Alphabet Cuts Ties with Australian AI Firm

Alphabet has ended its contractual relationship with Appen, the AI data firm that assisted in training Google's chatbot Bard and other AI products.


Alphabet Terminates Contract with Appen

Alphabet, the parent company of Google, has decided to sever all ties with Appen, the Australian AI data firm. Appen played a crucial role in training Google's chatbot Bard, as well as Google Search results and other AI products. Alphabet's decision to end the relationship marks a significant blow for Appen, as one-third of its business revenue is derived from Alphabet contracts.

The termination of the contract, which was communicated to Appen over the weekend, will take effect on March 19. Appen was not previously informed of Google's decision. This decision will have an impact on at least two thousand subcontracted Alphabet workers, as stated by the Alphabet Workers Union.

Appen's Role in AI Training

Appen has established itself as a leading provider of AI training services, having worked with tech giants like Microsoft, Nvidia, Meta, Apple, Adobe, Google, and Amazon. These companies make up a significant portion of Appen's revenue, with five customers accounting for 80% of its total revenue in the past. Appen boasts a platform of over 1 million freelance workers across 170 countries.

In 2023, revenue from Alphabet totaled $82.8 million out of Appen's $273 million in sales for the year, according to Appen's recent filing. Despite its impressive client list, Appen has faced challenges in recent years, including customer losses, executive departures, and declining financials. These struggles were exacerbated by the increasing demand for training data driven by generative AI tools.

Appen's Future and Labor Issues

Appen plans to review its strategic priorities and focus on managing costs to turn the business around. The company aims to provide its customers with quality AI data moving forward. However, Appen's recent woes have taken a toll on its stock price, which has plummeted over 99% from its peak in August 2020. Labor issues have also plagued the company, with disputes over wages and charges from the U.S. National Labor Relations Board.

It remains to be seen how Appen will navigate its path forward in the AI training industry without the support of Alphabet. The full impact of the contract termination will become clearer in the company's FY23 full year results, which will be released on February 27, 2024.