Last year, Chegg didn’t mention “artificial intelligence” a single time in its annual report to investors. This year, it came up nine times, mostly as a threat. “We have absolutely pivoted internally to focus our resources on CheggMate and AI,” Brown said at an investor event on May 18. “We believe this is an existential change.”

Chegg is not the only education company suffering right now. ChatGPT-induced euphoria on Wall Street for shares of Microsoft, Nvidia, and other companies benefiting from relationships with OpenAI has been accompanied by a souring on ed-tech businesses such as Chegg, Duolingo, and Udemy. Some investors consider them to be threatened by ChatGPT’s ability to play teacher and tutor. None has taken the hit that Chegg has, or publicly warned that AI chatbots are chewing into its business, but if tech industry expectations for generative AI hold, it will be far from the last company to see its business undermined by text generators and chatbots.

Chegg was founded in 2005 by college students to rent textbooks. Its founders quickly moved on to other ventures, but it has survived by repeatedly reshaping its business, riding out a pricing war with Amazon over textbook rentals a decade ago, and then shifting away from that money-losing business. “We made ourselves competitive long enough that we could transition,” says Ben Van Roo, a Chegg vice president at the time who now runs generative AI vendor Yurts AI. Chegg went on to make a series of acquisitions that created a highly profitable array of services, including language courses, months-long skills training for corporate workers, and a math problem solver.

Students can save time, money, and perhaps their grades by “Chegging it” instead of hiring tutors, going deep into books, or knocking on professors’ doors. The idea that AI might change or challenge those services has been on Chegg executives’ minds for years. Since late 2018, it has used free, open-sourced models developed by OpenAI to help offer grammar and composition suggestions to students in a writing aid feature and to score the quality of internal documents, according to Ramirez, the former director of Chegg’s writing aid.

“We could see whether a suggestion we gave actually made the writing more fluent, whether the text was better or worse with what we were suggesting,” says Ramirez, who now runs AI-based writing helpers Rephrasely and Paraphrase Tool. AI programs also help route subscribers’ academic questions to appropriate experts among Chegg’s over 150,000 contractors, most of them in India.

The prospect of using AI to create the content students and other learners want isn't new to the company either. Since long before ChatGPT came on the scene, Brown has said the holy grail for Chegg has been generating content with algorithms to reduce tens of millions of dollars in labor and licensing costs. But OpenAI’s early models were not very fluent at text generation, and some Chegg leaders talked regularly about how difficult it would be to safely operate generative AI, according to three former employees. They feared students could goad a chatbot into silly and problematic responses that could tarnish Chegg’s reputation, while any instructional errors held huge academic consequences for users and liability questions for the company.