Alphabet Terminates Contractual Ties with Appen, Impacting AI Training for Google’s Products

Alphabet’s decision to cut ties with Appen, the AI data firm that contributed to training Google’s chatbot Bard and other AI products, leads to financial impact and concerns for Appen’s future.

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Alphabet, Google’s parent company, has chosen to terminate its contractual relationship with Appen, an Australian artificial intelligence data firm known for its work in training AI models, including Google’s chatbot Bard and search results. Appen received notification of the termination during the weekend, and the decision will be effective from March 19, according to a filing from Appen.

Alphabet’s Impact on Appen: Alphabet accounted for approximately one-third of Appen’s revenue, making the termination of the contract significant. The decision will affect at least two thousand subcontracted workers affiliated with Alphabet, leading to concerns among members of the Alphabet Workers Union.

Financial Impact: In 2023, revenue generated from Appen’s work with Alphabet amounted to $82.8 million out of the company’s total sales of $273 million for the year. Appen has struggled financially in recent years, facing a 30% decline in revenue in 2023 and challenges attributed to external operating and macro conditions.

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Stock Performance: Appen’s shares, which peaked in August 2020 at AU$42.44, have experienced a substantial decline, currently trading around 28 Australian cents – down over 99% from its peak.

Challenges Faced by Appen: Appen has grappled with customer losses, executive departures, and financial decline despite its enviable client list and a nearly 30-year history. The company’s difficulties in pivoting to generative AI have been attributed to weak quality controls and organizational issues.

Past Work and Services: Appen has worked on various projects for major tech companies, including evaluating search result relevance, assisting AI assistants in understanding diverse accents, categorizing e-commerce images using AI, and contributing to the mapping of electric vehicle charging stations. The company has also provided training data for lidar companies, security applications, and automotive manufacturers.

Labor Issues with Google: Appen and Google have faced conflicts in the past, including a dispute about wages in 2019. Google’s requirement for contractors to pay workers $15 per hour was not met by Appen initially. In January 2023, raises were implemented for Appen freelancers working on Google products, but labor issues persisted, leading to charges from the U.S. National Labor Relations Board in June.

Appen’s Response: Appen, responding to the termination of the contract, emphasized a focus on managing costs, turning the business around, and providing customers with quality AI data. The company plans to adjust its strategic priorities following the contract termination.

Alphabet’s decision to sever ties with Appen has immediate financial repercussions for the AI data firm, impacting revenue and raising concerns among workers. Appen faces challenges in restructuring and adapting its business model amid ongoing industry shifts and demands for higher-quality AI training data.