Appen Posts Revenues of AUD 111m for 2016, Up 34%

Appen, the Australia-based language services and data company, announced full-year results for 2016 on February 28, 2017. Revenues at the company, which has been listed on Australia’s ASX stock market since its IPO in March 2015, grew by a strong 34% and came in at AUD 111m (USD 85m) for 2016. EBITDA was up 24%, reaching AUD 17.2m (USD 13.2m).

Part of the growth can be attributed to Appen’s acquisition of transcription provider Mendip Media Group (MMG) in October 2016, which has since been rebranded as Appen UK. Furthermore, 2016 saw the opening of new offices in Beijing and Detroit. The company employs about 280 employees. Much of the work is farmed out to crowdsourced workers, however, which Appen says total 400,000.

Content Relevance Grows Fast

Appen operates two main business units: The Language Resources division creates audio databases for training speech recognition engines and generated revenues of AUD 37.7m in 2016, up 18% from the year before.

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Appen’s Content Relevance division is about training products that rely on machine learning. A key service is providing human evaluation of search engine results, which are then evaluated by tens of thousands of human, in-country evaluators for local relevance. Content Relevance grew a strong 44% in 2016, generating AUD 73.2m in revenues.

In an interview with Slator in October 2016, Appen CEO Mark Brayan explained the service: “We get tens of thousands of queries and we farm them out to the crowd. It’s a query pair: a query and a URL. We look at the query and we look at the URL and, yes, there are certain guidelines, but it’s really up to the human evaluator whether that’s a good response to that query.”

While Brayan was not at liberty to disclose client names, Google and Microsoft are likely the company’s two top accounts, contributing around a quarter of revenues.

Riding the Boom

Appen sees itself as a beneficiary of the current boom in machine learning and artificial intelligence. The company expects growth in AI applications to fuel the need for the high-quality data provided by its Language Resources unit.

In its results announcement, Appen quotes research by IDC that projects the market for cognitive systems and artificial intelligence to hit USD 47bn by 2020.

Appen is optimistic about 2017. Year-to-date revenues plus orders in hand for delivery already amount to AUD 70. EBITDA growth, meanwhile is projected at 15–20%.

The results failed to impress investors, however, with shares ending the day down 6%. Appen’s shares are still up over 300% from the IPO, yet down by about 20% from an all-time high in September 2016. Appen’s current market capitalization is AUD 260m (USD 200m).

While Appen’s staff-mix of project managers, vendors managers, and linguists sounds very much like that of a translation service provider (a.k.a. an LSP), Appen will not enter the translation space in a meaningful way anytime soon.

As CEO Brayan told Slator in October 2016, “We currently don’t have the scale of operations of a pure-play translation service provider. If someone came to us with a very large volume website, software localization, or document translation project, other companies would probably be better equipped to do that than us.”