Appen Acquires Leapforce in Multimillion Dollar Deal: What Are Potential Risks for Current Leapforce/Raterlabs Contractors?

About the Deal

In what might not come as a surprise to many, Appen, the language and search data service provider has made a move to acquire its US-based competitor ‘Leapforce’ for an estimated $105.3 million dollars. Leapforce was founded in 2008, headquartered in Pleasanton, California, and specializes in search relevance through a highly automated and proprietary end-to-end technology platform, which of course is Raterhub; the tool used by search engine raters to rate search engine results. It is a move that will make the company a leading provider in search data services. Mark Brayan, Appen company CEO said that it gives Appen the capability to serve their customers better. This deal comes after Mr. Brayan and Leapforce CEO, Daren Jackson, met a couple of years ago and remained in touch and formed a friendship. About six months ago, Mr. Jackson reached out to discuss a potential deal as both acknowledged at some point that the businesses would be better working together instead of against each other.

The Acquisition is subject to customary conditions precedent and is expected to complete on or around 7 December 2017. Appen’s existing customer base consists of, amongst others, a number of large global multi-national technology companies. The projects awarded by these companies, or the ongoing services which Appen may provide to these companies, can generate large amounts of revenue from that one client. The same is true for existing customers of Leapforce. However, and not surprisingly enough, Leapforce generates 99% of its revenue from only two customers, in the approximate proportion of 71% revenue from one customer and 28% revenue from the other customer. We’re guessing that these are both Google, and Facebook.

This brings up questions such as the acquisition of those contracts, or how Google feels about this merger of the two companies. The existing CEO and CTO of Leapforce, Daren Jackson, will join the Appen management team and will continue to manage the Leapforce business going forward. Leapforce is heavily dependent on the CEO who has the key relationship with its major customer and is key to the operations and service delivery of the Leapforce business. This of course means Google. Leapforce has only about 21 full-time staff, all of whom will be joining Appen.

What Are Potential Risks for Current Leapforce/Raterlabs Contractors?

The biggest question about this merger is finding out what exactly what will happen with Leapforce independent contractors. One of the risks that was mentioned in the acquisition merger was as follows:

“Some of the Appen Group’s search relevance and data analytics services are crowdsourced to, and often performed by, independent contractors. This is also the case for the Leapforce business. The independent contractors performing these services are retained pursuant to written agreements with a member of the Appen Group that commonly specify the individual’s status as an independent contractor, confirm the individuals are not employees of the employing company, and require the individuals to indemnify the employing company in the event the individual incorrectly represented their status to the employing company.

So if you are a Leapforce independent contractor, then you might have to sign new agreements with Appen after a certain time. And for the time being it looks like your job is secure, but its only as secure as it was before. Leapforce can at any time choose not to renew your contract for whatever reasons they see fit.

Or there could be a good chance that Leapforce independent contractors could have their contracts not renewed because Appen has a huge crowdsource pool from which to draw people from. Why do we think this? It was also mentioned in the merger agreement the following as seen as a risk factor for the merger:

“Notwithstanding the foregoing express contractual language, from time to time in the United States individuals retained by a member of the Appen Group as independent contractors may file claims for unemployment with the applicable state unemployment agencies claiming employee status with a member of the Appen Group and seeking unemployment benefits. Leapforce, being a US-based business, enhances this risk. Unemployment benefits are, from time to time, awarded by the US state unemployment agencies, which may result in nominal charges or increases to the employer’s unemployment tax accounts with the various states in which these individuals perform services and in which the member of the Appen Group does not have existing employees. The Appen Group is also subject to the usual risks posed to businesses that employ crowdsourcing, including claims relating to employee classification, claims to benefits, wage and hour claims and other employment claims.”

Of course this is true for any company when they acquire another business. But to be honest, in some markets Appen is known for paying miserable wages as compared to Leapforce and Lionbridge for the same search engine evaluation job. They have even lowered wages in some countries and pay far less than Leapforce did. There really isn’t any regard for the independent contractor in this situation.

And while its certain that all the internal employees were taken care of, as they will also go to Appen with their CEO, it is uncertain what the discussion was about the current raters. In our experience, independent contractors with both companies are simply a number or statistic. As an independent contractor for either of these companies, you are nameless, and you are expendable. This is the sad truth about being a contractor and working for these companies, along with the fact that you’re not really an employee for any company, and you have no benefits at all unless you are an employee.

And outside of this merger, it’s easy to see the behavior that this company takes against the people that help make them money. In some markets, Appen Global reduced their hourly rate for a project known as Aztec. In fact, some raters were hired with a higher starting hourly wage than others. And as mentioned before, in some countries Appen only pays HALF of what a Leapforce rater is paid.

It will be interesting to see what happens with the current independent contractors who work for Leapforce and whether they retain their contracts. One thing that is uncertain is if Appen will be calling the shots on the current Leapforce raters, or if Appen will take over and get rid of the ones that are paid more so they can take from their talent pool those who are paid far less for the same job. Regardless of the outcome, we feel that there might be a lot of raters who will end up losing their jobs in the mid or long term. After all, Appen Global doesn’t really care about the little guys who actually do the work. They seem simply set on cornering the market by acquiring their competitor, and then paying people lower wages for the same job.

If you are currently a Leapforce search engine rater or Raterlabs rater, leave us a comment and let us know what you think about the merger, what has been shared with you. We’d like to hear from you.