The education sector is coming to terms with the rise in popularity of AI and its integration throughout various platforms in the edtech space, particularly after the release of ChatGPT in November 2022.

This technology was initially met with scepticism and uncertainty as educators, policymakers, and school systems grappled with how to approach it. For example, in January 2023, New York City public schools banned ChatGPT tools from school devices and networks only to reverse the decision a few months later in May.

Implementing AI-driven tools has begun replacing traditional learning models, leading to the downfall of edtech companies that relied on the old business model. Chegg, once a dominant edtech player has had to reevaluate its strategies to align with the AI boom.

AI tools are personalising learning experiences

The introduction of AI-driven platforms like Google Gemini are revolutionising personalised learning experiences. These tools are capable of tailoring plans and structuring revision schedules depending on students’ preferences and learning pace, offering real-time solutions to problems.

The likes of ChatGPT can act as personal tutors to students at little to no cost. This is in stark contrast to the now rigid and expensive subscription services offered by edtech companies, such as Chegg. Traditional platforms depend on pre-generated content which cannot be altered or tailored in the short term.

Platforms like Chegg have continued to lose their edge as these models become more sophisticated and incorporate real-time internet searches, such as ChatGPT’s use of Bing. These chatbots have become more efficient and attractive options for students of all levels, as they can adapt and offer a range of subjects and education levels.

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Chegg’s business model, which was a subscription-based service that offered homework solutions and textbook rentals, was particularly vulnerable to the rise of GenAI. The introduction of a more cost-effective and sophisticated educational tool swayed its core client base and decimated its share price. Chegg’s stock price has fallen about 92% since the release of ChatGPT and around 99% in the last four years, according to The Economist.

Edtech companies will have to incorporate an AI strategy to survive

For traditional edtech companies to remain competitive in a world rapidly being changed by AI, they will need to adopt and implement an effective AI strategy. AI is not a new technology and has been a core part of several companies’ technological stack.

For example, Chegg has incorporated AI and machine learning into its work since 2016 according to its VP of machine learning. However, the rise of AI chatbots and the hesitation to incorporate them has had a severe negative impact on key players in the edtech sector. This lapse in judgment has meant these companies are now playing catch up with developing their own AI tools to compete with large language models.

One of the main concerns edtech companies will need to address is creating an equitable solution to compete with AI companies. If a free alternative is available—especially one that is also more sophisticated—it will be difficult to sway consumers back to a traditional model that operates behind a paywall. In conclusion, the advent of AI has brought profound change to the edtech sector, leading to the decline of companies that found themselves unable to adapt in time.

The downfall of a key player like Chegg highlights the transformative power of GenAI and the importance of having a successful AI strategy in place. As AI continues to evolve, companies that fail to successfully integrate these tools and follow traditional business models will increasingly face an existential crisis.