How Upwork Model Works: Business & Revenue Model

Upwork was formed in 2015 post the merger of freelancing companies Elance and oDesk, in a bid to create a platform to bridge the gap between companies and freelance talent. Valued at USD 1.5 billion, the success of Upwork as a freelancing talent solution company has led to the emergence of many such freelance talent aggregators. This article explores how Upwork operates and interesting insights into their business model.

Upwork’s Customer Segments

The Upwork platform works with two types of clients – companies looking to hire talent and professional freelancers looking for work opportunities. Its approach and services for both these segments are listed below:

1. Companies: 

• Companies are required to sign up and post job requirements.
• Upwork analyses requirements, shortlists top-rated talent and matches them with the client’s request.
• Clients receive proposals from different freelancers and can use the Upwork platform to schedule calls and sign a contract with the best fit.
• The platform promises a digitally secure tool to share information with freelancers.
• Upwork’s mobile application allows easy access to companies at any time and place.
• It allows companies to track work on an hourly basis to ensure that payment is made only for the time that the freelancer spends on the project.

2. Freelance Professionals:

• Upwork markets itself to freelance professionals as a platform to grow their independent business ventures and portfolios with higher rates of payment than other similar aggregators.
• Professionals are vetted through a series of skill tests and background verification including client testimonials from previous projects.
• Depending on skill level and expertise, certain profiles are highlighted to the clients as compared to other freelancer profiles. 
• The payment process is handled by Upwork to ensure timely payments for the work done. The payment is based on either hourly rates or depending on the milestones agreed upon by the client and freelancer.

What is Upwork?

Upwork is an online talent solution company that facilitates the connection between a leading pool of freelance professionals and customers from across the globe. Upwork’s internet-led business is used by 30 percent of the Fortune 500 companies including AirBnB, Microsoft and General Electric. It boasts of acquiring talent for any company need, with 8000+ skills listed under 12 core categories. 

Revenue Model

Upwork generates its revenue through charging both the recruiters as well as freelance professionals. However, the models for both these segments are different. Here’s how both these segments are charged:

1. Recruiters:

• Recruiters/Companies are offered three packages: Basic, Plus and Business. 
• The Basic package is free and acquires 3 proposals by freelancers for the job posted.
• The Plus package costs $ 49.99 through which companies can receive 15 proposals for the project.
• The Business package offers advanced organisational tools as well as unlimited proposals for the project.
• An additional 3% processing fee is levied on the payment for the project.

2.  Professionals:

•  Upworks charges 20% for the first $500 that a professional bills with the client.
• Subsequently, it charges 10% for lifetime billings with the client between $500.01 and $10,000.
• As the billing amounts grow, the charges are reduced to 5% for lifetime billings with the client that exceed $10,000.

Challenges

1. Payments: As a talent aggregator, Upwork’s strategy as a client-focused company has proven to be a challenge. In case of payment disputes, the company works towards retaining clients, while freelancers bear the brunt of it.
2. Experience Requirements: As Upwork promotes top-rated talent to clients, beginners in the freelancing arena find it much harder to break out and receive their first few assignments.

Going Forward

The freelance community is more in demand at the present moment than ever before. With lockdown restrictions across the globe due to the coronavirus pandemic, there is an increasing demand to bridge the gap between companies and professionals located in distant areas. In such a scenario, talent aggregators play a key role in helping businesses move forward with the required man power and talent anywhere across the globe. Want to create your own platform like Upwork? You can do it with Husky.

If you enjoyed reading this, we’re sure you will also love checking out what we have in store on our Youtube channel. You can also head to our home page for more info!