Appen is selling AI as its turnaround story. The market isn't buying it.
Appen rode the big tech wave but landed with a thud. The company is now hitching its wagon to artificial intelligence, but investor patience is wearing thin.
Few ASX companies have soared so high and fast only to fall just as quickly.
Appen went from a little-known data cruncher to a runaway market darling, valued briefly at more than $5 billion at its peak in August 2020. Such was its appeal, at a time of cheap credit, heady tech valuations and contrived acronyms, that it was wrangled into Australia’s WAAAX pantheon alongside fellow tech starlets Wisetech, Altium, Afterpay and Xero.
Today, Appen’s market capitalisation is just over $100 million.
Appen’s sharp descent began as its big tech clients started tightening their spending. Appen contractors were historically tasked with basic data processing in order to train advertising algorithms used by the likes of Google, Amazon and Facebook. Changes to Apple’s privacy policies in 2021, among others, made it significantly more difficult for big tech clients to track users, leading to project budgets being slashed.
It exposed the shaky ground on which Appen’s business model was always built, effectively contracting low-wage workers to sort through data, without an insurmountable moat or sufficient value-add, and an over-reliance on a small handful of major clients. Eighty cents of every dollar was estimated to come from customers like Google and Facebook.
