Online freelancing platforms (OFPs), part of the human cloud market including online work services and crowdsourcing—are online labor marketplaces that match the individual supply of labor with demand for professional talent from business organizations. Leading OFPs are companies such as Upwork and Freelancer who broker direct work arrangements between professionals and businesses on their platform.
The platforms provide a diverse range of work categories from software and web development to writing and translation, video animation, and data entry. For skilled professionals who are no longer constrained by geographical proximity to work, OFPs can fulfill a desire for flexibility and a balanced lifestyle. For companies, online freelancing platforms are a cost-efficient way to gain access to professionals with specialized skills on an on-demand basis, providing them with flexibility based on project needs.
Covid-19 is driving growth in online freelancing platforms:
Upwork : In FY2020, gross service volume increased by 21% year-over-year (YoY) to USD 2.5 billion and revenue grew by 24% YoY to USD 374 million. Core clients increased by 17% YoY to around 145,000.
Fiverr : In FY2020, revenue grew 77% YoY to USD 190 million on the back of a 45% YoY increase in active buyers up to 3.4 million with a 21% increase in spend per buyer. The platform reported elevated demand in e-commerce, content creation, and digital marketing categories.
Multiple freelancing platforms in creative, marketing, web development, and legal verticals finalized funding rounds backed by pandemic led tailwinds:
Braintrust raised USD 18 million in October 2020 as the platform experienced higher than expected growth due to the Covid-19 pandemic.
BOOM raised USD 7 million in Series A funding in October 2020.
Priori raised USD 6.3 million in Series A funding in October 2020.
MarketerHire announced its USD 3 million seed round in October 2020.
Juggle raised USD 2.1 million in seed funding in November 2020.
Incumbents in the online freelancing platform space largely connect freelancers in multiple industry verticals. Likewise, a large number of top disruptors have taken a similar approach such as listed notable disruptors Upwork and Fiverr. Web, mobile, and software development is a popular vertical with a considerable number of pure players in the segment. This could be attributed to high demand for related work as communication and operations migrated to digital form. The design and creative vertical is home to a handful of disruptors in their growth stage with notable companies such as Snappr.
The companies dominating the online freelancing platform (OFP) space vary from newer startups to companies that have been in existence for just over a decade. Four of the disruptors identified were founded between 2008 and 2010, likely responding to demands post-financial crisis. Some platforms focus on diversifying their offering while others focus on one or two verticals, while gradually moving into more categories of work.
In terms of volume, Freelancer has shown the highest user numbers and jobs and offers a diverse product with over 1,800 categories as of August 2021. Fiverr offers work across more than 400 work categories in areas such as graphics and design, programming, health and wellness, and business, but has a higher take rate than Upwork across their 90+ work categories (March 2021). Among private companies, French startup Malt leads with the highest funding (USD 134 million) as of August 2021. Disruptors such as Toptal and Snappr have a specialized offering, focusing on software development and design and creative categories, respectively.
Upwork is an online labor marketplace that assists in engaging freelancers and businesses in discovering direct labor arrangements for both short and long-term projects. Upwork’s roots date back to 1998 and 2003 when online talent marketplaces Elance and oDesk were founded. In December 2013, Elance and oDesk announced its merger with a combined freelancer base of over 8 million (5 million from oDesk and 3 million from Elance). Subsequent to the merger, Elance-oDesk continued to report losses and required a bailout package of USD 30 million from Benchmark Capital in November 2014. The company was rebranded as Upwork in May 2015.
In 2017, the platform reported that 20 work categories each contributed over USD 20 million in GSV, among them content marketing, business support, software development, and translation. Unlike its competitor Fiverr, Upwork encourages freelancers to offer services more closely related to one specific area of expertise. Further, Upwork allows clients to set the scope with the freelancers bidding for jobs as opposed to freelancers having the freedom to set the scope themselves. Upwork also provides freelancers access to personal payroll and healthcare benefits, in partnership with Catch , a portable benefits platform. In October 2018, Upwork was listed on the NASDAQ to raise approximately USD 187 million.
The company introduced a new recruiting solution called Talent Scout (May 2021) to connect customers with pre-vetted freelancers selected by a panel of expert recruiters from Upwork. The service offers a more personalized solution that adds to multiple efforts by Upwork to facilitate a smooth hiring process for businesses including its Work Marketplace (launched in early May 2021) and Project Catalog (launched in November 2020). As of May 2021, Talent Scout is available to customers in the US, Canada, the UK, Australia, and Israel with additional countries added throughout the year. Upwork launched the “Virtual Talent Bench” (October 2021), a collection of features that enables businesses to build a network of freelance talent. The release allows clients to find new talent and reconnect with them for future projects through curated freelancer lists.
Upwork closed its offering of 0.25% convertible senior notes due 2026 for gross proceeds of USD 575 million in August 2021 while part of the proceeds is expected to be used for general corporate purposes including marketing, brand awareness and sales. Upwork has further plans to invest in working capital and M&A.
In FY2020, Upwork reported a 24% year-over-year (YoY) growth in revenue to USD 374 million supported by growth in both its Gross Service Volume (up 21% YoY to USD 2.5 billion) and core clients (17% YoY to around 145,000). Despite attracting a much higher total client spend than its closest competitor Fiverr (GSV of around 700 million in 2020), Upwork recorded a lower total take rate of 14.6% in 2020 (compared to 27.1% for Fiverr in the same year). On the profitability front, gross margin improved by 100 bps to 72% while adjusted EBITDA doubled to USD 14 million. Upwork recorded adjusted EPS of USD 0.05, remaining flat against its mark a year earlier.
Upwork’s revenue guidance for FY2021 was revised to range between USD 496 million and 498 million (from between USD 490 million and USD 494 million), implying revenue growth between 32%-33% YoY. In addition, Upwork raised the lower end of its adjusted EBITDA guidance to USD 18 million (from USD 16 million), while the upper limit remained unchanged at USD 20 million for FY2021.
Design and creative:
Web, mobile and software development:
The incumbent players are traditional HR staffing firms that provide staffing solutions in either managing or assisting businesses in their recruitment process. Some companies have taken the initiative to develop their own online platforms, whereas others have invested in some of the disruptors. For instance, the Adecco Group, a global HR solutions provider, launched Adia, connecting freelancers to businesses in partnership with Infosys. Microsoft’s acquisition of Linkedin in 2016 for USD 26.2 billion marked its entry into the realm of online freelancing platforms (OFPs).
Out of the incumbents covered here, Randstad is identified to have taken a particularly aggressive stance in using investments and acquisitions as a tool to grow its portfolio. Other entrants via acquisiton includes Vistaprint (owned by listed Irish company Cimpress) which acquired freelancer marketplace 99designs in October 2020. Backstage, a freelance marketplace for content creators announced the acquisition of two freelance marketplaces for creatives, StarNow and The Mandy Network in February 2021.
The Adecco Group, a leading Swiss HR solutions provider, launched its traditional staffing firm in the US, Adecco USA, in 1996. Adecco has launched several OFPs for flexible work to adapt to the changes in the industry. Starting in October 2016, the Adecco Group and Indian IT consulting company Infosys, launched Adia, focused on flexible work hiring within the retail, hospitality, and catering sectors.
YOSS, launched by the Adecco Group in October 2017 and developed by Microsoft, is a cloud-based platform connecting skilled freelancers with global employers. The platform is a Software-as-a-Service (SaaS) solution that can integrate with a company’s own internal systems. The platform also offers vetting services for clients. In June 2020 Adecco invested in UK-based recruitment platform Tempo.
Adecco agreed to purchase the engineering consulting and R&D services company AKKA technologies for roughly EUR 2 billion (USD 2.4 billion) in July 2021. The acquisition is reportedly the largest in the company’s history and is expected to create the largest temporary staffing provider by revenue. The transaction is expected to close in H1 2022. To fund the acquisition Adecco Group raised approximately EUR 232 million (approximately USD 274 million) through the placement of 5.1 million new shares in September 2021.
Founded in 1984, AKKA is a European engineering and R&D services provider with a strong presence in the mobility segment. It serves companies in the automotive, aerospace, rail and life sciences industries with expertise in technologies such as autonomous driving, IoT, Big Data, and robotics. As of July 2021, it has 22,000 employees and recorded revenue of EUR 1.5 billion (USD 2.1 billion) in 2020. Adecco is expected to boost its engineering and IT services offering by combining AKKA with Modis – its engineering and IT staffing business. The two businesses are expected to combine for EUR 3.7 billion (USD 4.4 billion) in revenue and 50,000 engineers and intend to cater to aerospace companies and automakers.
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