Chegg Sues Google Over AI-Generated Search Results, Citing Revenue Loss

Chegg has filed a federal antitrust lawsuit against Google, alleging that the tech giant’s AI-generated summaries in search results have significantly diminished its website traffic and revenue. According to the New York Post, the online learning platform contends that Google’s AI Overviews — an automated feature providing direct answers to user queries — have unfairly diverted potential visitors away from Chegg’s site.

The lawsuit, filed in the U.S. District Court in Washington, D.C., targets Google’s practices under the leadership of CEO Sundar Pichai. Chegg argues that AI Overviews prioritize instant answers at the top of search results while simultaneously lowering the visibility of external links, including Chegg’s own educational resources.

In the lawsuit, Chegg CEO Nathan Schultz criticized Google’s approach, stating that the company has “unjustly retained traffic that has historically come to Chegg, impacting our acquisitions, revenue, and employees.” As reported by the New York Post, Schultz described Google’s actions as “harmful and unsustainable.”

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Chegg, which has retained Goldman Sachs to assist in a strategic review, is now considering options such as going private or selling the company. Schultz highlighted Chegg’s strong market presence, emphasizing its “brand awareness, engagement, and retention.” However, he argued that due to Google’s AI-generated content, traffic that would typically land on Chegg’s site is instead being kept within Google’s ecosystem.

According to the New York Post, Chegg’s financial struggles have been exacerbated by the decline in traffic, with its stock price plummeting nearly 90% over the past year. As of Tuesday morning, Chegg’s shares were trading at just $1.04, bringing the company’s valuation down to approximately $110 million.

The lawsuit claims Google has violated the Sherman Antitrust Act by allegedly forcing companies like Chegg to provide proprietary content in order to be included in Google’s search results. Schultz asserted that this practice puts content providers in a difficult position, as their work is being leveraged to sustain Google’s own platform without fair compensation.

Source: The New York Post