Chegg Cracks
Chegg Cracks
Plus, Linkletter loses another. Plus, 78% of parents of high school students say using AI on schoolwork is cheating.
Issue 206
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Cheating Giant Chegg, Shrinks
Yesterday, academic cheating company Chegg took yet another major hit on its stock value after the market closed, a decline that continues.
Today, Chegg - which is shockingly listed on the New York Stock Exchange - tumbled below $10 a share. In February 2021, Chegg shares were worth more than $113. In just over two years, Chegg shares have lost more than $100 in value - an Alpine decline of more than 91%.
Yikes.
The panic retreat by investors was initiated by Chegg’s quarterly earnings (Q1 - 2023) which were, not good. The bullets, according to news coverage:
Total net revenue down 7% year over year
Subscription services, which represent 90% of Chegg’s business, were down 3% year over year
Total subscribers were down 5.1 million year over year
Chegg projected further, continued declines in revenue, subscribers, and profit.
The company and media blamed the decline on AI tools such as ChatGPT - the automated service that can answer academic questions faster than Chegg, and for free.
In the earnings announcement, Chegg’s CEO said:
since March we saw a significant spike in student interest in ChatGPT. We now believe it’s having an impact on our new customer growth rate.
Two things.
To start, The Cheat Sheet could have saved Chegg’s investors some serious money. Or, made you some, had you shorted Chegg. Back in Issue 68, I wrote:
Bottom line: Chegg as a business is in trouble.
Yup.
This past February, in Issue 193, I wrote:
… Chegg thinks their earnings will be essentially unchanged for 2023 vs 2022. I think they’re dreaming
They were.
I’d repeated the wisdom of some smart readers who said early, early on that the likes of ChatGPT was going to be a Chegg killer. I agreed and told EdSurge exactly that, also in February (see Issue 193):
Some instructors have opposed companies like Chegg and Course Hero, as trying to get content related to the courses they teach removed can cause a headache. The chatbots represent a new headache, for teachers and possibly also for homework-help companies.
That whole business could be threatened by free tools like ChatGPT, argues Derek Newton, who runs The Cheat Sheet, a newsletter that covers academic dishonesty.
For Newton, the primary motivation of a student using homework-help services is laziness or a lack of preparedness. And so having a free alternative that can give answers to questions — like ChatGPT — could shrink the number of students who are willing to pay
In that Issue I wrote:
It’s too early to tell if ChatGPT will dent Chegg and its irresponsible ilk - but I can’t really see how it won’t.
And so it came to pass.
It is clear now that Chegg’s recent announcement of a partnership with ChatGPT (see Issue 203) was a desperate Hail Mary. And there’s no reason to think it will work, no reason to think Chegg’s decline won’t continue.
It also answers a question I’d been wrestling with for years - whether Chegg’s investors (see Issue 142) knew its core business was academic misconduct or not. This most recent investment retreat proved to me that they did. They only left when a better, more efficient cheater started eating their profits.
But a wise confidant and reader texted to say my question was academic - Chegg’s investors know now. He’s right.
When a free answer site takes away your customers, it becomes very clear very quickly what you’re actually selling.
Finally, a reminder that a collapsing valuation is not Chegg’s only problem.
As it happens, I checked in last week on the legal challenge by Pearson, against Chegg (see Issue 55). The suit is still active. And if Pearson wins, it could decapitate Chegg’s entire value proposition - selling the answers to questions they do not own. Chegg also continues to face investor legal challenges (see Issue 163). Since this recent stock evaporation essentially confirms that Chegg was a cheating provider all along, it’s hard to see how this recent news hurts investors’ claims.
Linkletter vs. Proctorio - Linkletter Loses Appeal
For years now, a legal battle has brewed between Proctorio, a remote exam proctoring provider, and Ian Linkletter, a former support staffer at University of British Columbia. Linkletter’s Twitter bio now identifies him as “Emerging Technology & Open Education Librarian.”
Here, let me repeat that this case has nothing to do with proctoring, whether it is good or bad, legal or not.
The short version is that while he was at UBC, Linkletter criticized remote test proctoring and Proctorio in particular. According to court documents, Linkeletter used his university access to create fake courses and access the company’s training materials which were not public and were proprietary (see Issue 103). Linkletter then shared those materials on social media. Proctorio sought an injunction. Linkletter sued, claiming the company’s legal action was an attempt to silence and intimidate him.
In March of 2022, a Canadian court dismissed Linkletter’s case. They were not too kind about it either. Linkletter appealed. Now, an appeals court unanimously agreed - Linkletter’s case against Proctorio is still dismissed.
In agreeing with a lower court, the new ruling found, again:
[Proctorio’s] breach of confidence claim had substantial merit and that Mr. Linkletter had no valid defence.
The Court said further:
that Mr. Linkletter was obliged to keep those [Proctorio] links confidential, based on the context in which he accessed them, and that sharing the links caused Proctorio detriment.
The Court also said that sharing confidential information that belonged to Proctorio “were not necessary for Mr. Linkletter to express his views.”
The full document is linked above.
The case is not necessarily over; Linkletter could appeal. Again.
Turnitin Survey: Parents Know AI-created Cheating is Going On, Want Tools to Stop It
Shortly after Turnitin released its AI detection system (see Issue 200), the company also released the results of a survey on AI-generated text and academics.
The company surveyed “1,011 parents and guardians of high school students, grades 9 through 12, in the United States.” That was in March.
A few findings stood out to me, including:
Nearly eight-in-ten, or 78 percent, think “using AI writing tools for schoolwork is a form of cheating.”
Nearly half, or 45 percent, said they were “personally aware of students using ChatGPT or similar services in ways that educators or schools may find inappropriate, or in ways that may violate academic rules or expectations.”
More than four in five (81%) parents and guardians said educators “should use technology tools that can spot or detect when something has been written by AI and not humans to check homework or test answers in order to cut down on cheating.
That 45% of parents of high school students know of students using AI to cheat ought to be alarming. If that many parents know, what do we think the actual percentage is? Double?
I’m encouraged though that nearly 80% say that using AI on schoolwork is cheating. It depends on how and for what and what the rules are, but that parents start by thinking AI is out of bounds is good - that’s a safe place to start.
I’m likewise encouraged by the 81% number saying teachers should use AI detection systems. I don’t know if that will put any pressure on teachers and schools to not only have, but to actually use, AI detectors. But it should.