Google sued by Chegg over AI Overviews hurting traffic and revenue

[Cpvr]

Chegg, the publicly traded education technology company, has sued Google over its AI Overviews, claiming they have hurt its traffic and revenue. The company said that AI Overviews is “materially impacting our acquisitions, revenue, and employees.”

What Chegg said. Chegg wrote:

Second, we announced the filing of a complaint against Google LLC and Alphabet Inc. These two actions are connected, as we would not need to review strategic alternatives if Google hadn’t launched AI Overviews, or AIO, retaining traffic that historically had come to Chegg, materially impacting our acquisitions, revenue, and employees. Chegg has a superior product for education, as evident by our brand awareness, engagement, and retention. Unfortunately, traffic is being blocked from ever coming to Chegg because of Google’s AIO and their use of Chegg’s content to keep visitors on their own platform. We retained Goldman Sachs as the financial advisor in connection with our strategic review and Susman Godfrey with respect to our complaint against Google.

More details. CNBC reports that “Chegg is worth less than $200 million, and in after-hours trading Monday, the stock was trading just above $1 per share.” Chegg has engaged Goldman Sachs to look at options to get acquired or other strategic options for the company.

Chegg reported a $6.1 million net loss on $143.5 million in fourth-quarter revenue, a 24% decline year over year, according to a statement. Analysts polled by LSEG had expected $142.1 million in revenue. Management called for first-quarter revenue between $114 million and $116 million, but analysts had been targeting $138.1 million. The stock was down 18% in extended trading.

The report goes on to say that Google forces companies like Chegg to “supply our proprietary content in order to be included in Google’s search function,” said Schultz, adding that the search company uses its monopoly power, “reaping the financial benefits of Chegg’s content without having to spend a dime.”

Here is more from Chegg’s statement:

While we made significant headway on our technology, product, and marketing programs, 2024 came with a series of challenges, including the rapid evolution of the content landscape, particularly the rise of Google AIO, which as I previously mentioned, has had a profound impact on Chegg’s traffic, revenue, and workforce. As already mentioned, we are filing a complaint against Google LLC and Alphabet Inc. in the U.S. District Court for the District of Columbia, making three main arguments.

• First is reciprocal dealing, meaning that Google forces companies like Chegg to supply our proprietary content in order to be included in Google’s search function.
• Second is monopoly maintenance, or that Google unfairly exercises its monopoly power within search and other anti-competitive conduct to muscle out companies like Chegg.
• And third is unjust enrichment, meaning Google is reaping the financial benefits of Chegg’s content without having to spend a dime.

As we allege in our complaint, Google AIO has transformed Google from a “search engine” into an “answer engine,” displaying AI-generated content sourced from third-party sites like Chegg. Google’s expansion of AIO forces traffic to remain on Google, eliminating the need to go to third-party content source sites. The impact on Chegg’s business is clear. Our non-subscriber traffic plummeted to negative 49% in January 2025, down significantly from the modest 8% decline we reported in Q2 2024.

We believe this isn’t just about Chegg—it’s about students losing access to quality, step-by-step learning in favor of low-quality, unverified AI summaries. It’s about the digital publishing industry. It’s about the future of internet search.

In summary, our complaint challenges Google’s unfair competition, which is unjust, harmful, and unsustainable. While these proceedings are just starting, we believe bringing this lawsuit is both necessary and well-founded.

Why we care. Will Chegg win in a court against Google? Will Google have to rethink its AI Overviews and find better ways to send traffic to publishers and site owners? It is hard to imagine but this may be the first large lawsuit over Google’s new AI Overviews.

Source: https://searchengineland.com/google...-overviews-hurting-traffic-and-revenue-452518

 

[dorky]

Very interesting read... i'll be interested to hear more about this lawsuit if it goes ahead.

 

[Cpvr]

Very interesting read... i'll be interested to hear more about this lawsuit if it goes ahead.

There’s more information that have been released regarding the lawsuit.


Along with the complaint document.

https://www.courtlistener.com/docket/69668109/1/chegg-inc-v-google-llc/

 

[fdk]

This is a really interesting read, and will be an interesting development to follow when/if the court hearing goes ahead. Chegg seem determined to go ahead with the lawsuit and I don't see Google backing down on this, so I imagine it ultimately will be decided in court. I read some of the filings from Chegg linked by @Cpvr above, and they make for interesting reading, and when you consider it further it really is a serious issue that needs to be considered and some case law set down.

They make a very valid point in my opinion. AI Overview is severely restricting traffic to websites. I know this as a result of the work I do - I am often Googling for quick answers to complex questions about legislation and law, which I kind of already know the answers to but want to just self-verify that I'm right, and Google AI Overview provides those answers pretty accurately most of the time because it is pulling that content directly from law websites, Government websites and such.

The problem is, as a result of this, users never need to click through to those websites. That might be fine for Government websites, but for businesses who provide free online information and articles they used to advertise for business, it's a potentially disastrous situation. They're losing massive amounts of traffic and reach due to AI Overview. There's also another problem - there are occasions where AI Overview gets things wrong, and sometimes they can be important things - now, this situation is constantly improving, but it's still a real risk. The risk is that people are relying too much on this information, and as it's being provided "by Google" in a sort of official capacity, they have no reason to question it. That can lead to potentially dangerous situations, and is a bit 1985-esque for me.

My feeling is that there will need to be some sort of restriction applied to Google's ability to pull content from sites for use in it's AI Overview feature, unless they agree to pay some kind of fee for using the content. That seems unlikely and hard to implement I suppose, as it would require site owners to give individual permission for their sites to be crawled and then the implementation of a new payments/tracking system for when Google uses the content... definitely not beyond their capabilities of course, but my feeling is they'll do everything and lobby everyone possible to stop that being an option.