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What is Upwork’s Business and Revenue Model? The 2022 Go-To Guide

Upwork business model is the flag bearer of the right approach to leading an online talent marketplace. And why wouldn’t it?   

From $164.45 million worldwide revenue generated in 2016 to $502.8 million in 2021, Upwork has come a long way since the merger of Elance and oDesk in 2015. This is a result of a digital trend of people working on their terms & preferences. A trend that allows people to choose,

  • what they want to work on, 
  • how they want to work, 
  • when they want to work, 
  • and especially, where they want to work?

With more independent talents attracting successful organizations due to their cost-effective and flexible solutions, you might want to learn more about this leading freelancing platform. Here’s a detailed analysis of Upwork’s business & revenue model

Upwork Business Model

The ideation behind Upwork’s inception is simple – getting the work done and expanding a business without hiring an individual for business premises. Here are the key components of the Upwork business model canvas. 

Upwork business model canvas

Upwork platform is divided into two segments – companies and freelancers.

  • Companies: Hire resources/talents for specific services
  • Freelancers: Group of people looking for work opportunities

Here’s how Upwork works with both of these clients. 

Companies

Here’s how the process goes.

company - business model

Freelance Professionals

This is how the process goes.

freelancer - business model

How does Upwork Work?

It all starts with clients posting a job description on the Upwork portal.

  • A freelancer then bids on the project, competing with other users specialized in similar skills. 
  • After going through their bids and portfolios, a client selects one or more freelancers to discuss the project details and check whether the candidate is good enough for the job. 
  • Once the client is sure, he/she sends the job offer to the freelancer. Once a candidate accepts the client’s proposal, he can start working on the project.

If it’s an hourly-based project, Upwork tracks freelancers’ work using data points like the hours they put in to complete the tasks. In addition, Upwork discourages users from negotiating outside of the Upwork platform. This protects freelancers from clients’ refusal to pay them for the work done.

There are a couple of downsides to the Upwork platform. 

The Upwork business framework makes new freelancers bid as low as possible to win a project. This often leads to the client getting substandard work from freelancers. Hence, the platform allows businesses to reject the payment to freelancers if the desired quality of work is not met. 

How does Upwork make Money?

Upwork’s revenue model is based on all the services offered by freelancers to their clients. The services range from software development, graphic design, copywriting, accounting, and administration to web development, project management, photography, social media marketing, virtual personal assistance, and the list goes on. 

Freelancers

  • There are two ways Upwork charges fees from freelancers – contracts with enterprise clients and non-enterprise clients. 
  • Contract with Enterprise Clients: Irrespective of the contract, whether it’s an hourly, fixed-price project, or projects on the catalog, all freelancers are charged with a sliding fee as per their billings. Here’s how the service charge is deducted at different project milestones. 

Upwork fee structure

  • Contract with Enterprise Clients: Unlike non-enterprise clients, Upwork negotiates every contract based on each case with enterprise clients. In addition, the sliding fees don’t apply to contracts with enterprise clients. Instead, Upwork charges a flat 10% service fee to enterprise clients. 
  • Connects: Freelancers get 10 free Connects each month to bid on projects on the platform. However, if they run out of Connects to bid on projects, they can buy virtual tokens for $0.15 each. Moreover, freelancers can roll over up to 140 Connects each month.

Clients 

  • The platform charges a subscription fee of $49.99 each month to its Upwork Plus Clients.
  • On the other hand, Upwork provides customization liberty in pricing features to its Enterprise Clients. It is based on the level of the service that will be provided.
  • Upwork divides the fees structure for its Payroll services as follows,

23% of Employee Pay = 13% payrolling costs + 10% Upwork fee 

  • Upwork charges a flat fee of 3% to its clients on all its payments. In addition, Upwork fees are calculated based on the billing method.

How Upwork is leading the freelancing marketplace?

Multiple factors come into play for Upwork’s successful run over the years. But what’s remarkable is that Upwork has managed to stand out from other freelance platforms even when the marketplace has been subjected to a highly competitive and rapidly growing environment. 

Technology is changing, business needs are shifting – products and services, and new competitors & freelancers are joining the freelance marketplace. Here are a few aspects that Upwork is covering better than the rest.

Trusted Work Marketplace

  • The business operations on Upwork are as transparent as it gets. Some of its competitors in the freelance marketplace have complications in their payment process and authenticity of freelancers & companies. Upwork provides various tools to its clients that help them efficiently validate the work performed by freelancers. 
  • When a contract ends, both freelancers and clients give feedback to each other. This helps freelancers and clients to build a business reputation and establish credibility. 

Robust Functionality

Here are a couple of valuable features that enable both freelancers and clients to run their businesses hassle-free.

  • Time tracking
  • Payment Services
  • Proposal Tracking System
  • Search Engine
  • AI-driven independent talent matching
  • Proposal Ranking 

Valuable Database

  • Whether it’s the skills provided by freelancers, their feedback, and success indicators, or clients transacting on the freelance marketplace, every single piece of information is safely stored on the Upwork database.
  • It provides a dynamic, detailed, and trusted way for freelancers and clients to better collaborate on a project. 

Competitors

Here are some of Upwork’s key competitors in the online job marketplace.

  • Fiverr
  • Freelancer
  • Toptal
  • Outsourcely
  • ServiceScape
  • Truelancer
  • WriterAccess

Final Thoughts

Whether it’s the rise of Covid-19 or the onset of the digital age, there has never been this huge drive for remote working as today. Today, many top organizations are outsourcing & digitizing their work over online platforms and preferring remote working as their primary or alternative work options. 

So, what does this indicates?

It indicates the high probability of successive growth in the online freelance marketplace in the coming times. Hence, the business model of a talent marketplace like Upwork can work wonders in helping similar businesses follow the path to success over time. 

Now, if you have an idea for an online talent marketplace and want to turn that idea into reality, Code Brew is here to help! Discover all the digital possibilities for your brand with our comprehensive suite of app development services.

Contact us today to get a free demo!

August 18, 2022

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