Let us turn to the companies leading the charge in the freelance economy. Upwork and Fiverr both operate online talent marketplaces, focusing on digital-only delivery and capitalizing heavily on the largest skills gaps/most-demanded services, chiefly in technology. These are not staffing companies with an online job market, however. Apart from completely remote delivery, the core operating model of these firms is to enable continuous learning and building experience through freelancing, rather than taking a previously acquired skill and utilizing it at a role.
As freelancing both expands in online presence, both companies are at the infancy of serving a large and diverse total addressable market. Upwork is targeting 161 million service jobs that can be provided remotely, a total global opportunity of $560 billion22, while Fiverr is focused on a $115 billion segment of the massive $815 billion U.S. self-employed market23.
To capture that opportunity, Fiverr is using an e-commerce approach to freelancing. There is no hiring process or long-term commitment (everything is on-demand), and services are purchased from a comprehensive catalog. Compared to staffing companies, Fiverr is transparent with pricing and timing of services, and this has resulted in the company attracting 3.1 million active buyers to their platform24.
Upwork’s business model is geared towards larger corporate customers, with over 30% of the Fortune 100 part of their clientele25. This enables the company to upsell more profitable “Managed Services”, which goes a step above providing a platform to hire freelancers and take a small commission. Upwork, themselves act as a manager on behalf of their client, taking responsibility for project deliverables and engaging the freelancers as necessary. Upwork is clearly benefiting from both the secular trend of freelancing and network effects. The company has acquired 80% of its customers without advertising - through unpaid search, free referrals and word of mouth, showing the organic interest in the service.
A key ingredient to the process at both Upwork and Fiverr is the skill matching, which, compared to a traditional HR process, happens much quicker. Since the platforms are transparent, they allow the sellers to address gaps in their skillset, learn through work experience with a more diverse clientele than normally accessible and build their portfolios.
Fiverr and Upwork’s models also remained robust in the adversity of COVID-19 pandemic, and were fully able to facilitate selling digital services. With uncertainty lingering in the air, many companies could still acquire relevant skills without the need to make a long-term commitment. With this backdrop, Upwork managed a 24% revenue growth26 in 2020, while Fiverr posted incredible 88%24. As corporate and societal structures shift to more hybrid of fully remote working models even within companies, both companies were able to grow a customer base that is more prepared and willing to manage flexible work and receive services purely online.