Alphabet severs ties with AI firm Appen, impacting search and chatbot training

1. Alphabet has terminated its contract with AI training data provider Appen, accounting for a third of Appen’s revenue.
2. Appen has struggled recently despite its history, losing customers and executives amid declining finances.
3. Appen’s work has included evaluating search engine results and training AI assistants, but demand is shifting to processors for large language models.
4. Appen has had past conflicts with Google over contractor wages and labor relations.
5. With the loss of Alphabet’s business, Appen says it will focus on costs, strategic changes, and providing quality data.

Alphabet has cut all contractual ties with Appen, the artificial intelligence data firm that helped train Google’s chatbot Bard, Google Search results and other AI products. After a “strategic review process,” Alphabet notified Appen over the weekend of the termination, which will go into effect March 19, 2023, according to a filing from Appen. The company said it had “no prior knowledge of Google’s decision to terminate the contract.” The termination of the contract with Alphabet, which accounted for roughly one-third of Appen’s revenue, will impact “at least two thousand subcontracted Alphabet workers,” according to a statement from the Alphabet Workers Union.

Appen loses major AI customer as Alphabet ends contract worth a third of revenue

Appen is based in Australia and has helped train AI models for major tech companies including Microsoft, Apple, Meta, Google and Amazon, which have accounted for 80% of Appen’s revenue. Appen has a platform of about 1 million freelance workers in more than 170 countries. In 2023, revenue from work with Alphabet totaled $82.8 million of Appen’s $273 million in sales.

Despite Appen’s history and client list, the company has struggled in recent years with losing customers, executive departures and declining financials, even as demand grew for training data for generative AI tools. Revenue dropped 30% in 2023, after a 13% decline the prior year, which Appen partly attributed to “challenging external operating and macro conditions.”

Former employees said in interviews that Appen’s current issues pivoting to generative AI reflect years of weak quality controls and a disjointed structure. Appen’s past work has included evaluating search results, helping AI assistants understand accented requests, categorizing e-commerce images with AI, and building electric vehicle charging location maps.

Large language models like those behind ChatGPT and Google’s Bard operate differently, scouring data to provide sophisticated answers to text queries. Companies are spending more on AI processors and less on data annotation firms like Appen.

Appen and Google have had past conflicts, including a 2019 dispute about wages for contractors working on Google projects. In January 2023, pay raises took effect for Appen freelancers working on Bard and other Google products, increasing rates to between $14 and $14.50 per hour. However, in June, Appen faced National Labor Relations Board charges for allegedly firing six freelancers who publicly discussed workplace frustrations.

In its filing, Appen said it will focus on managing costs, turning around the business, and providing quality AI data to customers. The loss of the Alphabet contract will force an adjustment of Appen’s strategic priorities, with further details to be provided in its 2023 full year results.