Upwork's Financial Results and Forecasts for 2023

[#1]

I just attended Upwork's Stockholders annual meeting for 2022 and their forecasts for 2023.

It was a very interesting meeting and below are my takeaways from the meeting in no specific order. Feel free to ask any questions.

- In 2023 40,000 Clients have signed up for longer term hiring on Upwork and 2,000,000 Freelancers.

- Upwork lost $89.9 million dollars in 2022 with a possibility of becoming profitable in the second half of 2023.

- The current focus is to generate more revenue from existing clients versus adding new clients in the first half of the year.

- Clients are taking longer to make purchasing decisions due to the macroeconomic conditions.

- Marketing spend will drop 12% in 2023.

- Companies are in Phase 1 of 3 phases of economics. In English - companies are scaling back and are cautious.

- Upwork is very excited about AI and stated that during the past 4 months AI posts are up 39 x!

- Upwork stated clients are purchasing from freelancers that produce their work using AI because it reduces client costs.

- Indirectly stated skilled freelancers are in more demand and less skilled in less demand.

- Upwork sees the first half of 2023 as challenging and the second half to be better based upon their enterprise sales team.

My takeaway is that freelancers need to be incorporating AI and expert level Skills or risk being less in demand. Expect the first half of this year to be slower due to the economy. AI and the economy have taken the show for the next six months.

This is a recently written Post with the SECRETS to growing your Upwork Sales at:

https://community.upwork.com/t5/Coffee-Break/THE-Secrets-to-Growing-Your-Upwork-Sales/m-p/1229943#M5...

This is a recently written Post with the SECRETS to hiring freelancers on Upwork at:

https://community.upwork.com/t5/Clients/SECRETS-to-Growing-Your-Business-On-Upwork/m-p/1235553#M8984...

[#2]

It sounds like the competition on Upwork has become quite intense in 2023. With clients receiving 50 or more proposals within 24 hours, it's not surprising that only about 50% of the jobs posted result in a hire. And for the average freelancer, it's only a 1% chance of getting hired. That's definitely a tough market to compete in.

It's interesting to hear that there are 4 million active freelancers on Upwork and only 800,000 active clients. That certainly makes the supply of freelancers higher than the demand from clients. And it's good to know that, all else being equal, the average freelancer has a 20% chance of getting hired once per quarter.

[#3]

The economy is the major issue in 2023, however AI generate tools will be the next leg in the second half of the year going forward that will take a bite out of the next for anybody other than Expert freelancers. Upwork will be under the most pressure ever during 2023 to change to fit the sign of the times.

[#4]

Hi Alex,

That usually happens for two main reasons. Either the cover letter isn't converting and / or the submission didn't make the client's post very well. The information below will help:

COVER LETTER: Create a flexible cover letter that is less than 100 words. Long cover letters rarely get read, but instead are ignored. Break the cover letter into four sections. Section 1 : Acknowledge the job that you are applying for such as "Looking forward to discussing your graphics design project". Section 2: Highlight your validations stamps IE skills that are brought to their project. Section 3 Explain how you will solve their problem and the final section request an Upwork Zoom call to discuss their project.

JOB SUBMISSIONS: Tips - Only apply to Jobs that you are highly qualified, don't Bid for the top 3 spots unless you are an exact match and have a high probability of getting the job, don't immediately apply for jobs, but instead wait at least a few hours so your bidding is more accurate, don't get into bidding wars because serious Clients will view most applicant's cover letters, don't apply for Jobs that have 20 - 50 applicants in less than 24 hours. If a Client gets 50 cover letters, there is only a 2% chance of being hired; bad odds. I set my freelancer sort to apply for jobs with less than 20 proposals.

[#5]

William, I'm curious to know if you have some insight into how many long-term contracts there are on Upwork?

From the 800,000 active clients, how many active contracts do they have? (One active client may have multiple contracts)

Of those, roughly what percentage are long-term?

I once read a comment from a tenured freelancer on the platform, that actual active freelancers / contracts is much lower than advertised. (Something like 100,000 big earning freelancers if I remember correctly)

Do you think UW earns more from that consistently contracted, high-earning group of freelancers, or do they earn more from the lower earning, short-term contracted freelancers?

What numbers do you estimate?

[#6]

Bilal,

I can make educated guesses based upon some of the facts and using intuition, but want to make it clear these are not Upwork's offical numbers, but instead best guesses.

During the annual stockholder meeting, it was stated that in 2023 Upwork got 40,000 clients to signup for longer term engagements and it was one of several focuses for the company this year. Draw your own conclusions.

Typically on these types of sites $25,000 annually or higher places a freelancer in the top 1% of earners. If Upwork has 4,000,000 active freelancers, than the top 1% is 40,000 so called larger freelancers. However, a freelancer can have 100 $250 clients to make $25,000 or one $25,000 client. Draw your own conclusions.

There are legal, management, HR, investor, and other considerations for bringing a freelancer off of Upwork at the two year mark. I find it dubious that too many clients will risk those considerations for only a 5% Upwork fee. I most certainly wouldn't if I was back in corporate America.

[#7]

Thank you William. This definitely helps in creating a picture, and drawing conclusions, albeit based on best guesses.

UW doesn't share the breakdown of revenues, so we can't say for sure, and I strongly feel the real situation would be very interesting.

PS: I didn't say this was about going off platform, but appreciate your insight on that as well. 😉 

[#8]

Hi William I am very new here and would love any suggestions. 

[#9]

Hi Lindsay,

Below are some BEST practices plus the Academy link at the top of the page:

PROFILE: Always complete your Upwork Profile before applying for Jobs. Create a synergized Title, Summary, and Skills to apply for Jobs to match what Clients are searching for. Use one or two of the Skill keywords in the Title to emphasize what you bring to the table for the Client. Create 4 short paragraphs in the Summary. If the Summary is too long, most Clients will not read the rest of the Summary; too short then there isn't enough information for a Client to hire. The first two sentences of the Summary are the most important because they are visible to the client as they search for a freelancer. Use all 15 Skills IF they apply. The Skills are used to assist a Client in locating your Profile via search. Add your Portfolio and always use a colorful image. Consider adding a Project Catalog if it applies. Use a short sentence description for each Employment entry. By the way, it goes without saying make sure that your Profile Settings are on Public not Private so others can view the Profile.

COVER LETTER: Create a flexible cover letter that is less than 100 words. Long cover letters rarely get read, but instead are ignored. Break the cover letter into four sections. Section 1 : Acknowledge the job that you are applying for such as "Looking forward to discussing your graphics design project". Section 2: Highlight your validations stamps IE skills that are brought to their project. Section 3 Explain how you will solve their problem and the final section request an Upwork Zoom call to discuss their project.

JOB SUBMISSIONS: Tips - Only apply to Jobs that you are highly qualified, don't Bid for the top 3 spots unless you are an exact match and have a high probability of getting the job, don't immediately apply for jobs, but instead wait at least a few hours so your bidding is more accurate, don't get into bidding wars because serious Clients will view most applicant's cover letters, don't apply for Jobs that have 20 - 50 applicants in less than 24 hours. If a Client gets 50 cover letters, there is only a 2% chance of being hired; bad odds. I set my freelancer sort to apply for jobs with less than 20 proposals.

[#10]

William, 

Thank you much for your expertise and words of encouragement. I only wish I had not missed this before I bid on my first job 😅 which I am more than qualified. I had no idea what  bid for the top 4 spots were until I realized it was way more than the 6 connections it said but live and learn right! I am excited to be here and meet new talented people. I just need to come up with a way to showcase some of my work as most recently working in Consulting and can't exactly provide Client Specific Account details.

[#11]

Very interesting numbers, or maybe just worrisome.

With 40,000 clients doing longer term hiring, the loss per is over $2000  ($89.9 million/0.40million = 2250).

Of couse there are more than 40,000 job posters but I'd think the one-off cases are all profitable on a net basis to UpWork.  

[#12]

Michael,

The longer term hiring is a 2023 initiative for Upwork so we will not know until first quarter results of the effects of the program. Have a great day!

[#13]

Michael,

It's important to note that the calculation you provided is based on the assumption that all 40,000 clients who do longer-term hiring experienced a loss of $2,250 each. However, we don't have access to the exact numbers of clients who experienced a loss and the extent of their losses, so it's difficult to say whether this assumption is accurate.

Additionally, it's important to consider the long-term value of retaining clients and building a strong reputation in the industry. While Upwork may experience short-term losses from unhappy clients or freelancers, the company may also benefit in the long run by providing a high-quality platform for remote work and attracting more clients and freelancers to its platform.

It's worth noting that Upwork generates revenue from multiple sources, including fees charged to clients and freelancers, as well as premium services and add-ons. Therefore, even if the company experiences losses in one area of its business, it may still be profitable overall.

[#14]

You dont make any profits in highly regulated, almost command environment. Unfortunately, the future of Upwork and wish of its shareholders is that they get the most capable individuals for as less money who would work for corporations basically. All the talk in prior year or more about "transformation of work" and "working less, earning more" was a prelude to this what is happening. That however wont happen, they will just force many capable people and clients who are not corporate off the platform and they wont get what they wanted - they will get people who are ready to work for peanuts. All of that leads me to believe that shareholders of UW are actually big corporations and they don't care about either freelancers, smaller clients or even platform and its future at all. 

[#15]

Peter,

For the freelancers reading this post, the net result of increasing the minimum connect bidding to 8 will be:

- Fewer freelancers bidding on jobs that truly are not a good match.

- Fewer freelancer submissions for client review which speeds the client decision making process.

- Increased revenues for stockholders. Upwork NEEDS to become profitable. Hopefully by  2024.

Increasing the minimum bid should make the professional freelancers, clients and Upwork shareholders happier.

It is highly likely that the bid system will need to continue to increase to the 12 to 18 minimum range to met the above goals. The data scientists and the economist at Upwork can optimize for the best outcome once the new data starts coming in. My best guess is that 8 connects will be very inelastic and bidding will need to go higher to have the desired outcome for all involved.

[#16]

That is only detailing about truely irrelevant thing, to distract attention while the plaform transforms into Big Corporations' Recruitment Office. They don't really care about profiting from UW and that is obvious, I believe to you as well. Who else would have tens of millions and interest to finanace losses of UW, if not big corporations? They are its shareholders and their goal is not to maximize profits from UW (big corps have much, much larger profits as we both know), but to access the flow of talent, as cheap as they can get it.

[#17]

Thanks for sharing this, William!

[#18]

You are most welcome Susan and have an amazing weekend!

[#19]

Wow 

It is very interesting congratulations 

[#20]

You are most welcome and have an amazing day!

[#21]

William,

Thank for you your description of the Upwork meeting.  I enjoy reading your posts.  Interesting situation.  I am surprised Upwork has not figured out how to make money.   My only concern is when they finally figure it out my fees will go thru the roof and make it harder to compete with offshore.  

Warm regards, 

[#22]

Irv,

Due to AI reducing costs, corporate downsizing, and connect fees, it is possible the 10% freelancer fees might stay the same.

[#23]

The next Earnings dat is August 7th, lets see what happens!

[#24]

I expect it to be another positive earnings report with more profits coming from Connects.

[#25]

Good Point, tons of connects, new things to buy with connects and so on.