Fiverr and the Future of the $5 Freelance EconomyBy Aubre Andrus September 17th, 2014
When it comes to online job marketplaces, many freelancers are wary of finding only low-paying gigs. So when Fiverr, a site that lists an overwhelming number of $5 jobs, got another $30 million in funding, some freelancers shook their heads. Who can survive on $5 per gig?
The origins of the $5 gig
Founded in 2010 by Shai Wininger and Micha Kaufman, Fiverr was designed as a place to sell services for $5 each, with the company taking a 20-percent cut. Sellers complete services ranging from ghostwriting and logo design to voice-over work and search engine optimization.
But Wininger said the $5 figure was simply an easy way to build the brand and describe the site to potential users and investors. Freelancers can now charge up to $8,000 per gig and unlock the platform’s “next-level” features after completing a few $5 jobs and earning a positive reputation via client feedback.
“We wanted to tell a story and tell it piece by piece and create this idea of a free marketplace where eventually the market determines the limits,” Wininger said. “It’s not easy to get there—eBay took many years to get where it is.”
The founders believe the $5 dollar limit is beneficial to the freelance economy: “When you have a single price, it’s no longer about who’s giving the cheaper quote. It’s about who’s doing the better job, who’s providing a higher-quality service,” Wininger said. “It helped set the stage for the quality of the services that we have on the site now.”
But when that price is so low, doesn’t it send the wrong message to buyers and consumers about the work’s value?
Unlocking the next level
Vancouver-based graphic designer Alym Amlani, 33, tried out Fiverr as both a buyer and a seller. He described most of the graphic design work he purchased as “stock.” And from a seller’s perspective, he decided the $3.60 he earned per job—after accounting for Fiverr and PayPal fees—wasn’t worth his time.
Users who log into the site today will still see gigs selling for $5. Whether that’s because a majority of users are new or because most users are entry-level freelancers content to work for $5 is undetermined.
Some Fiverr users have learned to work around the system. Mike Vannelli is a top-rated seller who makes $20,000 per year with Fiverr. How? For “one gig,” he charges $5 per seven seconds of video—and no one’s buying only seven seconds. Vannelli plans to eventually raise the price of his mobile video production service to $5 per four seconds of video.
“The main benefit freelancers can get from Fiverr is not having to search for clients,” he said. “If you are able to offer a premium product or service, deliver it on time and with a professional attitude, buyers will flock to you.”
Wininger said after sellers started creating $5 gigs called “tips” for their happy customers to purchase, they implemented an “Extras” feature. Once the seller has earned the buyer’s trust, the buyer can purchase additional items to increase the compensation. After all, $5 is an easy commitment for buyers. If they’re happy, they’ll likely buy more—potentially at a higher cost.
“If you can find that sweet spot of providing just the right balance of value and effort so that there’s some need in the hands of the buyer to continue the order and increase the price, that is a great position for our sellers to be in,” Wininger said.
The highs and the lows of the Fivver hustle
Dusti Arab, a 26-year-old writer and entrepreneur from Portland, said she proved herself on the site by charging only $5 for her first 10 gigs but now earns up to $160 per gig. She’s made over $1,000 on the platform and much more via referrals from Fiverr clients. “I was only undercharging by a little bit, but that didn’t bother me because the clients all came to me, taking out much of the work for me,” she said. “I’m also careful to craft my gigs in a way where I am only delivering five minutes of work for the $5.”
It seems Fiverr could generate leads and more high-paying work for some freelancers. But from Amlani’s experience as a buyer, it’s unclear whether Fiverr has the ability to hang on to its top talent. “Freelancers who were trying to make money on the site tend to do it from the add-ons, but most of the better freelancers tend to leave from what I noticed,” Amlani explained. “If anyone’s good, they will get on there, get frustrated, and leave.”
Thirty-one-year-old Heidi Hecht of Benson, Ill., was one of those people. As a top-rated seller, she charged $5 for a 500-word article, $10 for a 1,000-word piece, and $15 for 1,500 words. She earned a total of about $2,000 for her efforts. “I eventually quit because I was facing the burnout that came with writing up to 10 articles a day,” she said. “I felt I could make more simply by telling some of my frequent buyers that I was quitting Fiverr but they could still contact me if they wanted articles written.”
Quality leads to quantity
Inspired by stories like this and by Reddit, the site that allows community members to submit and vote up content to the front page, Amlani dreamed up BuckMeUp—an online marketplace that allows satisfied buyers to vote up the price of a gig and is otherwise just like Fiverr.
“We bring real transparency to the actual marketplace—because other than the starting price, the market will very quickly vote it up or down,” Amlani said.
Upon the completion of a service, buyers must vote whether the service was worth more, worth less, or worth exactly what they paid. A vote can increase or decrease the price by one dollar. Eighty percent of the gigs currently listed on the site have been “bucked up.” Amlani said they are looking into a percentage scale for the future.
“How do you legitimize the price you’re charging?” he asked. “If everyone is getting a four- or five-star review, it’s hard to distinguish yourself from the quality of service you’re offering.”
When community members vote up and vouch for a price, it can justify a freelancer’s value and take the guesswork out of hiring a reputable person.
Amlani believes the freelance marketplace is here to stay, even though it’s become increasingly competitive. Now that more than one-third of U.S. workers are freelancers, global online marketplaces like Fiverr and BuckMeUp may become even more important, to the dismay of those who believe these sites drive down prices.
“The claim that marketplaces in general drive prices down is false,” Wininger said. “It means that there is a wide spectrum of quality you can buy. Maybe the only thing that changed by the ability to use a crowd-based system or marketplace is now you have immediate access to this wide spectrum.”
For now, regardless of how Wininger spins it, this transparency seems to be in the best interest of the buyer, not the seller. That could change, but if I were you, I wouldn’t even bet $5 on it.
[UPDATE, 2/17/17. A representative from Fiverr sent us the following statement, which we’ve included to acknowledge the changes in Fiverr’s freelance business model.]
In 2015, Fiverr’s marketplace continued to evolve from its $5 beginnings, eliminating the previously defined pricing structure and adding a Packages feature to give freelancers total freedom in how they choose their services and price them. The addition of packages further allowed freelancers to standardize their offerings through “Good,” “Better,” “Best” pricing structures.
In early 2017, Fiverr launched its first-ever branding campaign, focused on entrepreneurialism and freelancing as a movement and lifestyle. The campaign, title “In Doers We Trust,” targeted all entrepreneurs, including those who may not consider themselves startups.
From a raw numbers perspective, there are 53 million freelancers and 28.8 million small businesses in the U.S. alone, and Fiverr’s marketplace aims to address the many businesses strapped for creative and financial resources.
Fiverr’s community has grown globally, reaching 190 countries worldwide while the marketplace itself now boasts 150 different categories of services for the lean entrepreneur.Image by pgaborphotos