The gig economy is thriving, and an estimated 30 percent of US workers are participating with skills that range from ridesharing and grocery delivery to writing and coding. While the concept of earning extra income through side jobs isn’t new, the rapid growth in gig workers is directly related to advances in digital and mobile technology.
Today’s gig workers don’t have to engage in local marketing to secure clients. Instead, they simply sign up with one or more online platforms.
Those who prefer delivery services have options like Instacart and DoorDash.
Airbnb (ABNB) brings travelers together with those willing to provide lodging, and Wag! connects pet owners with pet care providers.
No matter what skills freelancers and contractors have to offer, there is a platform that fits. For designers, writers, coders, marketers, and other digital service providers, two of the most popular platforms are Fiverr and Upwork.
Both have captured significant shares of the freelance marketplace, and both have a strong reputation among employers and freelancers – but which is the best choice from an investment perspective? In other words, Fiverr stock vs Upwork: which is best?
What Does Fiverr Do?
The Israeli platform Fiverr (FVRR) was founded in 2010, and it’s now one of the biggest freelance sites in the world.
It attracts buyers and sellers of services on an international scale, and it generates approximately 70 percent of its revenue from the English-speaking countries of Australia, Canada, New Zealand, the United Kingdom, and the United States.
The name Fiverr comes from the fact that services can be priced as low as $5, but that’s just a starting point. Some sellers make hundreds or thousands of dollars, depending on the job.
Fiverr supports more than 380 separate job types, which are referred to as gigs on the site. Nearly all roll up to one of nine categories:
- Digital Marketing
- Graphics & Design
- Music & Audio
- Programming & Tech
- Writing & Translation
- Video & Animation
Buyers and sellers advertise skills and available jobs in these areas. Fiverr’s searchable database makes it easy for the two parties to connect.
Fiverr is compensated for providing the infrastructure to make these connections by charging a fee that totals 20 percent of the contracted job price.
Fiverr: By the Numbers
The 2020 transition to remote work made Fiverr a popular choice for investors. In the first few months of 2021, share prices increased more than 60 percent, but there was a precipitous drop in March and another in May – not to mention yet another decline when 2021 Q2 earnings were announced.
Second-quarter results weren’t necessarily poor, but leadership’s third-quarter guidance was lower than investors and analysts expected.
For the period ending June 30, 2021, revenue totaled $75.3 million, which represents a year-over-year increase of 60 percent.
Active buyers rose 43 percent year-over-year to more than four million, and the average spend per buyer went up 23 percent for a total of $226. Fiverr isn’t profitable quite yet, but its gross margin is an impressive 83.4 percent. Investors and analysts aren’t yet concerned with Fiverr’s earnings per share, though that patience won’t last forever.
Fiverr leadership said they expect third-quarter revenue to come down slightly as compared to the second quarter – somewhere between $68 million and $72 million, with EBITDA between $2.5 million and $3.5 million.
For the full year, guidance was lowered to a range between $280 million and $288 million, which would represent a year-over-year rate of growth between 48 percent to 52 percent. Full-year adjusted EBITDA is expected between $12 million and $14 million.
Why Upwork “Fired” 1.8 Million Freelancers
Elance was originally founded in 1998, and oDesk was founded in 2003. The original companies brought freelancers and clients together from all over the world to complete jobs that ranged from inexpensive one-off projects to full-time assignments lasting months or years.
While Elance, oDesk, and eventually Upwork started off by catering to micro, small, and medium-sized businesses, it changed its focus in 2020. A full 1.8 million freelancers were removed from the platform, primarily due to reviews that indicated their work was sub-par. Upwork began pursuing more skilled workers and more lucrative Fortune 500 clients.
Though Upwork has a long list of project categories, all of the work rolls up into one of these six:
- Admin & Customer Support
- Design & Creative
- Development & IT
- Finance & Accounting
- Sales & Marketing
- Writing & Translation
Upwork gets a cut from every completed job – 20 percent of the first $500 billed by freelancers, 10 percent of amounts between $500.01 and $10,000, and 5 percent for billings over $10,000.
Upwork Earnings Disappoints
Upwork’s Q2 2021 earnings announcement was met with disappointment.
In fact, on the first trading day after results were released, prices dropped more than 15 percent. The biggest issue was its miss on earnings.
Analysts expected revenue to come in at $120.24 million, with a loss of $(0.9) per share. Instead, revenue totaled $124.2 million, exceeding projections, but losses dropped to $(0.13) per share.
Gross sales volume, which is the total amount that freelancers billed through the platform, was up 50 percent year-over-year at $875.8 million. This prompted the 42 percent rise in revenue. The gross profit margin was also up, reaching 73 percent, but heavy expenses depressed bottom-line results.
Upwork’s research and development expenses increased by 37 percent, sales and marketing went up by 33 percent, and administrative expenses rose by 89 percent. At this point, the company has to make expense reduction a priority if it is to achieve future profitability.
Risks of Fiverr Stock Vs Upwork Stock?
While Fiverr and Upwork are in the same gig economy, they aren’t true competitors. That’s because Fiverr is focused on the smaller one-off jobs, while Upwork makes its money in longer-term freelance contracts. Both have a place in the current ecosystem, and there isn’t a lot of overlap.
The bigger problem these companies face in terms of competition is the possibility that one or more of the tech giants will choose to go after either or both sets of clients and gig workers.
The events of 2020 illustrated the benefits of working from home, and many members of the workforce have no intention of going back to the office. That means digital labor will take center stage, attracting the attention of companies with the resources, branding, and reach to sign up Fiverr and Upwork clients.
Outside of concerns about competition, some investors and analysts question whether either or both companies are overvalued. Both stocks lost value after their second-quarter earnings reports, but they still seem a bit expensive as compared to their growth prospects.
Upwork Stock Vs Fiverr: Which is Best?
Freelance platform sales are expected to reach more than $6.7 billion in 2025. That’s impressive growth as compared to 2018’s $2.35 billion.
The decision between Upwork stock or Fiverr stock really comes down to which company is more likely to capture the increasing market share and turn a profit along the way.
While Fiverr may still be the winner, most analysts say that between the two, Upwork stock is a buy.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.