I’ve written this on the APX boards several times over the last 5 years. Yes, I was very lucky to enter APX early on in its journey.
I wrote about why Appen has a moat, although many people underappreciates its moat.
None of its current clients (FAMGA) will all of a sudden stand up and say “I think I can do better, I’ll just create my own division”.
I think I’ve written this down 3-4 times, almost once a year but I’ll reiterate:
1. Data labelling is not Facebook, or Google, or Amazon’s core business. Large conglomerates like these have too much shit going on, and they struggle to focus. They are always looking to cut off distractions - which is why they like to sell off non-core businesses.
Someone else is already doing it well and we’re happy with their services. Their pricing is reasonable. It’s not worth our effort. Let them do it.
2. The cleansed data coming from Appen is neutral, robust and secure and free from influence. That is their advantage.
Imagine if Google or Amazon created a similar service to Appen. Do you think Apple or Microsoft will gladly use their service or will they prefer Appen, a neutral 3rd party vendor?
3. As the other poster mentioned, it’s easier said than done. energies are better spent and focused elsewhere.
Why don’t I just design, plan, project manage and build my own house, rather than spend so much money on architects, engineers, project managers, tradies and contractors?
Why use a broker or buyers advocate for property transactions?
Why choose an REA to rent out My property, why not advertise on gumtree?
Sure, if one of Appen’s FAMGA clients felt like they REEEEALLY wanted to go into data labelling, of course they could. Any company in this world could, if they really put their focus and resources to it. Nestle or Coca Cola could. But is that the best use of resources? Probably not... so it is very unlikely that any of Facebook, Amazon, Apple, Microsoft, Google or any of those seemingly tech companies will want to waste precious resources building this from scratch when there is a pre-existing service that provides data labelling on the cheap.
It’s akin to saying Facebook should start an AWS competitor, since they are super data-hungry company. Ummm yes, but that’s easier said than done. Probably not the best use of their expertise and resources.
APX Price at posting:
$24.49 Sentiment: Buy Disclosure: Held
(20min delay)