Chegg, an online education company known for textbook rentals and homework help, has been significantly impacted by the emergence of AI chatbots like ChatGPT. Chegg's stock price has plummeted by 99% since its peak in 2021, leading to a loss of $14.5 billion in value and half a million paid subscribers. This decline is largely attributed to ChatGPT offering a free and readily available alternative to Chegg's paid services.

Students have been abandoning their Chegg subscriptions, which cost around $20 per month, in favor of the free and instant assistance provided by ChatGPT. A survey conducted by Needham, an investment bank, revealed a decline in Chegg usage among college students, with only 30% intending to use it, compared to 62% planning to use ChatGPT.

Chegg's struggles highlight the disruptive potential of AI in the education technology sector. Other companies like Coursera, Udemy, Course Hero, and Quizlet are also experiencing challenges due to AI's emergence. The accessibility, breadth of knowledge, and free nature of AI chatbots pose a significant threat to these companies' business models.

While Chegg had internal discussions about AI and its potential impact, they underestimated the speed of its development and consumer adoption. Despite warnings from employees and external advisors, Chegg executives believed an experience like ChatGPT wouldn't be possible until 2025.

Chegg is now attempting to adapt by developing its own AI-powered study assistant, CheggMate. However, the company faces an uphill battle in convincing customers and investors of its value in a market dominated by ChatGPT. CheggMate's success remains uncertain, particularly given the company's historical reliance on acquisitions rather than in-house product development. Furthermore, concerns about cheating and the ethical implications of AI in education persist.