The pandemic has changed life as we know it. With the numbers game much more crucial than ever, the novel coronavirus continues to reshape industries and the supply-and-demand cycle that forms them. As such, how we approach employment has significantly altered too.
Forecasted to exceed 50% by 2027, a study says freelancers account for 35% of the U.S. workforce. While we can attribute the growth of free agents to a plethora of factors, it is undeniable that online freelance marketplaces play such an irreversible role in the continued expansion of the gig industry.
As new platforms unfold and old ones try to remain relevant, the numbers for independent professionals are bound to grow more dynamic, encouraging more people to take on independent service-based entrepreneurship.
Explaining the science of freelance marketplaces
To better understand the key elements of a freelance marketplace, let’s consider the following components:
Sourcing & Screening
Immediate access to a vast network of clients is the primary reason why more than 70% of freelancers turn to online marketplaces to score gigs and engagements. Thanks to these platforms’ sourcing and screening functions, the process is made easy. Whereas sourcing invites freelancers to sign up and engage with these virtual mediums, screening establishes the quality of talents presented to clients.
The capacity of a platform to seamlessly connect freelancers to clients is what makes these two-sided marketplaces such a breakthrough. An abundance of talents and applicants will mean nothing if a medium is unable to connect searchers and “searchees.” This is easily done through dropdowns and categories, which makes it a lot simpler for freelancers to pick which gigs they’re trying out for.
All in all, these platforms simplify the freelancing process because both parties can choose which ones they engage with.
Oppositely, one can argue that a freelance marketplace’s matching capacity may depreciate over time in terms of the quality of clients and freelancers. The longer both parties thrive in what they do, the easier it will be for them to find each other through referrals. This is the very reason marketplaces like this should provide value that goes beyond connecting independent professionals to clients.
Consequently, over 90% of freelance marketplaces make a profit out of getting cuts from the parties that engage with them on their site, adding all the more reasons for parties to dip from a platform once they’ve connected. That said, extending simplified logistics and SaaS tools is a great way to keep parties on a platform.
Moreover, working through a marketplace eliminates the hassle and paperwork clients and freelancers have to deal with. These days, sites like Upwork supply features that allow clients to pay their freelancers on the platform. Furthermore, freelancers may also complain about their clients should anything negatively impactful come up, allowing more room for accountability on the client’s side. To a certain degree, these are forms of protection both parties don’t get when they transact outside.
But should those features be enough to combat attrition?
We have to factor in the cost of alternative solutions, how large a project is, and the trust between both parties have toward each other. Mostly, corporations and large companies benefit the most from platforms like freelancer.com because they improve logistical undertakings.
Still, it all boils down to a platform’s unique features that cultivate a reliable freelancing community.
Before the pandemic, numbers on freelancer growth saw a steady rise. Today, we can only expect it to surge much more drastically. According to the Intuit 2020 Report, an estimated 80% of large companies intend to increase their involvement with freelancers, with Accenture even noting that nearly a quarter of Fortune 500 companies already resort to Upwork.
This trend is well-supported by the increasing availability of freelance platforms that target enterprise clients. This reality is well demonstrated with Upwork Pro and Upwork Enterprise. The reason is much more overt than we think: enterprise clients pay heftier amounts of money compared to smaller companies. So much so that 10% of Upwork’s $121million revenue of 2018’s first two quarters came from one client only—a number you can source only from enterprise clients.
Whereas startups work with free agents for a ton of reasons, larger corporations typically hire independent workers for highly specialized one-off projects. That said, these companies are more than willing to pay huge sums of money to seasoned freelancers. If you consider the associated risks, resources, opportunity costs, and time it takes to work with, say, a top-notch full-time employee at an established firm, then a $200-$500 hourly freelancer rate is barely anything in comparison.
Freelance marketplaces are slated to take on more critical roles in educating the market. Despite the apparent expansion of the gig economy, many freelancers can still be naive and ill-informed when it comes to pricing, improving clientele, evaluating potential collaborators, and what the best practices are to foster a sustainable career.
This presents a substantial extent of freelance platforms to help build meaningful communities that thrive equally, competitively, and fairly. Even in the abidance of marketplaces in this department, competition is still very much warranted and there’s a lot more room for new freelance platforms to succeed.
Do you have dreams of building the next Upwork? We can help do that for you!