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Alphabet Ends Contract with AI Firm Appen

2024.01.24

 

Key Takeaways

  • Alphabet terminates its contract with Appen, affecting AI training for products like Google’s Bard.
  • The decision impacts Appen’s revenue significantly, with Alphabet being a major client.

Sudden Termination by Alphabet

Alphabet has abruptly ended its contract with Appen, an Australian AI data firm crucial in training Google’s chatbot Bard and other AI products. Announced over the weekend, this termination, effective March 19, comes as a surprise to Appen, which derived a substantial one-third of its revenue from Alphabet.

Financial and Workforce Impact

The contract cessation significantly impacts Appen’s financial health and its subcontracted workforce. In 2023, Appen’s collaboration with Alphabet contributed $82.8 million to its $273 million annual sales. The decision affects at least two thousand subcontracted Alphabet workers, as per the Alphabet Workers Union.

Appen’s Challenges and Market Decline

Despite Appen’s impressive client roster including tech giants like Microsoft, Apple, Meta, and Amazon, the company has faced recent difficulties. These include client losses, leadership changes, and a significant drop in revenue, leading to a drastic 99% decline in stock value since its peak in 2020.

Shift in AI Model Requirements

The evolution of AI technology, exemplified by sophisticated language models like OpenAI’s ChatGPT and Google’s Bard, demands more advanced processors and less reliance on traditional training data providers like Appen. This shift underlines the changing landscape in AI development and training.

Past Conflicts and Labor Disputes

Appen’s history with Google includes disputes over wage standards and labor practices. Despite a wage increase for Appen freelancers in 2023, labor issues persisted, leading to legal challenges from the U.S. National Labor Relations Board.

Appen’s Strategic Response

In light of Alphabet’s decision, Appen plans to realign its strategic priorities, focusing on cost management, business turnaround, and delivering quality AI data to its customers. Further details on Appen’s response and future plans will be disclosed in its full-year results due in February 2024.

 


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