Freelancers: Take Back Your Reputation
Why data portability is crucial in a Gig Economy
It’s a Freelancer’s World
The world is moving towards a Gig Economy. According to a study by the Freelancers Union in 2017, Freelancers make up 36% of the US workforce. By 2020, this number will increase to 40%, and by 2027 the majority of the US workforce will freelance. As we move towards the Gig Economy — reputation becomes even more valuable.
“Freelance workforce growth is accelerating and has outpaced overall U.S. workforce growth by 3x since 2014.” (Internet Trends Report)
According to a global study by Payoneer, freelancers typically take on 3+ different projects each year. The number of projects and companies quickly adds up — making a resume pretty unhelpful in the search for the next gig. The study also found 75% of freelancers find work on online marketplaces. Trust becomes even more abstracted as the potential hiring pool becomes a vast, global network. As a result, ratings and reviews of past work — which are a proxy for trust — have become instrumental in the hiring process.
Reputation as a Proxy for Trust
As marketplaces for goods and services moved online, so did the reviews of their products. The business models of web 2.0 quickly grew from providing the product/service (cars and hotels) to providing the network and the facilitation of trust through financial assurance and reputation. These marketplaces became a gateway to further social exchange and interpersonal interaction.
But, while large companies like Google have built a brand around trust, small businesses and freelancers fight harder to earn the confidence of consumers. Ratings and reviews are most important for the long-tail, and thus SMEs and individuals diligently work to maintain good reputations online. (Zhu, Zhang)
Trust is an essential part of a functioning economy. If actors do not trust each other, goods and services will not be bought or sold. This becomes even more relevant online amongst complete strangers. If Alice doesn’t know Bob, she has no personal way to establish trust that he will deliver the t-shirt she paid him for. This is where a history of ratings and reviews comes in. So, Alice doesn’t have to know Bob to trust his service. Instead, she trusts the history of ratings and reviews to make a judgment on Bob’s reputation, value, and then on a purchase.
There is a proven relationship between trust and the intention to purchase online.* The influence of trust is significant and positive.** Consumer’s perceived trust directly impacts purchase intention. It reduces the non-monetary cost and raises the perceived value. Reviews display this trust, and thus, are a tool for online users to evaluate and purchase a product or service online. Globally, 83% of online shoppers consider reviews important before making purchase decisions.
As a result, reviews impact the price a business can charge. A higher rating also increases sales. Reviews directly increase financial performance and revenue. Reputation online is critical for businesses. Freelancers depend on their online reputation to find work. Yet, the reputation in one marketplace does not carry over to another marketplace. This is why data portability is crucial for freelancers online.
Data Ownership & Portability
These marketplaces capitalize on the user data they silo, preventing users from moving to competing marketplaces by restricting the access of ratings and reviews to their marketplace alone.
We are now moving into web 3.0, and things are about to change. New technology has enabled financial assurance structures for users without the need for a middleman. Users no longer have to trust a central service such as AirBnB to make sure they get paid; blockchain and smart contracts can accomplish this. You can do this right now on Ethereum — or make it even easier by using Aragon.
The major innovation is in projects that take this a step further and decentralize what was once a silo — with the core belief that the user should own their own data. Data no longer needs to be centrally held. This allows users control over their information, more privacy, and enhanced security.
The nation of Estonia is a good working example of this. A core tenet of the Estonian system is that an individual owns all recorded information about them. The government’s data platform links individual servers through encrypted pathways — decentralizing its storage and letting the information live locally. This reduces the chance of Equifax-level security failures, and gives users control over that information when they request it.
Taking Back Reputation
We are making great progress towards taking back reputation as a society. But reputation data remains silo’d and out of the control of freelancers. GDPR has been a huge step towards ensuring users own the rights to their reputation data, forcing marketplaces to give the data back to the true owner: the businesses. Yet, we are still some ways away from truly decentralized and portable reputation — the most critical aspect of data for business success online.
At Chlu, we are providing a solve for both reputation data ownership and portability. We will leverage GDPR data access rights and data portability rights to give freelancers control of their reputation — to choose when, and with which marketplace, to share their data. We believe the data belongs to the freelancer, so they should control it. The lack of data portability is a well documented problem for the gig economy. Allowing users to own their data will open up new doors to freelancers.
“If Uber drivers want to change platforms and start delivering packages for Instacart, they have to start from scratch to build up a good reputation on the new site — even though they are using skills that are valuable to both sites.” Wired
Independent experts, commissioned by the UK, recommend the portability of ratings and reviews to support the modern competitive digital economy. They find that with data portability, freelancers will be able to list their services on as many marketplaces as they choose, which will result in increased economic activity and also in fairer competition between platforms. With a stronger, persistent reputation, freelancers will have access to more work at better rates — increasing their financial performance.
In fact, the portability problem was one of the driving forces behind the creation of Chlu. Through our own difficulties in hiring software developers, we were able to experience first-hand how valuable transferable reputation is for freelancers. We felt that the individual should own their reputation, and be able to take it with them to any marketplace they choose. That is why we started Chlu, and leverage DIDs (decentralized identifiers) and IPFS (a peer-to-peer, distributed file system) to store your data and tie it to your digital identity. With Chlu, users own and control their reputation.
Another important part of reputation is validity — an integral part of our solution at Chlu. Stay tuned for our next blog post where we will cover the problem of fake reviews and how businesses can fight this.
Additional Citations
*Chiu, Huang, & Hui, 2010; Gefen et al., 2003; Grazioli & Jarvenpaa, 2000; Jarvenpaa et al., 2000; Kim et al., 2008, 2012
** Bigne, Sanz, Ruiz, & Aldas, 2010; Escobar-Rodríguez & Carvajal-Trujillo, 2014; Kamarulzaman, 2007; Kim et al., 2009, 2011; Sanz-Blas, Ruiz-Mafe, & Perez Perez, 2014; Wen, 2009, 2010
Thanks to: Ha Duong, Ricardo Sequerra Amram for the feedback & source contributions!
