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.

[tjmisny]

I couldn't disagre with this more.

Upwork's increased profits are beacuse the signal to noise ratio has been DECREASED - from perspective of both clients and freelancers.  Floodgates have been opened with no vetting for Clients, and less requirements for Freelancers.  Clients are now met with many more proposals, and the boosting makes it harder to separate the wheat from the chaff.  Freelancers are now met with fewer jobs that hire with an increased costs per application, making it harder to discern which jobs are likely to hire.  

The company's profit is because there is way more noise amidst the signal - and beacuse UW has figured out to profit directly from the increased noise.  The Boosted Connects program contributes to this - and is Upwork's way of charging Freelancers to cut through the increased noise... which ironically only creates more noise and confusion for Clients.  

[nav_designer]

The upwork main concern is how to earn money, as many skilled freelancers are not working and applying for jobs as they usually did, the system is destroyed everyone knows there Is zero hiring rate. This has led to some freelancers offering poor-quality work to clients, which causes them to lose valuable clients.

[atreglia]

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 Alexander N wrote:

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.

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I don't think it baffles you, I think it annoys you to no end.

My issue with your theory of backing into connects is that it assumes a 100% hire rate and we all know that's not what's going on here.  It actually does matter how many no-hire/wasted connects are in GSV because they're very much a variable component of it.  I mean, why do you think they're not netted out of GSV and shown seperately?  Do you think that was an accident?

[alexandernovikov]

No this calculation makes no assumption of the hire rate and does not even operate it as a variable. Upwork reports put it clearly: there is Upwork's revenue and there's amount that was paid by clients, dividing former by the latter gives marketplace take rate. There is also known commission rate from freelancers (10%, which is now flat) and from clients (3%). Which means we know how much people pay for connects and other things except commissions (subscription fees, arbitration fees, etc), because this is what's the  marketplace take rate minus commission is. And this is a much smaller amount than commissions. I have explained it several times over and it seems like everyone contradicting me simply skimmed through my text without trying to read or understand it. I really don't want to add my personal level conclusion to this but it's what comes naturally here.

[tjmisny]

90% of the jobs don't result in hires - as you yourself said.  

[matthewschenker]

How about adding into your "calculation" the many jobs that don't result in hiring at all. You seem to be pretending not to notice this!

[natashaabadash]

It is absolutely ridiculous how dissmissive you are of our dissaproval of your completely wrong calculation.

Maybe you should check your math?

Not only that you based your calculation on 100% hire rate (actually more), but you did not try to add in the fact that marketplace take rate consists of marketplace revenue value which is the WHOLE marketplace revenue, not just freelancers marketplace revenue! And freelancer marketplace revenue accounts for 63% of total marketplace revenue. So, when you take that into account and think real hard, you can't even think about the possibility that 10% of the whole freelancer marketplace revenue can come from freelancer service fee, simply because: 

a) not 100% of job ads end up with a hire;

b) on every job ad which ends up with one hire, there are at least a few dozens of applications (connects ka-ching!) and some of those are boosted (ka-ching!);

c) membership fee some freelancers are paying for could also be classified as connects (if not in quantitative analysis then in qualitative analisys for sure).

[the-right-writer]

You might be having difficulty getting jobs is because you need to complete your profile professionally. I have to ask why your video introduction is not you? Is that your boss? Are you an agency? Why are you pretending to be someone you are not? These are questions clients ask. 

It is absolutely ridiculous how dissmissive you are of our dissaproval of your completely wrong calculation.

You spoke the truth here. You, and others have your "disapproval" but you don't consider the OP's calculations and react emotionally.

In freelancing, there are no guarantees. If you find your ROI is poor, then you have to figure out how to increase it. There are no guarantees here or on any platform. If you want guarantees, you have to find an employer who will tell you what to do, how to do it, and if you don't, instead of losing one job, you lose the only job.

What are you doing to make your situation better? What are you doing to make the platform better? Yes, freelancers do have power, but they refuse to use it. Instead of acting like reasonable adults, far too many expect a guarantee they will get any job they apply for, are not prepared to work as a freelancer, have extremely unrealistic perceptions, and continue to do no vetting, not use common sense, bid for every job and boost like mad until they run out of connects. Then it's Upwork's fault.

You have a JSS of 70%, yet you claim 100% rated successful certified photo editor. Clients can see your wild claim, and your score - what do you think, they think? Why do you make such a claim? Confidence is one thing, but it won't win many good clients when you use fake figures. Clients don't like blatant deception, but the scammers do. It's another invitation to them when your profile is not professional.

Remove the "Glamour/Boudoir photo retouching" in your portfolio. You know the difference between lingerie and crotch shots.

Why am I telling you that you need to use the Academy and learn? Because you keep blaming Upwork for all of your issues. Upwork is strictly responsible for some areas, as are freelancers. It's important to see reality, no matter whose "side" it is on.

[natashaabadash]

Hi Jeanne, and thank you for your insightful comments. I haven't realized this thread is about freelancer profile reviews.
I thought it was about UW fee policies, revenue, and future of this platform, etc. Also can't remember asking for advice, but thank you for providing one for free. I appreciate it.
I departed this platform months ago, but I'm still curious how things will unfold because it looks like a dumpster fire for quite some time. My services found better luck on alternative platforms this year, so I'll stick to that and doubt that I'll make any improvements to my portfolio here. My profile does not receive many views, to be honest, so I don't mind it staying outdated. In a way I did something to improve my ROI, but not here, sadly. 
Regarding "crotch shot" advice - I am not sure if you are working in the design field and if you are involved in pop culture trends, but you'll be surprised how profitable and wanted is that kind of content. 
 
In the end, I feel that you did not understand what issue I expressed in this thread. I have issues with someone's baseless calculations. If I was UW I would most probably do the same they already do. It doesn't mean I can't point out publicly how that short-term cow milking project is harming freelancers. 

[the-right-writer]

I told you why I included the issues with your profile. If you don't want to use the Academy and learn how to use the platform safely, and earn more income, that is your choice. I explained to you why I was including the information and urged you to educate yourself through the Academy. You presented as someone working on the platform.

No, you did not ask for my advice, and I knew you wouldn't like it. I can still have hope that freelancers will open their eyes and educate themselves. When you are talking about Upwork and how people can't get a job, and it is Upwork's fault, of course I will look at their profile. It is very much relevant to the discussion. Everything that goes wrong on the platform is not Upwork's fault.

Regarding "crotch shot" advice - I am not sure if you are working in the design field and if you are involved in pop culture trends, but you'll be surprised how profitable and wanted is that kind of content.

I do not work in the design field. I am aware of pop culture trends. There is a big difference between pop and porn. Do better.

I did understand your issues; you didn't even listen to mine. You feel you have no responsibility here, and I do.

Everyone is free to post.

Please explain how you determined the calculations were baseless? You dismissed them. I haven't had a chance to look at everyone's numbers, but the fact remains - we as freelancers have power. Use it or lose it.

[natashaabadash]

Jeanne, it is interesting how you "knew" I won't like your advice and still felt the urge to post it. I do like advice, and I like yours too. And I like criticism more than praise. But I like it more when it comes from someone who has no ill intentions, a power trip, or who I can look up to regarding that advice. 
You opened a dedicated thread where you give people advice, you are most generous, and they ask you for help. So it looks like a success. That is nice. Maybe we should better stick to the topics of conversation respectfully. 
 
Thank you for putting the spotlight on my profile with these keywords, but if that is porn UW would ban that job post in the first place, and then wouldn't allow me to publish it. Maybe there is a deeper issue you have with this? I don't know, and don't care really. And please don't go into taste discussion, I have no say in clients' style anyway. So please, do not give advice if it's going to be condescending (that is my unsolicited advice to you... "Do better"?????!!!).
Ok you told me good, I am irresponsible, and you are responsible. Cute.
 
"Please explain how you determined the calculations were baseless? You dismissed them. I haven't had a chance to look at everyone's numbers, but the fact remains - we as freelancers have power. Use it or lose it."
- here is your issue, Jeanne. Right there! You didn't consider Alexander's calculation seriously but you approve of his standpoint. You also didn't read what I wrote as a comment on his calculations but... yeah. I'll leave you to run through those conversations and the reasoning behind them, and maybe you'll come to your own conclusion if you have time...

[the-right-writer]

I have heard, initially, from a few freelancers that were not finding jobs, and were ticked off at my response. One even reported me for being mean. I am well aware that freelancers who want to blame Upwork for all of their problems won't like my words, but they need to hear them, before they fail. That same freelancer contacted me, apologizing profusely, because she had learned so much and was doing well. This has happened with every freelancer who took the advice of freelancers like me.

Upwork doesn't look at portfolios, they barely look at anything in the profile. I am not going to argue with you what is pop and what is porn. Legs spread wide with a small piece of material covering most of the genitalia - this is not pop. Out of all the photos you could take off the net to demonstrate your skills, this was all you can find? It's your choice what you want to represent. I don't respond to deflection.

I have made my point, and you and other freelancers can complain, or use the power you have to change the platform. When people complain bitterly, how things aren't working, and you show them a way to have some control and not be a pawn, and they refuse to do it, then they have made their choice.

When people complain how they are unable to get jobs and the platform is against them, it is natural to see the profile. I don't care if you follow best practices or not. I told you the truth and how you could use Upwork resources to improve your situation.

I did look at the numbers, but I wanted some time to analyze the data I have researched, and the data I have from other sources and the latest. I do not want to knee-jerk an answer after 2 seconds of consideration. I know, it's an alien concept, but I do thorough analysis, I don't just insist someone's numbers are wrong.

What I have discovered is that some people do not understand statistics, or how to weigh calculations. People are using all different numbers, in different ways, and a lot of them literally don't add up. Personal figures only count for that individual, if you are making sweeping statements you need empirical data, from a large number source. There are rules for calculations and in math. Alexander is absolutely correct, some people do not understand how to use math.

I won't be responding to your posts because there is no point.

[natashaabadash]

Oh, Jeanne... how shall I put it... but since you are familiar with pop culture - so cringe.
While there's no better way to feel important than to play a rescuer role, I can't escape the feeling of how shame-driven the comments you make are. This insisting that you are always right and that those who don't appreciate or follow your advice are simply unable to accept the hard truths, feels too arrogant and patronizing for my taste. 
Authentic help comes without expectations for reciprocation. 
 
Moreover, your characterization of those who voice concerns about their experiences on UW as complaining bitterly is dismissive. 
Especially when you are having a conversation with somebody you perceive as less successful than yourself, not realizing that you have to be successful yourself if you want to give lessons. 
 
In the end, of course, you used classic invalidation to escape the conversation that didn't go as per your expectations. If you're out of arguments just say so. 

[2297e2bc]

This seems more like a long winded CAT fight than a community conversation!
I'm going back to work and earning my money instead of bitching (litteraly) about it!

Be productive- or go home!

[natashaabadash]

This "calculation" is fundamentally flawed because it's guessed. There is no way you'd know how much they get from all fees separately because those details are missing from statistics. 

Also, you mixed apples and oranges to do the "calculation" anyway.

[revenue from freelancers : revenue from clients = 63% : 37%]

And their marketplace take rate is 15.4% btw, but all the same.

[the-right-writer]

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.

many people here can't do basic math - this may be the answer. I agree with your comment, and can predict the usual folks lining up in outrage.

I haven't had the chance to examine your data, but I appreciate numbers. They don't tell the whole story, but they are superior to "disapproval."

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.

Excellent comment.

I do not understand why freelancers do not see the difference between their responsibilities and Upwork's responsibilities. Oh wait, they don't want to see.

[matthewschenker]

You are ignoring the vast number of jobs which do not result in a hire at all -- only attempts.

See, this is why I am suspicious of you and some other defenders of Upwork. You just pretend not to see some blindingly obvious details in an effort to make Upwork look like an ethical player.

[tjmisny]

Clients only pay $5 per project when they actually hire, and as we've established, the majority of jobs do not result in a hire.  

[alexandernovikov]

Why $5?

[tjmisny]

I know it may seem like I should be the CEO of Upwork, but I can assure you, I am actually not.  

[natashaabadash]

Right! I know. That is exactly my point. 

[the-right-writer]

There are jobs that pay $500 or more.

There is a difference between doing everything right, having a professional profile, excellent skills, stellar proposals,  doing fantastic work, and not being able to find anything worthwhile, and not bothering to do anything completely, not having a professional profile, few to no skills, and little motivation not being able to find jobs. Yes, for a significant portion of freelancers, their issue is of their own making, and has nothing to do with Upwork. For the rest, the issues are related to Upwork, for reasons I have stated often.

If it's a casino, you are under no obligation to give them money.

[21925a6d]

Thank you for starting this insightful discussion. Your data provides a solid case for Upwork's potential revenue gap between job attempts and hires. It emphasizes the changing nature of online freelancing platforms and encourages analysis of their economic dynamics. Your request for evidence-based debate is critical to comprehending this complex topic. Let's investigate how these dynamics affect freelancers and the platform's operations.

[alexandernovikov]

Thank you ChatGPT!

[2297e2bc]

All,

Have we beaten this horse to death yet?
Time to move on folks.

Nothing to see, or get accomplished, here!

[tjmisny]

It's important to keep making noise in hopes that Upper Management will pay attention to our concerns that the platform is being destroyed by corporate greed.