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Upwork Idea Proposal (UPWK)

Upwork Idea Proposal (UPWK)
 

Will newly IPO’d Upwork generate significant, sustainable growth in 2019?

Report Available: October 31, 2018

 

Blueshift’s initial research found UPWK, the leading freelance employee marketplace, scheduled for its IPO on October 3rd. The company hopes to raise $169 million with a total valuation of $1.3 billion, pricing its offering between $12 and $14. Given the success of other tech company IPOs this fall, and UPWK’s focus on serving the growing freelance/gig economy trend, observers are optimistic about the company’s opportunity to succeed. Following the offering, UPWK will have to navigate a highly competitive and volatile market to maintain and exceed the 23% growth rate it achieved in the first half of 2018.

 

Observations

  1. UPWK was created in 2015 with the merger of Elance (founded 1998) and oDesk (founded 2003). UPWK is an online platform providing skilled freelance workers from over 70 different work categories access to businesses that have a need for temporary or project-based labor. Currently, UPWK has more than 375,000 freelancers in over 180 countries and 475,000 clients, of which 95,000 are considered Core clients. UPWK generates $1.5 billion in gross services revenue and nets $225 million.
  2. The freelance or gig economy is growing at a rapid pace which bodes well for UPWK’s growth. Work performed by flexible talent is expected to increase 168% over the next 10 years according to a survey of 1,000 hiring managers commissioned by UPWK. The survey also found that over half the hiring managers said the shortage of talent was responsible for openness to a more flexible workforce model. Working remotely is going to increase dramatically in the next decade as skills outweigh location in making hiring decisions. Four times as many hiring managers expect their use of freelance workers will increase in 2018 compared to those who expect it to decrease, and 90% of hiring managers prefer freelance workers over hiring temp staff through a staffing agency.
  3. UPWK’s growth strategy includes several areas of focus; two key initiatives involve investment in its direct salesforce and the expansion and customization of its freelance skill sets. The sales effort will target new enterprise clients, expansion of existing client spending, and cross-selling/upselling existing clients across several categories. The freelance skill expansion initiative will focus on offering broader, deeper, and customized features and functions to allow clients to hire the right freelancer for the right job.
  4. Despite the growing gig/freelance economy which suggests continued and meaningful growth for UPWK, the company faces various headwinds and challenges. UPWK has struggled to drive growth and attempted to improve the situation by implementing a tiered pricing structure to drive larger client engagements. It remains to be seen if the tiered pricing produces the desired results of bigger engagements, more enterprise clients, and eventually larger growth. Another headwind is offshore freelancers offering their services at much lower rates than their U.S.-based counterparts which reduces UPWK’s take on any given project.
  5. UPWK also faces significant competition (page 18) in the pursuit of freelancers and clients, from both online and offline platforms and services. The market is rapidly evolving, fragmented, and subject to changing technology, shifting skill requirement, frequent introductions of new products and services, and subject to regulatory uncertainties. UPWK’s growth and future success will be determined by how successfully its navigates this crowded and evolving landscape.

 

Will enterprises engage with UPWK in a meaningful way? What effect is UPWK’s new enterprise salesforce having? Will spending from UPWK’s existing increase, decrease, or remain the same in the second half of 2018 and into 2019?  Will UPWK be able to sustain meaningful growth in the second half of 2018 and through 2019? What could derail UPWK from meeting and exceeding its 20%+ growth targets? To answer these and other questions, Blueshift will gather data and issue a market research report from independent sources in the following areas: UPWK’s small and midsize clients, UPWK’s enterprise clients, UPWK’s freelancers, UPWK’s competitors, and Industry Specialists.

 

Companies: Upwork (UPWK), Alphabet Inc. (GOOG/GOOGL), Amazon.com Inc. (AMZN), Freelancer Limited (ASX:FLN), Microsoft’s LinkedIn (MSFT), ManpowerGroup Inc. (MAN), Randstad NV (RAND.AS), Recruit Holdings Co. Ltd. (RCRRF), Robert Half International Inc. (RHI)

 

Research Begins: October 15, 2018

 

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