Chegg has filed a federal antitrust lawsuit against Google – alleging that the company’s use of AI-generated summaries in search engine results has crushed its website traffic and revenue.
In a lawsuit filed in US District Court in Washington DC, the online learning platform focused on Sundar Pichai-led Google’s use of “AI Overviews” – a controversial feature automatically generates answers to user queries at the top of search results while effectively demoting links to other sites.
Chegg CEO Nathan Shultz said Google “has unjustly retained traffic that has historically come to Chegg, impacting our acquisitions, revenue and employees” and described the search giant’s conduct as “harmful and unsustainable.”
The company has retained Goldman Sachs as part of strategic review and will explore going private or selling itself.
“Chegg has a superior product for education, as evident by our brand awareness, engagement, and retention,” Schultz added in the company’s earnings call. “Unfortunately, traffic is being blocked from ever coming to Chegg because of Google’s [AI Overviews] and their use of Chegg’s content to keep visitors on their own platform.”
Chegg shares have plunged nearly 90% over the last 12 months and were trading at a scant $1.04 as of Tuesday morning. The company’s valuation has fallen to just $110 million.
Google is accused in the lawsuit of violating the Sherman Antitrust Act.
Schultz said Google “forces companies like Chegg to supply our proprietary content in order to be included in Google’s search function.”
Google is also alleged to have engaged in monopoly maintenance by flexing its dominance over online search to “muscle out” smaller rivals, and of improperly benefitting from Chegg’s content “without having to spend a time,” the Chegg CEO said.
Chegg’s traffic from non-subscriber sources fell by a whopping 49% in January compared to the same month one year ago.
The company detailed its lawsuit against Google alongside dismal fourth-quarter results. Chegg reported a net loss of $6.1 million on total revenue of $143.5 million – a decrease of 24% year-over-year.
Google spokesperson José Castañeda pushed back on the lawsuit’s claims, asserting that “people find search more helpful and use it more” thanks to the AI Overviews feature.
“Every day, Google sends billions of clicks to sites across the web, and AI Overviews send traffic to a greater diversity of sites,” Castañeda said in a statement. “We will defend against these meritless claims.”
As The Post has reported, Google has faced an avalanche of criticism over its AI-generated summaries since they launched last year, with one prominent trade group, the News Media Alliance, warning that the feature would do “catastrophic” damage to cash-strapped publishers, bloggers and content creators.
AI Overviews were also shown to be prone to giving bizarre responses, such as advising users to eat rocks or add glue to their pizza sauce.
Publishers have also accused Google of improperly scraping their websites for data to train their AI products without proper credit or compensation – and then using the products to compete against them.
Google has denied wrongdoing.
Chegg’s lawsuit marks another headache for Google after US District Judge Amit Mehta found last year that the company has an illegal monopoly over online search.
Mehta is expected to hold court hearings in April while considering potential remedies to address Google’s tactics.
His final decision is expected by this summer.
In a separate lawsuit, the Justice Department has accused Google of maintaining a “trifecta” of monopolies in the digital advertising sector by controlling platforms on the buy and sell side of ad deals as well as the marketplace that connects advertisers to websites.
