Chegg Sues Google Over AI Hurting Traffic & Revenue

Will other companies take legal action against Google for reducing website traffic and revenue through its AI Overviews?

Chegg, a publicly traded education technology company, has filed a lawsuit against Google, claiming that AI Overviews have significantly impacted its business. The company alleges that these AI-generated summaries are diverting traffic that would have previously gone to Chegg, leading to financial losses and affecting its employees.

In its statement, Chegg explained that it would not need to explore “strategic alternatives” if Google had not launched AI Overviews. The company argues that Google is keeping users on its own platform by using Chegg’s content, preventing potential visitors from reaching Chegg’s website.

Chegg emphasised that its platform offers a superior educational experience, backed by strong brand awareness, high engagement, and user retention. However, the company believes that Google’s AI Overviews are unfairly restricting access to its services.

To address these challenges, Chegg has hired Goldman Sachs as a financial advisor for its strategic review and retained Susman Godfrey for its lawsuit against Google.

 

More Details on Chegg’s Lawsuit Against Google

According to CNBC, Chegg’s market value has dropped below $200 million, with its stock trading just above $1 per share in after-hours trading on Monday. In response to its financial struggles, the company has enlisted Goldman Sachs to explore potential acquisition opportunities or other strategic alternatives.

Chegg recently reported a net loss of $6.1 million for the fourth quarter, with total revenue reaching $143.5 million—a 24% decline compared to the previous year. Despite analysts predicting revenue of $142.1 million, Chegg’s performance slightly exceeded expectations. However, the company’s outlook for the first quarter appears bleak, with projected revenue between $114 million and $116 million, falling short of analysts’ expectations of $138.1 million. As a result, Chegg’s stock dropped 18% in extended trading.

The company claims that Google is leveraging its dominance in search by requiring platforms like Chegg to supply proprietary content in order to be featured in search results. According to Chegg’s CEO, Schultz, Google is using its monopoly power to benefit financially from Chegg’s content without any investment, further exacerbating the company’s decline.

 

Chegg Takes Legal Action Against Google Over AI Overviews

Chegg has officially filed a lawsuit against Google and its parent company, Alphabet Inc., in the U.S. District Court for the District of Columbia. The education technology company argues that Google’s AI Overviews have significantly harmed its business by reducing website traffic, cutting revenue, and impacting its workforce.

Chegg’s legal complaint is built around three main allegations:

1. Reciprocal Dealing – Chegg claims that Google forces companies like itself to provide proprietary content in order to appear in Google Search results. Essentially, businesses must comply with Google’s terms and share their content, but in return, Google’s AI Overviews use that same content to generate answers without directing traffic back to the original source.

2. Monopoly Maintenance – The lawsuit argues that Google unfairly leverages its dominant position in search to suppress competition. By integrating AI-generated answers directly into search results, Google is keeping users within its own ecosystem, reducing the need to visit third-party websites like Chegg. The company suggests that Google’s behaviour is anti-competitive and harmful to businesses that rely on search traffic.

3. Unjust Enrichment – Chegg accuses Google of profiting from its content without providing any compensation. According to the complaint, Google is using AI to display information sourced from Chegg and similar platforms while reaping financial benefits without having to invest in the content itself.

 

The Impact of AI Overviews on Chegg’s Business

Chegg argues that Google’s shift from being a search engine to an answer engine has had devastating consequences. Rather than directing users to educational resources, AI Overviews now provide instant responses within the search results page, discouraging users from clicking through to external sites.

The financial impact on Chegg has been severe. The company reported that its non-subscriber traffic declined by 49% in January 2025, a dramatic increase from the 8% decline recorded in Q2 2024. This steep drop suggests that Google’s AI Overviews are diverting users away from Chegg’s platform, directly affecting revenue and overall business performance.

Beyond Chegg’s losses, the company argues that this shift affects students and online learners, who now receive AI-generated summaries instead of detailed, high-quality, step-by-step explanations. Chegg believes that Google’s changes could weaken the digital publishing industry, limiting access to accurate, expert-created content in favour of AI-generated responses that may lack depth or verification.

 

Google’s Response to the Lawsuit

Google has defended its AI Overviews, arguing that the feature improves the user experience by making search results more informative and interactive. According to Google spokesperson Jose Castaneda, AI Overviews actually increase engagement with search results and create new opportunities for content discovery.

He further stated that Google continues to send billions of clicks to websites every day, including educational resources, and that AI Overviews help distribute traffic to a greater diversity of sites rather than concentrating it on a few dominant platforms.

 

What’s at Stake?

This lawsuit could have significant implications for Google’s search model and the broader digital content industry. If Chegg’s case succeeds, it may force Google to revise its AI Overviews, ensuring that more traffic is directed back to the original content creators.

At the same time, if Google wins the case, it could set a precedent for how AI-generated content is used in search, potentially impacting other industries that rely on search traffic for revenue.

As the legal battle unfolds, it raises bigger questions about the future of online search, the role of AI in content discovery, and whether platforms like Google should be held accountable for the impact of their AI-driven decisions on content creators and businesses.