Bad Math

[matthewschenker]

Hi Everyone,

There have been many discussions about real and fake jobs, and the whole process of bidding and boosting. In some of these discussions, I have posted my view that Upwork makes more money on freelancers attempting to get jobs than actually getting jobs, I have argued that this situation is ripe for abuse.

In some discussions, people have disagreed with me and said that Upwork does not make more money from attempts. In this discussion, I want to offer my arguments for why it is obvious that Upwork does make more money from attempts.

The math is pretty simple actually.

Take a typical job, with some modest assumptions for the sake of argument:
- $500 offer
- 50 proposals submitted

- 16 connects needed to apply for the job
- 20 proposals "boosted" with an average of 5 connects spent on boosting

There is only going to be 1 hire for this job, no matter how many freelancers apply. That means Upwork earns $50 commission after the freelancer is hired.

Now let's look at the rest of the picture, which is the attemps to get hired:

- $120 from submitted proposals ($0.15/connect x 16 connects x 50 proposals)
- $15 from boosting ($0.15/connect x 5 connects x 20 proposals)
- $135 total earned from attempts

Upwork earns $135 from attempts and $50 from actual hire. That means Upwork earns $85 more from attempts.

This is a modest example.

Let's go a bit further. Prices for jobs is driving downward, meaning that Upwork is making less and less from commissions. Which means that they are making more and more on attempts as time goes forward. It's simple corporate logic to say that they would build a profit system around attempts instead of hires.

Consider the implications of this.

Anyone trying to tell me that Upwork does not make more money on attempts must offer a counter argument, based on numbers, not feelings.

As long as Upwork is making more money on attempts than hires, we have a problem.

[celgins]

What I'm saying is so inherently obvious, I'm suspicious of anyone who argues against it.

It's obvious to you because we (freelancers) can make assumptions based on our limited view of Upwork's marketplace.

I have always disagreed with the notion that Upwork makes more money from freelancers attempting to get jobs. My disagreement isn’t based on feelings; it’s based financial data and information reported by Upwork. According to their most recent financial statements—which they are required to file with the U.S. Securities and Exchange Commission—Upwork’s revenue is primarily generated from service fees (10% of freelancer earnings) and to a lesser extent, client fees. Upwork also generates revenue through its payroll offerings, Connects purchases, membership fees, foreign currency exchange fees, and other fees.

“Primarily” is the operative word in the previous paragraph. Publicly traded companies in the U.S. are required to report their primary source of revenue in quarterly and annual financial statements. If Connects expenditure makes up most of Upwork’s marketplace fees or has become their primary source of revenue, it would mean Upwork’s CEO, CFO, and its team of accounting and legal experts are lying to the SEC about its largest revenue source, and I don’t think they can afford to do that.

I agree that Connects spend is a convenient way to increase revenues; it helped Upwork make its first profit in 2023. However, Upwork have never said the amount generated through increased Connects spend is larger than the amount generated through service fees. Until they report a different primary source of revenue, we have no formulae, guesses, or data—no matter what calculations are used—to make such claims.

Upwork have consistently stated their main source of revenue comes from service fees collected when freelancers are paid for jobs—not freelancers attempting to get jobs. As I and others have stated, this includes thousands of jobs that are never posted and never require Connects.

[khushbu_gohil]

Next financial report will be on May 1, 2024..let's see because everyday fluctuations in connects is there which will impact on revenue per job $40-50 average revenue 

[celgins]

Yes--the fluctuations are tricky. And when the next report is released, the OP may be proven right in his assertion.

[atreglia]

---

 Clark S wrote:

I have always disagreed with the notion that Upwork makes more money from freelancers attempting to get jobs. My disagreement isn’t based on feelings; it’s based financial data and information reported by Upwork.  

---

Clark, you may be correct about that for now, but even Upwork has said in those reports that monetization was their "fastest growing revenue stream in 2023".  I don't know about you, but I am not at all surprised and I, as well as the majority here, "feel" every bit of it.

[celgins]

Oh, I'm definitely not surprised. As I mentioned, Connects expenditure has increased revenues and helped Upwork make its first profit in 2023.

Freelancers--not just the OP--have been saying for years that Upwork makes more money from Connects spend, and Upwork has consistently stated their main source of revenue comes from service fees. The OP may be right, but until Upwork's financial reports change, there is no way for us to know.

[matthewschenker]

Again, it's so blindingly obvious that Upwork makes more on connects and boosts than it does on fees. I mean, my god, how can anyone fail to see this?

With freelance jobs paying poverty rates as low as $5/hr, and often even lower than that, but with numerous freelancers competing for those jobs with connects and boosts, and only 1 poverty freelancer being hired for it -- how can anyone fail to see what I'm saying?

[alexandernovikov]

No you are wrong, and i have explained many times how exactly and why but no one wants to hear it. I'm done with this online forum - it's just too depressing to read what delusional people keep blindingly posting in their fruitless bouts of passive aggression.

[marc_compte]

---

 wrote:

Are there ever jobs where the commission is paid more than once?

If by comission you mean the fee, yes. All my jobs are hourly-based. I pay fees every single week. I started 3 years ago and in these 36 months I must have paid about $20K in fees and $0 in connects.

You seem to be suspicious about everything and everyone who does not agree with you in everything you say. And this is really starting to look like a fact and not an assumption or a suspicion.

If you can't discuss with people that see things differently without accusing them of being sell-outs or dumb, there's no point in discussing anything with you.

[nav_designer]

Upwork's hiring rate and bidding system, which has led to a zero percent hiring rate and the collapse of the bidding system. As a result, your repeat rate will likely decrease to zero, and you may need to post about the issue. Unfortunately, Upwork's poor policies have resulted in 95% of freelancers wasting their connects on fake jobs, making it difficult for them to survive. This has been the case for the last two years, and Upwork continues to earn by posting fake and unfiltered job posts. The nightmare is continuing, 

[feed_my_eyes]

---

 wrote:

Upwork's hiring rate and bidding system, which has led to a zero percent hiring rate and the collapse of the bidding system. As a result, your repeat rate will likely decrease to zero, and you may need to post about the issue.

---

These are some pretty extraordinary claims. Care to explain?

[marc_compte]

I understand my reply was a bit too lengthy, I admit that. But you should at least read it and try to understand it, if you are going to reply back. Otherwise it is like talking to a wall.

You should understand the difference between a proven fact and an assertion or assumption. Yours is an assumption, like mine. No matter how clear you think you see it. It is not a fact. A fact to back your statement can only come from the total values of revenue. Everything else is an assumption.

And I'm not doing more assumptions. I'm doing the same assumptions you do but I'm looking at different scenarios, not just a single one.

If you'd have read the post you'd have noticed I can agree with you on Upwork earning more on connects than fees. I don't think your example is proof of anything, like I said, but at least I accept you could be right.

Where I seriously believe you are wrong is in assuming that Upwork does not want us to get hired because they make more on connects. It does not make sense at all.

Is this a good enough TL;DR for you or should I make it shorter?

PR: The definitive proof that you didn't read my post is your last paragraph. You are so out of line there I'm not even going to discuss that.

[lucioric]

if doing that, they are pushing freelancer off the platfrom, although myself have preferred Upwork in the past after being scammed in Workana. IS WORLD NOW FORCING ME OFF FREEELANCING????

[7966b5e7]

I totally agree

[alex-nemchyn]

That's true. But we've all gotten too caught up in chasing orders. If I have to work hard to get a job. Write a cover letter to get the client interested and get the job.
Then I looked at it from a different perspective.
When I look through my job feed, many of the job postings don't look compelling or attractive. They look more like spam and you realize that no one is going to hire anyone.
So then I asked myself, Upwork got me interested in making connections and bidding on these projects.
Convince me, get me interested.
Make it happen.

[khushbu_gohil]

And some client doesn't respond since week atleast some reminders should be their for client to check their job after posting 

[msimon_pm]

Less than a month later: the same sample bid costs 23 connects. $3 without boost

Freelancers in the online marketing segment, what's your 2 cents?

[alexandernovikov]

Why do we need to guess about it? Upwork's marketplace take rate is 15.8% as stated in it's quarterly report. Because on the marketplace (that is, all of Upwork except Enterprise section), commission is now always 10%, it means they make 10% on commissions ("on getting work done") and 5.8% on connects, subscriptions, and other charges ("attempts to get work"). So we know the precise breakdown - 36.7% of Upwork revenue comes from connects, rest from commissions.

Why would anyone come to the idea that price of jobs trends downward? I agree that "prices that people who fail to win jobs, offer, trend downward", but it only means that they are being squeezed out of the market. Prices those who *can* get jobs, are trending up.

Upwork simply started working the way it was always supposed to. It's job is to sort freelancers by quality, which it now finally does.

[48f850a0]

Where did you come up with the 5.8% on connects. It's surprising people still defend Upwork, but please explain.

Also 10% on commission means per project, for example 50$ job, Upwork makes 5$... So please explain your math, because it's not making sense 

[alexandernovikov]

https://investors.upwork.com/static-files/3c3081d4-468b-40ac-8c48-2251fbc527bc

Marketplace Take Rate

Marketplace take rate measures the correlation between Marketplace revenue and Marketplace GSV and is calculated by dividing Marketplace revenue by Marketplace GSV.

 Because marketplace revenue is comprised of commissions - which are always 10% of GSV, as there are now no exceptions in marketplace (which is all Upwork except Enterprise), and connect charges - the rest, most recently 5.9%, are connect charges and other revenue (subscriptions, arbitration charges, etc), but mostly connects. So there's the breakdown - 5.9% of GSV on everything except commissions including connects, and 10% for commissions. What's not clear about it?

[48f850a0]

Makes absolutely no sense all these numbers, and doesn't prove Upwork started doing anything right. 

[alexandernovikov]

Try to make some effort and explain what in particular you don't like about my answer. Sounds like a baseless insult.

Also, this is data from their annual SEC filing. Not some marketing material. If any of that is a lie, someone will go to jail over it because it can be interpreted as attempt to manipilate stock value. So these numbers can be trusted.

[48f850a0]

You said Upwork now works how it was supposed to, by sorting freelancers by quality.

This statement right here. Sounds like something someone from fiver or freelancer.com would say not a regular Upwork freelancer

[alexandernovikov]

I make this assumption based on the fact that it has become harder for random people to get projects, but easier for capable ones - i know many people (who were already established engineers with top degrees and millions of dollars made in their careers) who first started on Upwork 1-2 years ago (Russians who emigrated, leaving their established careers behind, out of opposition to war, and starting over) - and they are doing just fine. I'm sure it wasn't possible 10 or 15 years ago. Being such an engineer myself back in the day, i comparatively, struggled big time to get going.

[yofazza]

I make this assumption based on the fact that it has become harder for random people to get projects, but easier for capable ones

I think I've also mentioned before in a similar discussion, that it looks like your niche is quite specific where your experience in Upwork is different with quite a few 'capable people' here.

Yes it's not just you, but I'm observing the fact that there are now many 'capable people' came here to complain.

[48f850a0]

What i see first hand is that the quality of clients on Upwork is very low and people that don't care much about the quality but the pricing of the freelancer, this isn't something Upwork will record anywhere but it's an everyday scenario looking for work on the platform. Probably your field is different, but i can't defend Upwork in any way these days because i don't see any moves they are doing to improve the situation.

Check out their most recent update, pushed portfolio up above the work history on profiles and expect us to clap for them that they did something? Their main interest is making sure they make enough from the connects, this is something you see clearly on the site, not in some numbers from a report

[yofazza]

I just wrote here a few days ago. It's arguable that the money they receive from 'attempts' is greater than what they receive from fees.

In some cases, on small but 'popular' jobs, the revenue from 'attempts' exceeds that from fees, indeed.

While Alexander is basing his comment on Upwork's report. We take their word for it. Faking reports is risky and/or unnecessary.

[2297e2bc]

E-bay is at 13% and higher!

[feed_my_eyes]

---

 wrote:

Where did you come up with the 5.8% on connects. It's surprising people still defend Upwork, but please explain.

---

How is it "defending Upwork" to point out facts and credible sources? Yes, on a $50 job, Upwork makes more money from connects than they do from commission, but obviously, not all jobs are $50 jobs. 

[matthewschenker]

I agree! I'm starting to wonder about the interests of some of these people who defend Upwork in the face of such clear evidence.

The one logical thing I see being posted -- let's see thje latest financial report.

[khushbu_gohil]

And why tax on connects since few months?

[the-right-writer]

I don't see anyone "defending" Upwork. Why do sides have to come into this? It amazes me how some people declare "Upwork spy/employee/whatever" when someone dares to post logic or tell freelancers they need to be responsible. Why does someone who posts make you declare them a defender of Upwork? So, you disagree. That does not make the other person wrong, or a participant of the entity you believe is somehow out to get you.

Facts, not feelings if we're looking at numbers.

[matthewschenker]

Here we go again...

You seem to be assuming that on every job, Upwork gains 10%. The problem is, there is a vast pool of jobs where there is no hiring, and apparently no intention of hiring. And yet, anyone can see that for those jobs there are often 30 - 50 attempts to get that vapor job. In other words, the only revenue Upwork gets is from connects and boosts, which are attempts. There is no other revenue. And those vapor jobs are clearly taking up more and more of the postings.

[2297e2bc]

Sorry folks. If you think this is supposed to be easy - start your own website!

Y'all miss the issue right in front of your faces!

An abundance of "Hiring" sites and methods - UW,  5r, Indead, Angy, and yes - even Ebahy, Fbook, TickTot, Ex  and on and on. Also include your local Classified News and Backpages.
Now - do some math.  I'm in Video Production and Editing. Ther are over 4,000 similar folks on just here on UW. So I am competing every day with the 4K here, PLUS the 1,000's on the other mentions services, PLUS all the guys who have regular jobs (like TV) looking for side-hustles!

Look at YOUR specific area of expertise, and determine your Odds of winning. Its sort of = to your states lottery!
Its all about self promotion. One tip that DJT gets right is - "Stay in front of the people". So he is always in the news!
YOU need to market everywhere! Dont just rely on UW for work. But that also means you need to SPEND MONEY and CONNECT(S), and TIME. Buy into the SSO and MARKET YOURSELF - or you wont see any busuness!

Good Luck,

Dave

[natashaabadash]

Yes. Upwork is getting more money from freelancers either way, but your point is right with a few remarks:

- those 500$ are never 500$, but less

- clients pay 5$ per project (or is it 10$ now?), plus a fee (3%?, I am too lazy to check if it is 3 or 5)

- freelancers pay money transfer fee

- freelancers pay VAT in some instances

I thought we are absolutely clear on UpWork Casino scheme by now... 

[alexandernovikov]

By the way!! i TOTALLY forgot of the 3% fee clients pay. Which means, "commissions" part of the marketplace revenue is almost 13%, out of total marketplace take of 15.9%. Making connects cost totally negligible.

[tjmisny]

Connects cost is not negligable when you consider how many projects do NOT result in hires.  (A large majority)

[atreglia]

---

 Thomas wrote:

Connects cost is not negligable when you consider how many projects do NOT result in hires.  (A large majority)

---

Just a minor detail, right?  🤣

[alexandernovikov]

It seriously baffles me how many people here can't do basic math or pretend to ignore what's going on just because they have an agenda. Again, here is my logic:

- Upwork marketplace take rate, which is marketplace revenue divided by gross value of client payments, is 15.9%. It includes both connects cost and project payment commission.

- Upwork commission is now 10% always without exception.

- For all or almost all clients there is also a 3% payment processing fee (for some qualifying clients with US credit card there seems to be a $25 per month flat fee, but this was not offered to new clients since a long time ago and may be only "grandfathered in" for some old clients).

- It means that all contracts result in a minimum of 12.7% (1.0-0.97*0.9) commission rate, maybe with a small proportion using the flat fee for payment processing, it could be like, 12.4% or something like that.

- Overall marketplace take rate being 15.9% means there's no more than 3.5% of the projects billed volume for the connect fees (and also other fees like subscription charges, arbitration charges in case of disputes etc. etc.)

- Because again, overall marketplace take rate is 15.9% it means no more than 22% of overall Upwork marketplace revenue comes from connects purchase (3.5%/15.9%).

And it does not matter at all how many projects never result in a hire. Indeed, about 90% do not, was around 80% when i did Upwork (then oDesk) study using their APIs 10 years back and gone worse since. It's irrelevant. Almost all charges happen not on $500 projects (if it was the case, they won't change from 20/10/5 to flat 10% commission rate as it would mean letting go of most of commission). They happen on large projects where billed amount per contract is tens or hundreds of thousands, and in some cases millions. There are too few of those for you to see but each is worth 10,000 of $50 projects.

What is not clear about it?

When so many people engage in groupthink, wholly stuck in tunnel thinking inventing the next conspiracy theory right on the go, without anyone to maliciously influence them, it's no longer surprising to see **Edited for Community Guidelines** polls numbers. SAD.

[tjmisny]

Upwork just recently began to turn a profit because of the emphasis on Connects being sold like lotto tickets... and if 90% of the jobs do not result in a hire, then this fact is extremely relevant.  Because it means that Upwork is operating in bad faith - creating a feeding frenzy for jobs that odds are, will never hire - rather than improving the functionality and dynamics of the platform to facilitate better connections between high quality clients and high quality Freelancers.  

[alexandernovikov]

Upwork started turning a profit exactly because it increased signal to noise by making it harder for irrelevant people to be visible, through use of connects system. Granted, without any connects sold, Upwork would be still mildly in red ($9.9M out of $1.1B GSB last quarter), but less so than before connects system.