Chegg's stock takes a hit: Is ChatGPT a threat for the education industry?
Chegg's stock dropped nearly half after its CEO warned that OpenAI's free ChatGPT service was threatening its growth.
Recently, Chegg's CEO Dan Rosensweig said that OpenAI's popular chatbot ChatGPT is killing Chegg's business. After the announcement, the company's shares have seen a drastic decrease, around 48%.
"Since March, we saw a significant spike in student interest in ChatGPT. We now believe it's having an impact on our new customer growth rate," said Rosensweig.
The stock dropped as much as 50% on Tuesday and was down 48% to $9.04 a share, putting it on track for its lowest finish since 2017. Other online-learning platform shares were hit by the selloff. Duolingo shares sank 9%, while American depositary receipts linked to shares of Pearson, located in London, fell 12.5%.
ChatGPT is a free option
One of the biggest reasons why ChatGPT is more popular among students is that the chatbot is completely free and has several abilities. It has become some kind of hub for people to handle small tasks. On the other side, even though Chegg is an old and known platform, it is not free.
“It’s not substantial yet. It’s just on the margin that, based on our research, that people normally who would have paid for us around midterms or closer to finals that were reluctant to pay or be longer-term subscribers now have a new, free site to go try,” Rosensweig said.
OpenAI's ChatGPT is what everyone is using nowadays. The chatbot gives people quick and direct answers to help them save time, and the same goes for students. ChatGPT can solve a simple math question if given the correct prompt and write an essay according to the student's needs.
Apart from being a very useful helper, ChatGPT also faces criticism and controversies from companies and even countries. Some Wall Street banks and tech giants like Samsung decided to ban their employees from using the chatbot on company devices and sharing any sensitive information. Moreover, Italy issued a ban on the chatbot a while ago, which increased VPN usage in the country.
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