Chegg is cutting 388 jobs (45% of workforce) due to AI competition and reduced Google search traffic

Chegg announced on Monday it will eliminate 388 jobs, representing about 45% of its total workforce, as the education technology company struggles with falling revenue caused by artificial intelligence and decreasing visitors from Google searches.

The company, which started two decades ago, has taken a major hit from AI-powered tools like ChatGPT that students now use instead of traditional homework help services. Chegg took legal action against Google in February, claiming that AI-generated answers appearing directly in search results have reduced the number of people visiting its website and hurt sales.

On Monday, Chegg repeated these concerns, pointing to AI technology and fewer clicks coming from Google as the main problems hurting its performance.

“As a result, and reflecting the company’s continued investment in AI, Chegg is restructuring the way it operates its academic learning products,” the company stated.

This marks the second round of job cuts this year. Back in May as Cryptopolitan reported, the company let go of 22% of its workers, also blaming growing AI use for the decision.

Leadership shakeup as company stays independent

Along with the job cuts, Chegg announced that Dan Rosensweig will take over as CEO right away, replacing Nathan Schultz. Schultz will leave the CEO position but stay on as an advisor to Rosensweig and the board.

The company also revealed plans to keep operating on its own, ending a review process that started earlier this year to explore other options.

“After thoughtful consideration of multiple proposals, the board unanimously determined that remaining an independent public company offers the best opportunity to maximize long-term shareholder value,” the company explained.

In April, Chegg faced possible removal from the New York Stock Exchange. The warning came when shares traded around 60 cents. Stocks staying under $1 for 30 straight trading days trigger these warnings. By May, the price climbed back above $1.

Companies worldwide, from technology firms to airlines, have been cutting workers as AI’s real effects become clear, making employees nervous. However, some observers believe companies are using AI as a convenient reason for downsizing.

Last month, consulting firm Accenture revealed a reorganization that pushes out workers who cannot quickly learn AI skills. Shortly after, Lufthansa announced plans to cut 4,000 positions by 2030 while using AI to improve operations.

Salesforce eliminated 4,000 customer service jobs in September, saying AI handles 50% of company tasks. Payment company Klarna reduced its staff by 40% while adopting AI systems. Language app Duolingo said it would slowly stop using contract workers and rely on AI instead.

Experts question if AI is real reason behind layoffs

The news sounds bad, but Fabian Stephany, who teaches about AI and work at the Oxford Internet Institute, thinks there might be more behind these cuts than companies admit.

Companies previously hesitated to discuss AI use, but now they are “scapegoating” the technology to justify difficult business moves like layoffs, he explained.

“I’m really skeptical whether the layoffs that we see currently are really due to true efficiency gains. It’s rather really a projection into AI in the sense of ‘We can use AI to make good excuses,'” Stephany told CNBC.

Companies can present themselves as technology leaders while hiding actual reasons for cutting jobs, according to Stephany.

Pandemic overhiring may be true culprit

Some businesses that grew during the pandemic like Duolingo or Klarna hired too many people during pandemic, and recent layoffs might simply be corrections.

“It’s to some extent firing people that for whom there had not been a sustainable long term perspective and instead of saying ‘we miscalculated this two, three years ago, they can now come to the scapegoating, and that is saying ‘it’s because of AI though,'” he added.

“At the same time there are announcements of big layoff plans ‘because of AI.’ It looks like a big excuse” said Bouglé, who helped start Authentic.ly.

Despite the widespread concerns, recent research from Yale University suggests that AI’s impact on employment may be overstated, with job losses not materializing at the scale many executives predicted.

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