Struggling AI firm Appen, which previously worked with Microsoft, Nvidia, and Google, has lost its chief revenue officer, Andrew Ettinger, and chief marketing officer, Alicia Hale. Both executives, who joined last year, stepped down last week, according to an internal memo seen by CNBC.

What Does Appen Offer?

In the past, 80% of Appen's revenue came from five significant customers: Microsoft, Apple, Meta, Google, and Amazon. The company leveraged its platform of over 1 million freelance workers to train some of the world's top AI systems across more than 170 countries. 

According to publicly available information and interviews conducted by CNBC, Appen has previously undertaken projects for tech companies, such as evaluating the relevance of search results, assisting AI assistants in understanding requests in various accents, categorizing e-commerce images using AI, and expanding map locations of electric vehicle charging stations.

Today's Large Language Models (LLMs), which power platforms like OpenAI's ChatGPT and Google's Gemini, extensively explore the digital landscape to offer intricate responses and sophisticated images to basic text queries. Companies are increasingly investing in processors from NVIDIA for this purpose, reducing their reliance on external AI training services provided by companies like Appen.

Alphabet Cutting Ties with Appen

The departures come after Alphabet announced in January that it was ending all contractual ties with Appen, which previously helped train Google's chatbot and other AI products. Two weeks after Alphabet's decision, Appen CEO Armughan Ahmad left after 12 months.

Following a strategic review process, Alphabet informed Appen of the termination in January, which took effect on March 19, which it had no prior knowledge of, as stated in a filing from Appen. According to a January filing, revenue from collaboration with Alphabet amounted to $82.8 million out of Appen's $273 million in sales in 2023.

Appen Lagging Behind Generative AI

Despite being an industry darling in the past, Appen is now facing challenges as the generative AI sector flourishes. Tech companies are investing billions in training their large language models (LLMs) or leveraging leading AI platforms, causing Appen to lose business. This market is expected to surpass $1 trillion in revenue within a decade.

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Appen's revenue plummeted by 30% in 2023 despite its prestigious client list and nearly 30-year history. This followed a 13% decline in 2022, which it attributed in part to "challenging external operating and macro conditions." Meanwhile, Former employees informed CNBC last year that Appen's difficulty transitioning to generative AI reflected years of inadequate quality controls and a fragmented organizational structure.

Appen CEO's Optimistic Outlook

The latest memo also noted that the company's sales vice president and global solutions vice president will now report directly to Kolln. The company is now focusing on targeting customers who are currently investing in data services.

CEO Ryan Kolln emphasized in a memo shared with CNBC that strengthening the sales and marketing functions remains a top priority for the business and that the strategy to grow revenue from existing and new customers has not changed. Kolln stated in the memo that he is dedicated to supporting the sales team to maximize their effectiveness and emphasized the importance of providing them with content and messaging that distinguishes Appen from competitors.

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