- Edtech corporation Chegg is poised to lose nearly a billion dollars in valuation due to fears that ChatGPT could make its business obsolete.
- Chegg’s chief executive says that ChatGPT’s enormous popularity among students is harming the company’s ability to attract new customers.
- Unlike Chegg’s products, ChatGPT is freely accessible and has entered the public zeitgeist in a way Chegg never has.
The clock replaced the hourglass. The MP3 player replaced the walkman, and that in turn was replaced by the smartphone, and now it looks like homework helper software is to be replaced by ChatGPT. At least this is what some analysts believe is happening at the moment.
Major edtech corporations have seen their shares sent tumbling since 2nd May, when Chegg – an American firm that sells software to help students with their homework, provides online tutoring and other education-oriented services – had to suspend its full-year outlook because of OpenAI’s ChatGPT.
Chegg CEO Dan Rosenweig said the company has identified a significant spike in student interest in the AI-powered chatbot, and that this interest is actively hurting its ability to attract new customers. Chegg fears that since more and more students are turning to the free and easy-to-use ChatGPT, fewer and fewer will opt to pay for Chegg products and services.
Jefferies analyst Brent Thill told Reuters that Chegg’s core business model could very well become obsolete thanks to free online AI tools like ChatGPT. Tools where a student simply needs to ask a question to receive an immediate answer, can draft entire high school essays and can even do coding without any prior knowledge.
In a bid to seemingly capitalise on ChatGPT’s incredible popularity among students, Chegg even launched a GPT-4-powered AI platform called CheggMate last month. At the time the company’s market capitalisation was at $2.3 billion.
Now, while CheggMate is currently waitlist only, Chegg’s market cap is on the precipice and could fall by $994 million if current losses continue. Analysts are concerned that Chegg may completely be eclipsed by ChatGPT’s popularity among students before CheggMate even has its wider rollout.
There are plenty of reasons why this could be possible. While Rosensweig said that CheggMate would be “free initially.” ChatGPT is already free. Already available. Already getting a host of new improvements that make it more dynamic and powerful, and above all, it has captured the imagination of the world in a way that Chegg could only dream of.
As such, it might be a little too late for Chegg, and for companies offering similar services. Chegg’s shares are currently trading at 48.41 percent lower, meanwhile UK rival edtech firm Pearson PLC’s shares are trading 14.60 percent lower as of Wednesday.
The apparent decline of such companies due to ChatGPTs popularity will do little to appease academic institutions across the world, fearing the rise of plagiarism fueled by ChatGPT’s drafting capabilities. The platform has already been banned by top universities in France, high schools in New York, and was briefly banned in Italy.
As with most other things, the implications of artificial intelligence on the future of education seem to be getting quite interesting.