Alphabet, the parent company of Google, has severed its contractual ties with Appen, an Australian artificial intelligence data firm. This decision comes after a strategic review process and will be effective from March 19, as disclosed in a recent filing by Appen. Surprisingly, Appen stated that it had no prior knowledge of Google’s decision.
The termination of this contract is significant for both companies. Alphabet accounted for approximately one-third of Appen’s revenue, and the termination will impact at least two thousand subcontracted Alphabet workers. The Alphabet Workers Union released a statement expressing concern over the impact of this decision on workers.
Appen, known for its work in training AI models, has a client base that includes tech giants like Microsoft, Apple, Meta, Google, and Amazon, with these five companies historically contributing to 80% of its revenue. Despite its prominent client list and a workforce of about 1 million freelance workers globally, Appen has faced challenges in recent years. The company has experienced a decline in revenue, attributed in part to challenging external conditions and macroeconomic factors.
In 2023, revenue from Appen’s work with Alphabet amounted to $82.8 million out of its total sales of $273 million for the year. This significant reliance on Alphabet highlights the impact of the termination on Appen’s financials.
Appen’s struggles have been reflected in its stock performance, with its shares plummeting more than 99% since its peak in August 2020. The company has also faced internal challenges, including executive departures and criticisms from former employees regarding weak quality controls and organizational structure.
The company’s past projects with tech companies have included tasks such as evaluating search result relevance, assisting AI assistants in understanding diverse accents, categorizing e-commerce images using AI, and mapping electric vehicle charging stations. However, the landscape of AI has evolved, with companies now relying more on advanced language models like OpenAI’s ChatGPT and Google’s Bard, as well as investing in hardware like Nvidia processors rather than outsourcing to firms like Appen.
This decision by Alphabet to terminate its contract with Appen is not the first instance of conflict between the two companies. In the past, they have clashed over wage disputes, with Google setting a minimum wage requirement for its contractors, which Appen reportedly did not meet initially. Although raises were implemented for Appen freelancers working on Google products in January 2023, labor issues persisted, leading to charges from the U.S. National Labor Relations Board over the alleged firing of workers who spoke out about workplace conditions.
In response to the contract termination, Appen has outlined its plans to focus on managing costs, reviving its business, and ensuring the delivery of quality AI data to its customers.
(Source: The Guardian | Market Watch | Search Engine Journal | CNBC)
