Unless you have been living under a rock, you have most likely heard of the term “freelance economy” — which currently makes up 35% of the U.S. workforce and is projected to reach 50.9% by 2027.
Online freelance marketplaces for high-skilled workers, such as Upwork (recently IPO’ed) and Freelancer.com, have been key players in shaping the freelance ecosystem. They will certainly not miss the opportunities ahead. As new platforms emerge and old ones try to stay in the game, we‘ll likely see a new wave of innovation in this space within the next 2–3 years.
As a former product manager at Codementor, a freelance and 1-on-1 mentorship marketplace for software developers, I’d love to share some personal observations and predictions about this rapidly-growing space.
Let’s first look at the key functions of a freelance marketplace. Feel free to skip this section if you are already familiar with them.
Immediate access to a large pool of clients is the No.1 reason why 73% of freelancers look for work via online marketplaces. This simply wouldn’t be possible without the sourcing and vetting functions of a platform.
Sourcing refers to the user acquisition effort a platform dedicates to increase its overall supply and demand pools, whereas vetting refers to the mechanism a platform has set up to ensure a basic level of quality among its users, such as skill tests and background checks.
However, having an abundance of supply and demand is useless if clients cannot quickly find suitable freelancers for their projects. This is where a platform’s matching function comes in. The ability to efficiently connect the two sides sets good platforms apart from the bad ones. It involves a tremendous amount of behind-the-scenes work users don’t see.
To give you an example, back when I was working on CodementorX, a platform for companies to hire elite freelance developers, each request would go through four matching steps:
A phone call between hiring consultant and client to gather requirements
ML-based algorithm to rank freelancers by structured data such as expertise, availability, timezone, hourly rate, etc
Dedicated matcher to shortlist three candidates based on qualitative factors, including soft skills, personality, work experience, etc
Hiring consultant to facilitate interviews between client and candidates
This process has proven to cut down the average hiring time for a senior freelance developer from 4–8 weeks to less than two weeks.
But here is a problem — the value of a platform’s matching function depreciates over time for quality freelancers and clients. The longer they stay in the ecosystem, the easier it is for them to find each other through referral. This is the reason a platform must provide value beyond merely connecting freelancers and clients to maximize their LTV.
Over 90% of freelance marketplaces generate revenue by taking a cut (typically between 10–25%) of transactions occur on their platforms. Therefore, they better give users strong incentives not to circumvent them other than a hefty penalty. Offering SaaS tools and simplified logistics to facilitate ongoing engagements is one way of doing so.
Generally, working through a platform cuts down the hassles clients and freelancers must deal with in terms of paperwork and payment, especially when an engagement is cross-border. It can also provide a certain degree of protection in case of dispute.
The answer: It depends. You have to consider factors such as project size, the cost of alternative solutions, and the trust between the client and freelancer. In my experience, large companies using freelancers for short-term projects usually benefit the most from working through a platform due to the logistical convenience.
Now, let’s dive into some interesting observations I’ve made in the past two years.
Read more : https://hackernoon.com/freelance-marketplace-2-0-where-future-of-work-happens-1a92ada76725
Online freelance marketplaces for high-skilled workers, such as Upwork (recently IPO’ed) and Freelancer.com, have been key players in shaping the freelance ecosystem. They will certainly not miss the opportunities ahead. As new platforms emerge and old ones try to stay in the game, we‘ll likely see a new wave of innovation in this space within the next 2–3 years.
As a former product manager at Codementor, a freelance and 1-on-1 mentorship marketplace for software developers, I’d love to share some personal observations and predictions about this rapidly-growing space.
Freelance Marketplace Explained
Let’s first look at the key functions of a freelance marketplace. Feel free to skip this section if you are already familiar with them.
Sourcing & Vetting
Immediate access to a large pool of clients is the No.1 reason why 73% of freelancers look for work via online marketplaces. This simply wouldn’t be possible without the sourcing and vetting functions of a platform.
Sourcing refers to the user acquisition effort a platform dedicates to increase its overall supply and demand pools, whereas vetting refers to the mechanism a platform has set up to ensure a basic level of quality among its users, such as skill tests and background checks.
Matching
However, having an abundance of supply and demand is useless if clients cannot quickly find suitable freelancers for their projects. This is where a platform’s matching function comes in. The ability to efficiently connect the two sides sets good platforms apart from the bad ones. It involves a tremendous amount of behind-the-scenes work users don’t see.
To give you an example, back when I was working on CodementorX, a platform for companies to hire elite freelance developers, each request would go through four matching steps:
A phone call between hiring consultant and client to gather requirements
ML-based algorithm to rank freelancers by structured data such as expertise, availability, timezone, hourly rate, etc
Dedicated matcher to shortlist three candidates based on qualitative factors, including soft skills, personality, work experience, etc
Hiring consultant to facilitate interviews between client and candidates
This process has proven to cut down the average hiring time for a senior freelance developer from 4–8 weeks to less than two weeks.
But here is a problem — the value of a platform’s matching function depreciates over time for quality freelancers and clients. The longer they stay in the ecosystem, the easier it is for them to find each other through referral. This is the reason a platform must provide value beyond merely connecting freelancers and clients to maximize their LTV.
Engagement Facilitation:
Over 90% of freelance marketplaces generate revenue by taking a cut (typically between 10–25%) of transactions occur on their platforms. Therefore, they better give users strong incentives not to circumvent them other than a hefty penalty. Offering SaaS tools and simplified logistics to facilitate ongoing engagements is one way of doing so.
Generally, working through a platform cuts down the hassles clients and freelancers must deal with in terms of paperwork and payment, especially when an engagement is cross-border. It can also provide a certain degree of protection in case of dispute.
But are these really enough to prevent circumvention?
The answer: It depends. You have to consider factors such as project size, the cost of alternative solutions, and the trust between the client and freelancer. In my experience, large companies using freelancers for short-term projects usually benefit the most from working through a platform due to the logistical convenience.
Observations
Now, let’s dive into some interesting observations I’ve made in the past two years.
Read more : https://hackernoon.com/freelance-marketplace-2-0-where-future-of-work-happens-1a92ada76725
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