Educational platform Chegg sues Google over damages from AI answers in search results
Chegg, an education platform, has filed a lawsuit against Google in a U.S. federal court, accusing the tech giant of using artificial intelligence answers in search results, which allegedly negatively affected its traffic and revenue, CNBC reports. The company is currently experiencing a decline in revenue and user numbers, which is partly due to the popularity of AI tools such as Google's AI Overviews and OpenAI's ChatGPT.
Chegg's lawsuit alleges that Google's AI-generated answers (AI Overviews) use the company's proprietary content from its database of 135 million questions and answers without proper attribution. These summaries appear at the top of search results, making it less likely that users will click through to Chegg's site.
"Google forces companies like Chegg to supply our proprietary content in order to be included in Google’s search function,” said Chegg President and CEO Nathan Schultz. "Google uses its monopoly power, “reaping the financial benefits of Chegg’s content without having to spend a dime."
The lawsuit alleges that Google violated Sections 1 and 2 of the Sherman Antitrust Act of 1890, alleging that the company's dominant position in the search market allows it to unfairly restrict competition and exploit content providers.
The lawsuit against Google comes amid Chegg's serious financial woes. In the fourth quarter, the company reported a net loss of $6.1 million on revenue of $143.5 million, down 24% from a year earlier. While the result slightly beat analysts' estimates of $142.1 million, the company's outlook remains bleak. Chegg is forecasting first-quarter revenue of $114 million to $116 million, well below the $138.1 million it expected. The news sent shares of the company down 24% in after-hours trading, to just over $1 a share, reducing Chegg's market value to less than $200 million.
In response, Chegg engaged Goldman Sachs to evaluate strategic options, including a possible sale of the company or taking it private.
Despite its financial difficulties, Chegg has been aggressively pursuing its own AI strategy. The company has integrated AI-based tutoring features into its services, using Meta’s Llama model, as well as technologies from Anthropic and Mistral. Chegg is also working with OpenAI, despite considering the company a competitor on par with Google.
But those efforts have so far failed to bear fruit, with Chegg seeing a significant decline in its user base — subscribers fell 21% in the fourth quarter to 3.6 million. This coincides with the rise of AI tools like ChatGPT, which former Chegg CEO Dan Rosensweig said has had a negative impact on new customer acquisition.
Google denied Chegg's allegations and said it would defend its interests in court. "Every day, Google sends billions of clicks to sites across the web, and AI Overviews send traffic to a greater diversity of sites," a Google spokesperson said.
Chegg's lawsuit also cites a 2023 federal court ruling that upheld Google's monopoly in the search engine market. The ruling comes after the U.S. Department of Justice filed an antitrust lawsuit against Google in 2020. Chegg argues that Google's monopoly practices now extend to content created using artificial intelligence, further limiting competition.
The outcome of this court case could set a precedent in regulating the use of artificial intelligence in search engines and determine the balance between large technology platforms and content providers.