Google's AI-generated summaries, referred to as AI Overviews, are accessible through its search engine in over 100 countries, serving more than 1 billion users, according to claims made by the company in October. These summaries appear above links to other web pages in search results. A Google representative commented to CNBC that the company is prepared to defend itself against Chegg's lawsuit, which alleges violations of sections one and two of the Sherman Antitrust Act of 1890. "Google directs billions of clicks to websites daily, and AI Overviews facilitate traffic to a broader range of sites, " the spokesperson stated. Chegg argued that Google utilized its repository of 135 million questions and answers across various subjects for model training data sets. The online education company contended that, after developing its models, Google produces content that competes with the information published in search results. In its complaint, Chegg included a screenshot of a Google AI Overview that incorporates details from its site without attribution, although the relevant Chegg page does appear further down in search results.