Fri. Jan 21st, 2022

When U.S. university campuses closed in 2020 during Covid-19 restrictions, Chegg, a student aid subscription service, seemed ready to capitalize on the promise of a thriving market for educational technology.

Limited to their laptops and cut off from the actual support of lecturers, millions of students joined Chegg, which provides on-demand answers to university course questions for $ 14.95 per month. Group revenue increased by 57 percent year-on-year in 2020, while its number of subscribers increased by more than two-thirds to 6.6 million.

But 12 months later, the picture looks very different for the platform, which offers a library of answers as well as a service where freelance employees will answer a question for you.

Shares fell 21 percent between early 2020 and late 2021 and its most recent set of quarterly results, for the three months to September 30, showed a decline in student enrollment compared to the previous quarter, and sales projections to come far below analysts’ estimates.

Part of Chegg’s misery stems from an ongoing legal dispute with Pearson after the FTSE 100 group claimed in a lawsuit in September that the California-based company had rendered answers to its course material illegally. Chegg said he believed it was in “full compliance with copyright law” and disputed the allegations.

Stock Price Line Chart ($) Showing Chegg Forfeits Early Pandemic Profits

But the dip in its share price speaks to greater concerns about the online learning sector. One is the concern that as the pandemic subsides, there will be a return to classroom learning. Between fall 2019 and 2021, there was also a 7.8 percent drop in undergraduate enrollments at U.S. universities, continuing a decade-long downward trend.

A deeper fear is that some companies are enabling students to cheat their way to qualifications by creating more direct routes to learning for students. Some universities are considering action to identify where students use services like Chegg and Course Hero, another subscription competitor, to cheat.

Dan Rosensweig, Chegg’s CEO, partly blamed declining enrollments at U.S. universities because young people prefer to enter paid work instead of diving into the group’s shares.

“[In] such a robust economy, people who would normally go to community colleges. . . took the route to go to the economy and you really can not blame them, ”he told the Financial Times.

Subscribers to Chegg’s response services skyrocketed during the pandemic, but the US company is viewed with suspicion by many academics © Dennis Diatel / Alamy

He called allegations that the website allows fraud possible “unfortunate” and “nonsense”. Chegg said it provides much-needed access to learning support, such as explanations or non-university-led subject guides, to a student body that is more likely to work and be more technologically literate than ever.

“It has nothing to do with finding answers,” Rosensweig said. “These are students who have had no support for most of their lives – the way we are used by the overwhelming majority of students is to learn.”

But many academics disagree. C Edward Watson, co-vice president at the Association of American Colleges and Universities, said the use of websites like Chegg to answer course questions was “normalized” on campus, creating an “existential crisis” in higher education. “It questions the quality of the degree,” he said.

At a recent AAC & U conference, professors described how they confront multiple instances of students lifting responses from sites like Chegg of Course Hero, an unlisted competitor that allows students and academics to share course materials.

Educators said they are working to combat the threat by both improving support for students and capturing where there have been serious violations of honor codes.

Lisa Yount, a philosophy professor at Savannah State University, said her team uses tactics ranging from offering Course Hero with copyright claims to flooding the site with fake information to catch students using it to kul. “Our faculty team is now undergoing surgery, dismantling Course Hero,” she said.

Like Chegg, Course Hero, which was valued at $ 3.6 billion after its December financing round, denies that it makes cheating possible.

Bar graph of Rolling 4-quarters ($ m) showing Chegg sales soaring in 2020

The California-based company, which has attracted supporters in its most recent funding round, including the Canadian pension fund Omers and Sequoia Capital, has argued that it eliminates unequal access to study support for “under-represented students” rather than part of a technology-enabled trend for sharing and online research in learning.

“We are in line with facilitating learning and stopping cheating,” said CEO Andrew Grauer. He argued that Course Hero’s focus was “to strengthen better teachers and better resources. [while] to stop the abuse. ”

Aneesh Venkat, partner at Sequoia Capital Global Equities, said during the funding round that “online learning platforms will continue to play a vital role in complementing the student learning and educator teaching experience in today’s learning economy”.

Although attempts to curb fraud have lacked an outright ban on Chegg and Course Hero, the question of whether the accusations will limit their potential for growth – or lie behind Chegg’s share decline – has been questioned.

Chegg is facing another legal battle through a security fraud class action lawsuit filed in California last month.

It claims that the company failed to inform investors that its growth was a short-term result of the pandemic learning online and that “defendants were also aware that the platform was helping students cheat on their exams”.

When the restrictions eased and students returned to campus, the lawsuit alleges, universities were able to crack down on fraud and “students predictably stopped signing up on the platform”.

Chegg said he was “aware of the complaint” and that he “saw[ed] the suit as lack of merit and intent[ed] to vigorously defend the case ”.

Citi analyst Nithin Pejaver said he was not “completely convinced” that declining college enrollment was behind Chegg’s declining share price. But he agreed with the company that fraud allegations would probably not be behind the fall.

Instead, he suggested, Chegg might have overestimated the total potential audience for his services – not considering the possibility that it could be limited to those studying science and technology or at community colleges. “Maybe Chegg is saturating the US market – it’s just a suspicion we’re currently working on,” he said.

Apart from his own lawsuit, Pearson moves in Chegg’s land through a digital printing, which offers more interactive online textbooks and study aids.

Chegg and Course Hero insist they are willing to navigate these rocky waters. Both want to expand into other areas of the education market – including workplace learning and languages ​​- partly through acquisitions.

In August, Course Hero acquired the AI ​​platform QuillBot, which provides a grammar test and citation generator used by professionals as well as college students.

In November, Chegg acquired Busuu, a digital language learning company, and this month began launching its service tools that target students based on what their personal data suggested.

“We see a growing and growing need for learners to go online directly and try to learn whenever they want and in ways that suit their needs,” Grauer said.

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