Upwork and the Rising Freelance Economy
For years, companies across the country of all sizes, from industries ranging the entire spectrum, have encountered the same issue — attracting and retaining the quality talent they so desperately need. Whether it’s due to an over-saturated market, effects of the economy, or stiff competition, managers and HR departments across the board have ran into hurdle after hurdle trying to maintain quality staffing.
Not all that long ago, unemployed workers with specialized skills were stuck competing for jobs within “driving distance,” significantly reducing their exposure in the field. Not to mention their chances of getting the position.
Thankfully, like so many other things in our lives, high speed Internet changed all of that.
Now, qualified freelancers are able to not only find prospective projects and jobs around the country or even the world, they can actually accept many of those positions without ever having to relocate. Whether it’s as a freelancer or a “remote” employee, the unemployed or underemployed are finding quality work in record numbers. There’s no denying that the Internet has had a huge impact on the unemployment rates across the world.
However, the talent seekers aren’t simply relegated to posting jobs in regional newspapers, nor are employment seekers destined to spend hour upon hour perusing subpar employment sections of public sites like Craigslist. With Upwork, it all may come together in a way that makes it quite simple for both sides to find each other.
And when you take a look at how it all came together and why Upwork seems to work so well, it starts to make a lot of sense.
Upwork By The Numbers
“ Freelancers represent 35% of the total U.S. working population and could represent more than half of the country’s workforce by 2027.” — Morgan Stanley
Upwork went public in October 2018. It apparently debuted at $20.99 and currently rests at a price of $14.73.
According to an interview with CNBC, at or around the date of IPO, Upwork had 2M unique projects, 475K billing clients, 375K earning freelancers with over 5,000 skills.
Stephane Kasriel, the Upwork CEO, noted in the interview that “there’s a big shift happening in the workforce today. The baby boomers are retiring, they are much less likely to be freelancers, the millenials are the largest generation in the workforce, almost half of millenials do some amount of freelancing today. The oldest millenials are 38 years old.”
Stephane Kasriel is saying that hustle mode is real and my bet is that hustle mode won’t die. It’s unlikely to go away in the future as more people enter the global economy via the world wide web.
Freelance Market Growth
An Ask Wonder Question may yield some interesting insights. What is the Global market-size (TAM) for the Gig — Freelancer Economy industry?
The answer?
The total addressable market for the global Gig economy is $1.5 trillion, with North America accounting for over half of the world’s freelancers.
I think the startup economy and the freelance economy is heavily intertwined. As more people learn the right digital skills (from machine learning to digital marketing), join fast growing startup, exit and create startups of their own, they too, would require a flexible and lean workforce to quickly and efficiently grow their operations.
North America accounts for more than half of the worlds freelancers (77 million) but there’s still much room for growth in the U.S. and worldwide as well.
Global growth is perhaps the most exciting aspect of this sector.
Via AskWonder — The global distribution of freelancers is as follows:
Asia: 11.3%
Europe: 29.3%
North America: 50.7%
Australia: 3.3%
Africa: 1.4%
South America: 4.0%
https://seekingalpha.com/article/4208191-upwork-ipo-looks-quite-undervalued-11
McKinsey notes that there might be more than 160 million freelancers worldwide as the years progress.
Morgan Stanley notes “In the United Kingdom, France and the Netherlands, freelance growth has outpaced overall employment growth. The number of freelancers in the European Union (EU-28) doubled between 2000 and 2014, making them the fastest growing group in the EU labor market, according to the Association of Independent Professionals and the Self-Employed (IPSE).”
The same Morgan Stanley study notes the drawbacks of freelancing.
“Concerns include the lack of paid leave, health-care benefits, retirement provision and career progression. According to a 2017 study by the Freelancers Union, the top concern among freelancers is income predictability. The survey revealed that 63% of freelancers dip into their savings at least once a month versus only 20% of full-time employees.”
Thankfully, telehealth and firms such as Freshbennies tackle a portion of these problems and may help in regard to affordable supplemental health benefits. But unfortunately, even while freelance is on the rise, it’s still not necessarily the most stable mode of earning. These problems show that there might be more that platforms might be able to do for freelancers by somehow replicating benefits afforded to them by employers.
Laying the Foundation
We have to go back 20 years to truly discuss the history of Upwork. In 1999, Beerud Sheth and Srini Anumolu founded a company known as Elance and just 4 short years later, oDesk was founded by Odysseas Tsatalos and Stratis Karamanlakis. These two companies were both focused on making job hunting easier for freelancers, and in 2013 they joined forces in a merger, forming Elance-oDesk.
The newly formed company quickly gave the oDesk platform an upgrade, makeover, and rebrand to Upwork, and announced that the Elance platform would be phased out over time. Then, in just a few short years with the mission “to create economic opportunities so people have better lives,” Upwork reported an astounding 14 million active users in 180 countries and $1B in annual billing in 2017.
According to the company, they are now “the premier freelancing website for top companies to hire and work with the world’s most talented independent professionals.”
Why Do Freelancers Like Upwork?
Upwork isn’t a traditional job site. Unlike Monster and other employment websites, companies post their open jobs and projects on Upwork, and interested freelancers bid on the project. Additionally, to ensure that the companies posting jobs are actually legitimate and that the freelancers are serious, Upwork charges both the client for the post and the freelancer a fee for the job.
Both Elance and oDesk worked based on this premise and while they didn’t initially charge clients, they quickly proved that they had a viable business model. Now, under Upwork, freelancers pay a sliding fee of 5% to 20% and the more work they do with one client, the less fees they pay. Clients pay 2.75% per payment or a monthly flat fee of $25 if they meet certain requirements.
After the merger and upgrades, Upwork’s popularity seemed to take off like Falcon Heavy. Suddenly, freelancers from around the world could build their portfolios and bid for quality jobs right alongside talent that had years of experience.
Upwork helped level the playing field.
Almost overnight, small portfolios with quality work along with a competitive bid could garner a freelancer enough work to keep the bills paid. Instead of spending time writing job-specific cover letters, constantly manually tweaking portfolios, and sending out dozens of resumes each and every day, freelancers are able to focus completely on jobs in real-time.
Pros & Cons
Another reason that Upwork has gained and retained such popularity is the fact that both freelancers and clients are happy with it overall. With few negatives and a good selection of pros, Upwork continues to meet and even exceed expectations.
The Upside of Upwork!
A few of the biggest factors that users cite in their reasons for preferring the Upwork platform over other options include:
- Billing Accuracy — The fastest way to lose users and damage your brand is to mess up when it comes to money and billing, and Upwork works to ensure that never happens. With a mutual contract in place, freelancers send a bill to the client for hours worked and Upwork reviews each Work Diary to ensure that the clients are billed fairly. Additionally, clients can have access to captured screenshots and track billable time, helping ensure that they only pay for actual work completed as per the agreement.
- Payment Security — Clients can easily pay for completed work in one of two ways. They can fund their accounts and once the job is reviewed, the freelancer is promptly paid for their work thanks to the automatic payment scheme. Otherwise, freelancers can be paid via credit cards and other electronic payment options.
- Intuitive Search — The algorithms help client’s narrow down their searches for the best potential hires for the job.
- Intuitive Platform — Upwork is available on mobile for both Android and iOS, supports both text and video communications, and with their native messaging system, clients and freelancers can collaborate and discuss current jobs in real-time and even send and receive files.
- Talent/Job Pool — The talent pool on Upwork is rather quite colossal. There are so many skilled freelancers with such broad sets of expertise, clients are almost guaranteed to find the perfect fit for the project. Since clients can find talent available at whatever price they’re willing to pay, there are numerous bids available both small and large.
Hiring is as easy as clicking a single button and with Upwork ensuring that billing is safe and payments are prompt and accurate, along with a platform designed with both clients and freelancers in mind, they set the standard for freelance job hunting.
Apparent downsides of Upwork?
Fees
Users note that the startup might have extortionate fees. 20% fees up-to the first $500 worth of work done per client.
Too Much Competition
This is not an issue that is tied directly to Upwork, this is the case of general competition in the digital age but it is worth noting. An increase in standardization of skill-sets and demand for various digital skills pull in freelancers across the world who can deliver work for comparable quality with lower costs.
Further, this affects both sides, and is actually one of their main “pros” as well. The sheer number of freelancers applying for projects can make it rather time-consuming for clients to comb through in order to find that perfect match, but as basically anyone can sign up to be a freelancer on Upwork, competition can be fierce for applicants.
Time to Search For Gigs
Freelancers must take more time to look for gigs and they also get charged for connects on the platform. This helps the system to regulate freelance inflow but might be restrictive to freelancers.
Optimize for long-term gigs.
Contract Management
Fixed Milestones
Fixed milestones is an issue for some freelancers as they show that milestones might skew in favor of the client with erroneous milestones that appear out of nowhere and other factors that be an issue for the freelancer.
Inactive Contracts
There’s this thing called success scores on Upwork and it can be determinant of freelancer value. Success scores can be affected by lack of contract completion whether it is the freelancers fault or that of the contractor.
Freelance Rating Might Be Off
Freelance rating matters to both the client and the freelancer. If mismatched, there might a potential for the client to gain a valuable freelancer for a lower price but the risk might be too high (time wasted).
Overall
Upwork is an interesting platform and it should add value to freelancers to help them understand how to get involved in the freelancing space but significant improvements can be made to the platform and the overall sector.
Upwork and similar platforms are interesting because it shows the overall demand in the marketplace and what clients want. Further, what I like about the freelance economy is the fact that it is one that will (or should be) resilient in good economic conditions and bad economic conditions. We’ve been in relatively good times for the past decade or so, we’re seeing uncertainty and resilience is in freelancing, in hustling, and figuring out how to be useful to earn more.
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