Alphabet Has Terminated Partnership with Australian AI Company That Is Training Bard And Google Search

In a surprising turn of events, Alphabet has severed all contractual ties with Appen, the Australian artificial intelligence data firm that played a crucial role in shaping the intelligence behind Google’s chatbot Bard, refining Google Search results, and contributing to various AI products.

The decision, revealed after a meticulous “strategic review process,” caught Appen off guard, as Alphabet notified them over the weekend of the termination, set to take effect on March 19, according to a filing from Appen. Strikingly, Appen expressed having “no prior knowledge of Google’s decision to terminate the contract.”

Alphabet’s move holds substantial implications, considering the conglomerate’s contracts accounted for approximately one-third of Appen’s overall business revenue. This abrupt termination is estimated to impact “at least two thousand subcontracted Alphabet workers,” as emphasized by a statement from the Alphabet Workers Union on Monday.

Headquartered in Australia, Appen has been a cornerstone in training AI models for a star-studded list of tech giants, including Microsoft, Apple, Meta, Google, and Amazon. These five tech behemoths have historically contributed to 80% of Appen’s revenue. With a global platform encompassing around 1 million freelance workers across 170 countries, Appen has been a key player in providing high-quality training data for AI models.

The financial ramifications of this decision are significant, with revenue from Alphabet collaborations accounting for $82.8 million out of Appen’s $273 million in sales for 2023, as detailed in Monday’s filing.

Despite its enviable client list and nearly three decades of operation, Appen has faced challenges in recent years, marked by a loss of customers, a series of executive departures, and financial setbacks. The company reported a 30% drop in revenue in 2023, following a 13% decline the previous year, attributing part of this decline to “challenging external operating and macro conditions.”

Appen’s struggles are further illuminated by its stock performance, which peaked in August 2020 at AU$42.44 ($27.08) on the Australian Securities Exchange, boasting a market cap of $4.3 billion. Presently, the stock is trading at around 28 Australian cents, down more than 99% since its peak.

Appen’s previous projects for tech companies involved tasks such as evaluating search result relevance, assisting AI assistants in understanding requests with diverse accents, categorizing e-commerce images using AI, and mapping electric vehicle charging stations.

Appen, in addition to its high-profile collaborations, has showcased its expertise in projects such as search relevance for Adobe and translation services for Microsoft. The company has also been pivotal in supplying training data for lidar companies, security applications, and automotive manufacturers.

However, the landscape of large language models has evolved, particularly with models like OpenAI’s ChatGPT and Google’s Bard. These models operate by delving into the vast digital universe, offering sophisticated responses and advanced images in reaction to simple text queries. As a result, companies are allocating more resources towards advanced processors from Nvidia, redirecting their investments away from Appen’s traditional services.

The relationship between Google and Appen has been marked by past conflicts, notably a dispute over wages in 2019. Google mandated that its contractors pay workers a minimum of $15 per hour, a requirement that Appen reportedly did not meet, as indicated in public letters penned by some workers.

In January 2023, after months of organization efforts, Appen implemented raises for freelancers working on the Bard chatbot and other Google products. However, despite these adjustments, labor issues persisted. In June, Appen faced charges from the U.S. National Labor Relations Board for allegedly terminating six freelancers who publicly expressed dissatisfaction with workplace conditions. Fortunately, these workers were later reinstated.

Appen, in response to the recent termination of its contract with Google, outlined its strategic approach in a filing on Monday. The company expressed its commitment to managing costs, steering the business towards a positive trajectory, and ensuring the delivery of quality AI data to its remaining customers. Further details on Appen’s adjusted strategic priorities will be disclosed in its full-year results for FY23, scheduled for release on February 27, 2024.