The possible impact of AI, and ChatGPT in particular, on publishing and related educational businesses came into focus yesterday following remarks made by Dan Rosensweig, CEO of Chegg, a company that began life as a textbook rental company and is now an online learning platform for university students.
In comments on Monday about Chegg’s first quarter financial performance ended March 31, Rosensweig said that while the company saw no noticeable impact from Chat GPT on growth in new customers in the first part of the period, beginning in March “we have seen a significant spike in student interest in ChatGPT” that curtailed new accounts in the first quarter. The chatbox was launched by Open AI November 30.
In the first quarter, Chegg reported revenue of $187.6 million, down 7% from last year, a decline that included a drop in subscription revenue services. In his remarks, Rosensweig said that because it is too early to determine how AI’s impact will play out for the full year, Chegg was only providing financial guidance for the second quarter, in which Chegg predicted that total sales, subscription revenue, and earnings will all fall from a year ago.
Rosenweig’s comments and the financial forecast combined to drop Chegg’s stock price 48.4% on Tuesday, where it closed at $9.08. Rosenweig said that Chegg believes that generative AI and large language models are going to affect society and business, both positively and negatively, at a faster pace than people are used to.
“We can all see that AI technology is evolving at a very rapid pace, and at Chegg we are embracing it aggressively and immediately," Rosenweig said. “Throughout my career, I have witnessed the most significant technology platform shifts—from the creation of the internet to the explosion of mobile, and the movement of software to the cloud—and we believe that AI is the next big shift.”
To take advantage off the shift, he continued, Chegg "has reoriented our company to focus and prioritize on the utilization and incorporation of AI into Chegg services." The first of those services are beginning to get rolled out: the company announced a new "AI companion," CheggMate, last month.
Following Chegg’s disclosure, stock prices of Pearson, Wiley, and Scholastic all had declines yesterday, with Pearson’s stock price falling the most, 14.6%. A spokesperson for Pearson told the U.K. publishing newsletter Book Brunch that "Chegg is a fundamentally different company with a different business model. We are a highly diversified company, with 80% of our profits coming from businesses outside higher education."
