Among college students, Chegg is widely known for its textbook rentals and study help. Among financial experts, the company is a case study in how rapidly evolving technology can tank a company.
Chegg made headlines this spring after its stock shares plunged by nearly 50% in one day. The decline was in reaction to Chegg’s May earnings report, where company execs confessed that generative artificial intelligence tools like ChatGPT were negatively affecting the company’s revenue and customer growth rate.
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In July, the company’s CEO admitted at a Fortune conference that Chegg had seemingly become a “poster child for getting your ass kicked in the public markets by AI.”
Despite second quarter earnings showing decreases in year-over-year net revenue and subscription services subscribers, Chegg remains optimistic. In part because it’s now embracing AI and GPT-4.
This fall, the company will begin threading AI across all its products, giving students a generative personalized learning assistant that can adapt to their needs and provide immediate feedback. For example, if a student is struggling in chemistry, Chegg can create real-world examples to advance understanding or highlight incorrect parts of chemical structures.
According to Chegg, students can expect a simpler, more conversational user interface akin to ChatGPT and the ability to convert AI-generated content into study tools, like practice tests and flashcards.
While a majority of Americans still have not used ChatGPT before, those aged 18 to 29 are the most aware of the program. And among them, according to Pew Research Center, 30% have used it to learn something new—which could range from how to code or solve an algebra problem.
“I’m one who believes that technology and the evolution of technology is inevitable,” Nathan Schultz, COO of Chegg, tells Fortune. “So if you don’t embrace it, you’re going to have more problems.”
But Chegg isn’t just battling ChatGPT for student users. Other study platforms have announced new AI-powered study assistants and tools. For example, Quizlet is introducing Q-Chat, an AI tutor for students, and Khan Academy is launching Khanmigo, branded as a tutor for learners and an assistant for teachers.
As Chegg continues to adapt and prepares to roll out its new generative AI integration, Fortune sat down with Schultz to discuss the future of education and the company.
Evolving study environment
Fortune: With school starting back in the coming weeks, how are you feeling? What is your outlook like for education?
Schultz: We’re super excited for the school year. And we’re super excited for the continuation of our generative programs. It’s not about slapping it on the screen and calling it…done. It’s really about how you blend. In our case, what we do incredibly well is create learning objects for students that are tailored to the questions they’re asking, and we’re going to continue to do that. That’s kind of the bread and butter of high-quality content—personalized the way you need it.
It’s taking learning away from a fairly isolated, asynchronous experience, right? You’re studying by yourself, you may post a question anywhere on the internet or to a friend, and you get a response thirty minutes later. What we’re building and have been testing is something that is synchronous, real-time, and constantly evolving based on the [student’s] question.
Embracing AI
Fortune: How is Chegg meeting students’ needs?
Schultz: Students don’t just suffer from being stuck in their academics. We’ve got great research around the barriers of anxiety, the barriers around depression, distraction, and just exhaustion. And that all kind of stems from the same cyclical patterns of: I don’t know how to be a great student. I don’t know how to get ready for my final therefore, I cram 24 hours ahead of time.
So how do we leverage our amazing content…to start to be your coach, to start to be your guide, to start to be the proactive force that sends you the content you need it next.
We haven’t seen anything in the market; we’ve dreamed of this product for years, about how do you not just be a transactional education tool but how do you be a relationship-based educational tool and how do you think about the student as an entity that is an individual, has a personality—who needs different levels of encouragement at different times of the semester. That’s a dream product for us, and that’s what we’re building right now.
Fortune: What is CheggMate?
Schultz: The breakthrough for education with AI is the ability to create a one-to-one experience with the student and that’s what we’re blending into. So going forward, what we’re building for the student, what that generative, conversational experience—it’s just Chegg. It’s going to be part of that program you buy today. It’s not a new product. It’s just a new experience within the same product.
Fortune: What is going to set Chegg apart from ChatGPT or just trying to Google answers?
Schultz: In the next two to three years, content and the quality of content will be 100% commoditized. What people are really going to use our tools for is the value that we generate that’s not just content-based. I don’t think the content advantage that we have today, the 150,000 SMEs [subject matter experts] that create the highest quality content in the industry, the ability to tag that data with rich metadata that allows us to do personalization—that won’t go away in the next 12 or 18 months, we’re still gonna have that advantage.
But in three years, language models will all kind of be at the same quality. I think the advantage that we’ll have is, one, verticalization. So what does that mean? A GPT, a Bard, they’re generic models. They’re not trained in chemistry, accounting, or whatever the subjects are. I joke at the company a lot—we’re anthropology through zoology… and so we’re thinking of how to verticalize for every subject, which will constantly be a competitive advantage.
Ensuring success
Fortune: One criticism of generative AI programs right now is that they are not perfect—they get answers wrong, and they can make stuff up. How are you ensuring Chegg’s products won’t do that and that students will get the correct answers?Schultz: It all comes down to the training of models. One of the best training data sets is actually questions and answers, and we have a 90 million questions and answers data set that has been created and curated and quality assured by humans. So understanding that this is a [verified] question and this is the [verified] answer allows you to reduce a lot of those hallucinations.
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