Smartling leads translation industry transformation with AI, driving 40% growth amid industry downturn

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As billions pour into generative AI and large language model startups from venture capital and private equity investors, attention is turning to identifying the industry verticals and companies most poised for AI-driven disruption. The $50 billion global translation industry has emerged as a prime candidate for this transformation, with Smartling leading the charge.

While the broader translation industry saw declines in 2023, Smartling’s translation business achieved a remarkable 40% growth rate last year, which is accelerating further in 2024. What’s driving this standout performance? The company’s pioneering use of AI to deliver human-quality translations at half the cost and 10 times faster than traditional approaches.

“We have developed an AI translation solution that produces human quality translation for half the price, and in half the time,” said Smartling CEO Bryan Murphy in an interview with VentureBeat. “As we’ve gone out to customers with this, obviously there’s a lot of interest, because every executive in the world right now is being tasked by their CEO to do two things: come up with an AI strategy and reduce costs.”

Founded in 2009, Smartling had already established itself as a leading translation management platform, serving major brands like British Airways, Shopify, Survey Monkey, and Lyft. But in the past 18 months, the company made an aggressive push into AI, developing proprietary models and integrating machine learning throughout its language services.

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Driving down costs, boosting margins with vertical AI focus

“Our goal is to make high-quality translation ubiquitous by driving down costs by at least another 50%, similar to how cloud services and storage were transformed over the past decade,” Murphy told VentureBeat. “If you go back to January of last year, we had zero revenue in AI-powered human translation (AIHT). It was a new product, we just launched it. Now 50% of our volume is AIHT. Our business is actually up year over year 70%.”

Smartling’s AI translation initiative began bearing fruit quickly. In January 2023, AI-driven projects accounted for nearly zero revenue. Today, they make up almost half of the business and a growing portion of profits thanks to the technology’s attractive unit economics. The company also has multiple patents pending related to its use of AI in translation.

While tech giants like Google, Amazon and Microsoft are pursuing general purpose AI models, Smartling has taken a vertical-specific approach, optimizing its technology for the unique challenges of translation. This includes integrating with over 20 commercial engines and large language models like GPT-4 to achieve the highest quality translations.

“By doing these things, we’re able to improve the quality of the output of these engines by roughly 40%, which is massive,” Murphy said. “And it’s because we have this translation hub. The big aspect of it is what we call language quality estimation, which is sort of using AI to measure the quality of these streams in like, in real time, so that we can make decisions on where to route that translation and what to do with it.”

Legacy language service providers face disruption risk

The rapid ascent of AI-powered translation puts significant pressure on traditional Language Service Providers (LSPs), which make up the bulk of the global translation market. Most of these companies rely heavily on human translators, with minimal technology capabilities or financial flexibility to adapt to this disruption.

“Based on our results and the wider trends in AI, I expect significant dislocation in the translation industry as more companies adopt AI-first solutions,” predicted Murphy. “We have to continually refine our prompt engineering — that’s where our patents lie, in how we’re actually creating these prompts. It really is a very highly offensive R&D environment as we work to identify the most effective large language models for what we’re trying to accomplish.”

Looking ahead, Smartling aims to accelerate its already brisk growth rate, fueled by continued investment in its translation AI. With a war chest of over $223.3 million in venture funding, the company is well-capitalized to expand its market share as the industry shifts in this new direction.

As AI propels transformation across disparate fields from healthcare to finance, the Smartling story illustrates that in some verticals, the future is already here. With the right technology, talent, and business model, the competitive landscape can change practically overnight. In translation, it appears there will be no turning back from an AI-centric paradigm.

So as investors look to surf the generative AI wave, vertical-specific disruptors like Smartling are well worth watching. With a head start on its industry’s evolution and an ambitious roadmap, this under-the-radar incumbent is showing that the real promise of AI will be realized not by the splashy startups, but by companies deploying it to transform traditional businesses right now.