Google Sued for Hurting Traffic and Eroding the Internet with AI Overview. An Unfair Charge?

Key Takeaways

• Chegg has sued Google, claiming AI Overviews reduced its traffic and revenue by displaying answers directly in search results.
• Chegg is struggling financially, though. $6.1M net loss, a 24% revenue drop, and stock trading at just above $1.
• Google denies harm, arguing AI Overviews drive traffic to more sites. Also, users find the feature helpful for quick, reliable answers.

Chegg, an edtech company that provides online learning resources, sued Google in federal district court. It claimed that Google's AI-generated summaries have adversely affected its revenue and traffic.

The AI-generated summaries, or overviews, appear whenever you search for a query on Google. The intention of this feature is to combine the best pieces of information from multiple pages and present them to you so that it's easier and quicker to find an accurate answer.

Chegg's Accusations

Chegg, however, believes that this feature has transformed Google into an answer engine - instead of a search' engine. Google uses the data on platforms like Chegg and displays it at the top (in overviews), keeping users from visiting real websites (like Chegg) and thereby reducing engagement on their pages.

According to Chegg, Google isn't the only one stealing from them. In 2023, the then-CEO claimed that the advent of ChatGPT had significantly reduced student engagement on its platform.

The anti-AI propaganda takes a break when Chegg itself partners with Meta Llama, OpenAI, and Mistral to make the platform AI savvy. It also offers AI-powered learning tools in addition to renting and selling textbooks.

According to the evidence presented by the company, Google's AI overview feature uses around 135 million questions and answers from Chegg without any attribution. They also pointed out how this feature could be responsible for the lower search engine ranking of the platform.

Chegg also referenced a federal judge's ruling from last August that confirmed Google has a monopoly in search. This ruling came from a 2020 DOJ lawsuit, which claimed Google stays on top by making it hard for others to compete and reinforcing its own dominance.

Chegg's Financial Condition and Its Frustration

Rationalizing Chegg's claims becomes easier when we analyze the company's consistent downfall. It has reported a $6.1 million net loss on $143.5 million in fourth-quarter revenue, which translates to a whopping 24% decline year over year.

The company is trading at just above $1 per share after the company's stock crashed. It was once worth billions, but its valuation is now under $200 million due to fewer students signing up. This means reducing demand for the learning platform's paid services.

Let's unpack why Chegg thinks Google is responsible for its losses:

• Chegg made its money by helping students with their homework. It built a community of experts and students who could help each other out.
• With AI helping out students for free, the company lost a major chunk of its clients.

Chegg has hired Goldman Sachs to explore the next steps, which would be either to sell the company or go private. Management projected first-quarter revenue of $114-116 million, falling short of analysts' $138.1 million target.

An Unfair Accusation?

Every day, Google sends billions of clicks to sites across the web, and AI Overviews send traffic to a greater diversity of sites - a Google spokesperson clarified

Also, Google Overviews rightly mention the sites it's pulling data from. So, to say that it doesn't credit the original content providers would be unfair.

Also, overviews, while helpful, are mere summaries of the actual answer. For detailed answers, the user must head over to the source article, which, as a matter of fact, benefits from its placement in Overviews.

Looking from the point of view of a user, Google AI Overview is one of the best things that AI has given us because it not only saves a lot of time but also directly provides reliable and verified information at the top.

Google has not directly commented on the matter but will defend itself in court.

The post Google Sued for Hurting Traffic and Eroding the Internet with AI Overview. An Unfair Charge? appeared first on Techreport.