What’s the state of the freelance revolution? It can be difficult to identify the growth of freelancing on a rigorous quantitative and economic basis, after all the majority of digital talent platforms remain private companies with no requirement to share financials.
Certainly, there are trend indicators at a macro level, like the Upwork and Toptal surveys, reports of the BLS, and wide-casts by consultancies like the McKinsey Global Institute, Accenture and others. On an informal basis, the growth seems self-evident, incontestable and clearly reinforced by the impact of the Covid 19 pandemic. Most mature freelance platforms report growth in both SMB – small and medium sized businesses, the historical primary market for freelancing – and, increasingly, growth in repeatable, project based, enterprise work for large corporates. (disclosure: For my Forbes writing, I’m in frequent contact with a large and growing number of mature and new startup freelance platforms).
It’s difficult to find precise overall numbers for this nascent industry because most players are private and relatively new. But, a few of the best known digital talent marketplaces are now public companies and report their performance. I thought readers might like to review the most recent financial performance of Upwork, Fiverr, and Freelancer.com. Upwork and Fiverr are traded in the US stock markets, and Freelancer.com is covered in the Australian stock market. Looking at performance before and after Covid 19 was named a pandemic, has the freelance business remained robust? Moreover, has it grown? What can we learn from publicly available information and CEO comments?
The freelance revolution is large and growing, and Covid 19 and the shift to remote has been an accelerant. Each of the companies experienced a growth bump in April and is expanding revenues, talent, and client roster. Each remains primarily a supplier of SMB talent, but is also building deeper enterprise relationships with larger corporate clients.
Here are the specifics:
In the most recent quarter, Q2 2020, Upwork reported revenues just below $90 million USD, which was more than 10% higher than the company or analysts forecasted. Q1 2020 revenues were approximately $83 million USD, a 5% increase. Q4 2019 revenues were around $80 million USD, so without doubt Upwork continues to grow.
How does Upwork’s financial future look? Analysts expect a consistency of revenues throughout 2020 with a year-end revenue number closing in on $350 million USD. Analysts forecast that 2021 revenues will clock in at $400 million USD, an increase of over 15%.
Here’s what CEO Hayden Brown had to say:
“The seismic trends toward remote work and more flexible working models continue to move in our favor … 45% of hiring managers have frozen full time hiring, and yet 72% are continuing or increasing their usage of independent professionals — underscoring, the focus companies have today on cost management and workforce flexibility. Against this backdrop, I’m pleased to report second-quarter revenue of $87.5 million, representing 19% year-over-year growth and exceeding the high-end of our guidance range.
“Spend from new clients was a larger contributor than usual this quarter as we on-boarded and activated our record number of new clients. We benefited from the structural shift in favor of remote work and labor flexibility. The other key driver of our revenue was spend from retained clients. A predictable and meaningful spend level from retained client is a critical differentiator of our business model, and we are proud of the degree to which our customers have continued to fly on Upwork freelance talents as an essential part of their own operations through the economic downturn, as evidenced by the addition of more than 4,000 additional clients to our core client roster this quarter.
“In Q2, we saw significant traction with business customers from the launch of more than 50 new solution-focused pages demonstrating the specific ways that businesses can leverage freelancers on Upwork for immediate needs.
“Next, we successfully increased client hiring activity in our most valuable categories, including technical categories and customer support. We were able to achieve significant adoption of our Bring Your Own Talent functionality … and entered into a partnership in Q2 with Business Talent Group, which offers access for our clients to their network of professional business consultants while also enabling us to access BTG’s additional client base which includes 50% of the Fortune 100.
“Our third strategic priority is to make more high-quality matches with a focus on our high value technical categories of work. We saw huge global demand in Q2 for technical talent to address critical business needs in a digital-first world.
“In Q3, we will continue to expand our vetted talent pools as we – as well as our core systems to offer a matching experience differentiated by the specificity, speed, and quality of the talent matches we offer.”
Let’s start with stock market performance in Fiverr’s case: the value of a Fiverr share has increased by 356% year to date! It’s been an amazing run. In the most recent quarter, Q2 2020, revenues were $47 million USD, up from $34 million USD in Q1 2020, or an increase of over 40%.
How does Fiverr’s future appear to pundits? Analysts are counting on a forecast of $200 million USD or double the $107 million USD revenues achieved in 2019. Analysts are looking for around $250 million USD, or an additional 25% growth. Clearly, Fiverr is on a tear. Time will tell how long this growth can be sustained, but it sends a strong message about the resilience of the freelance revolution.
Here’s what CEO Micha Kaufman had to say:
“Fiverr reported strong Q1 results with revenue growing 44% year over year. This represents a third consecutive quarter of accelerating growth and beating our prior expectations. GMV on our core marketplace has accelerated on a year-over-year basis for every week in April since mid-March. We hit all-time daily revenue records four times in April. All of our existing cohorts have rebounded strongly from March volatility.
“We are also experiencing a strong uplift on new buyer acquisition, driven by organic awareness and performance marketing. All verticals have rebounded with similar trends to the overall market pace. And we have seen particular strength in categories related to moving businesses from off-line to online as well as digital content-related categories such as gaming, social media, online lessons and e-books. Last but not least, we are seeing the strength of our business, not only in the US but across the world. We enjoy an expansive and well-diversified global buyer base that stays active with us and contributes to the continuous and durable revenue streams for a very long time.
“There is an increase in our high-value buyers, which now represents 58% of our revenues. And what we’re seeing is we’re seeing that the behavior of all of these new buyers is very consistent with what we’ve seen. We have a combination of small businesses, medium businesses and larger businesses, with maybe a little bit more skewed in recent cohorts toward the more larger. That said, the SMB continues to be very vibrant, and this is shown by the fact that our older cohorts, those who have been with us for even 10 years have been going back into growth.”
Unlike Upwork and Fiverr, Freelancer.com is registered on the Australian stock exchange, measured in AU$, and reports on a half-year rather than quarterly basis. However, like Upwork and Fiverr, revenues have increased over the first half, although slightly less than the others. First half revenues for Freelancer.com grew to $96 million AU from $92 million AU in the first half of the prior year. This represents slower growth than Freelancer.com had experienced in the prior couple of years (in 2018 first half revenues were $83 million AU).
Freelancer points out that a significant contribution to Freelancer.com revenues was its partnership with Arrow Electronics, which increased net revenues for the first half by 11%.
A strong indication of growth for freelancing overall, and Freelancer.com in particular, is offered by Deloitte’s Nishita Henry, Chief Innovation Officer, describing Freelancer.com’s partnership with Deloitte through the “My Gigs Platform” initiative:
“We accelerated the launch of the MyGigs Platform, a self-service short-term staffing app connecting our internal talent pool to open project opportunities, in an effort to create the #1 remote talent experience. Since March 2020, the number of gig workers has more than doubled to a total of 16,800 and the number of job posts has increased by 10x for a total of 100k hours. As we begin to navigate the “new normal,” we will focus on on-boarding another 35,000 internal resources and drive to delivering 20% of all projects through this platform. MyGigs is changing the way we deliver work on our projects to our firm, our clients, and our society!”
Here’s what Freelancer’s semi-annual report and CEO Matt Barrie had to say about first half 2020 progress:
“1H20 Freelancer revenue all-time record of $25.7m, up 4% on pcp and excluding enterprise service revenue was up 11% on pcp to $24.5m (primarily due to completion of Arrow major work) – Revenue growth year on year by month (excluding enterprise engineering services) has climbed monotonically in US dollars from January. June 2020 revenue on June 2019 revenue was up 20% in US dollars and 21% in Australian dollars.
“For Enterprise: – In 1H20 we signed MSAs and/or SOWs with major companies in the professional services, FMCG, chemicals and robotics industries. – Joint winner of US$25M NASA Open Innovation Solutions 2 tender. – Began pilots with global healthcare, energy, consumer staples and telecommunications companies. – Successful pilot with a $11B chemicals company have led to global expansion plans, with on-boarding its Singapore region as a starting point and five countries to target in ultimate roll-out. – Multi-country field services pilot with US computer company rolls out to second country (>1000 projects) out of thirteen.”
“The front-end improvements continue to deliver wins and the focus is on collaborative tooling, useability improvements, the new mobile experience, managed services, API expansion, design overhaul and enterprise offerings in coming quarters.”
The rising tide
As the expression goes, a rising tide lifts all boats. Each of these leading digital talent marketplaces delivered meaningful growth through the first half of 2020, and increased performance in the second quarter. The driver: business continuity needs provoked by a black swan global crisis. Industry around the world was learning real time how to manage remote distributed teams and needed external talent to supplement or replace critical technical and functional staff. Whether an individual specialist in AI to a full team staffed to build and launch a new product, performance marketing plan, or strategic business analysis, large and small companies are turning to freelancers. They do not replace full-time employees as such, but together with full-time employees they make possible a flexible, blended, cost efficient and ready now workforce. Covid 19 fundamentally disrupted commerce across the world. The three CEOs of these companies share a confidence and enthusiasm that the changes provoked by Covid 19 together with enabling technologies will secure the future of the freelance revolution: More demand, a greater diversity of assignments, more enterprise level activity.
Viva la revolution!