Appen Faces Financial Strain as Google and Alphabet Ends Partnership
Alphabet has severed ties with Appen, the AI data firm pivotal in training Google’s Bard chatbot and other AI products. This termination, effective March 19, follows Alphabet’s strategic review, impacting approximately two thousand subcontracted Alphabet workers. Appen, based in Australia, relied on Alphabet for about one-third of its revenue, with $82.8 million in 2023. The move comes amidst Appen’s financial struggles, marked by a 30% revenue decline in 2023 and a stock plunge of over 99% since its 2020 peak.
The company, which faced disputes with Google over wages, plans to focus on cost management and delivering quality AI data after the contract termination, affecting its nearly 30-year history in training AI models for major tech companies like Microsoft, Apple, Meta, and Amazon. Despite its prestigious client list, Appen’s challenges include executive departures and a disjointed organisational structure. The termination underscores the evolving landscape, with companies increasingly relying on large language models like OpenAI’s ChatGPT and Google’s Bard, reducing dependence on firms like Appen for training data.
Similar Contract Termination by Google with Appen
Google has decided to terminate its contract with Appen, a pivotal Australian data company crucial for training its AI tools, including Bard and Search. This decision is part of Alphabet’s broader initiative to streamline and enhance efficiency in its supplier partnerships. Appen, seemingly blindsided by the termination, plays a vital role in tasks such as rating data quality and providing answers for AI models.
The contractors at Appen, often the underappreciated backbone of the industry, are facing uncertainties due to the move. Google’s decision has significant financial implications for Appen, as the company heavily relies on the tech giant. In the fiscal year 2023, Google’s contribution to Appen’s revenue amounted to $82.8 million out of a total of $273 million. The Alphabet Workers Union has highlighted that at least two thousand subcontracted workers will be directly impacted by this termination, underscoring the potential human and economic consequences of such strategic shifts in the tech industry.
Impact of these Termination on Appen
The termination of the Alphabet-Appen contract will have substantial ramifications, affecting not only Appen’s revenue but also the livelihoods of its workers, with at least two thousand subcontracted Alphabet workers impacted.
This move by Google aligns with broader industry trends where companies are reevaluating and adjusting supplier partnerships to enhance operational efficiency. It also highlights the increasing scrutiny on labour practices within the AI industry, with workers advocating for better wages and conditions. The Alphabet Workers Union’s ongoing efforts to improve conditions for workers in the industry may gain momentum in the wake of such developments.