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Revenues are not Profits

tlsanders
Community Guru
Tiffany S Member Since: Jan 15, 2016
1 of 18

Over the past couple of days, I've seen repeated references to Upwork having $1 billion in revenues, and more to the amount of income generated by low-budget jobs.

 

If Upwork has $1 billion in revenues and $250 million in expenses, it's a very profitable company. If it has $1 billion in revenues and $999.9 million in expenses, it generates about as much profit as my local quick lube shop. If it has $1 billion in revenues and $1.2 billion in expenses, it's bleeding money.

 

I don't know which is true. Doesn't seem that anyone posting about how much money the site is making does, either.

 

Likewise, if there are 1 million $25 jobs on Upwork, Upwork is generating $2.5 million in revenues on those jobs. If they cost an average of $1 each to service, Upwork is turning a profit on those jobs. If, on the other hand, they cost on average $5 to service, then Upwork is losing $2.5 million on those jobs. Though losing them would decrease revenues by $2.5 million, it would INCREASE profits by $2.5 million.

 

Again, I have no idea which of those numbers is closer to true. But, I do know that the revenue numbers so many are throwing around are utterly meaningless without attendant cost data.

swakefield
Community Leader
Simon W Member Since: Mar 7, 2008
2 of 18

@Tiffany S wrote:

Over the past couple of days, I've seen repeated references to Upwork having $1 billion in revenues, and more to the amount of income generated by low-budget jobs.

 

If Upwork has $1 billion in revenues and $250 million in expenses, it's a very profitable company. If it has $1 billion in revenues and $999.9 million in expenses, it generates about as much profit as my local quick lube shop. If it has $1 billion in revenues and $1.2 billion in expenses, it's bleeding money.

 

I don't know which is true. Doesn't seem that anyone posting about how much money the site is making does, either.

 

Likewise, if there are 1 million $25 jobs on Upwork, Upwork is generating $2.5 million in revenues on those jobs. If they cost an average of $1 each to service, Upwork is turning a profit on those jobs. If, on the other hand, they cost on average $5 to service, then Upwork is losing $2.5 million on those jobs. Though losing them would decrease revenues by $2.5 million, it would INCREASE profits by $2.5 million.

 

Again, I have no idea which of those numbers is closer to true. But, I do know that the revenue numbers so many are throwing around are utterly meaningless without attendant cost data.


Yes revenue isn't profit but $1bn in revenue is a pretty significant figure for this kind of business. No way does it have anything close to $1bn in costs. Their expenses mainly come in setting up the platform which the bulk of it has already been done using the seed money they have received from venture capatlists meaning it's just maintaining the platform and making incremental improvements which and getting people an assignment but that's a fraction of the revenue that the jobs bring in. Really the parts that lose them money are clients who post and never hire anyone or the freelancers who never get hired (or don't get hired very often). Even if someone only takes $50 jobs but has a few of those a week they are vastly paying more in fees than their share of the companies running costs is.

 

If we were talking about a different kind of business such as a video or music streaming service where it had a costs centre that by its nature is extreme then spending $1bn might be realistic but not a service like this

tlsanders
Community Guru
Tiffany S Member Since: Jan 15, 2016
3 of 18

Simon, I think you're dramatically underestimating marketing costs. I have worked with client companies much smaller than Upwork that spent $1-2 million/month in Google Ads alone.

m84champloo
Community Leader
Matija M Member Since: Feb 4, 2013
4 of 18

@Tiffany S wrote:

Simon, I think you're dramatically underestimating marketing costs. I have worked with client companies much smaller than Upwork that spent $1-2 million/month in Google Ads alone.


Then again, that UFO-like marketing by Upwork is literally nowhere to be seen in any of those highly acclaimed places like Computer Arts (I'm in D&C but I can bet that it's exactly the same in other categories), Print (Print Mag) and such; or heck, even Behance. Not a single word. Ever.

tlsanders
Community Guru
Tiffany S Member Since: Jan 15, 2016
5 of 18

@Matija M wrote:

@Tiffany S wrote:

Simon, I think you're dramatically underestimating marketing costs. I have worked with client companies much smaller than Upwork that spent $1-2 million/month in Google Ads alone.


Then again, that UFO-like marketing by Upwork is literally nowhere to be seen in any of those highly acclaimed places like Computer Arts (I'm in D&C but I can bet that it's exactly the same in other categories), Print (Print Mag) and such; or heck, even Behance. Not a single word. Ever.


I just Googled "hire web designer" and "freelance web design" and Upwork ads were listed in the 3rd and 2nd paid slots, respectively. 

m84champloo
Community Leader
Matija M Member Since: Feb 4, 2013
6 of 18

@Tiffany S wrote:

I just Googled "hire web designer" and "freelance web design" and Upwork ads were listed in the 3rd and 2nd paid slots, respectively. 


 Because we all know that top dogs search for agencies/studios/freelancers by SE.

 

tlsanders
Community Guru
Tiffany S Member Since: Jan 15, 2016
7 of 18

@Matija M wrote:

@Tiffany S wrote:

I just Googled "hire web designer" and "freelance web design" and Upwork ads were listed in the 3rd and 2nd paid slots, respectively. 


 Because we all know that top dogs search for agencies/studios/freelancers by SE.

 


The "top dogs" don't create the $200 one-off projects that everyone most concerned with the price increase keep saying are their bread and butter, so I'm not sure why that would be relevant. 

 

The discussion was about the cost of acquisition for Upwork to bring in those clients.

m84champloo
Community Leader
Matija M Member Since: Feb 4, 2013
8 of 18

@Tiffany S wrote:

The "top dogs" don't create the $200 one-off projects that everyone most concerned with the price increase keep saying are their bread and butter, so I'm not sure why that would be relevant. 

 

The discussion was about the cost of acquisition for Upwork to bring in those clients.


True, but I was referring to your statement (?) about companies, much smaller than Upwork, spending $1-2 MM/mo solely on Google Ads.

 

If company big as Upwork is targeting only SEO and Google Ads (I've seen some, rarely though) to attract new business than there's something seriously wrong.

tlsanders
Community Guru
Tiffany S Member Since: Jan 15, 2016
9 of 18

I don't know what other marketing methods they might be using (aside from some social media advertising I've run across). I mentioned PPC specifically because I have seen those ads and it's easy to ascertain approximately how much they cost.

taustinray
Community Guru
Tom R Member Since: Oct 29, 2015
10 of 18

@Tiffany S wrote:

@Matija M wrote:

@Tiffany S wrote:

Simon, I think you're dramatically underestimating marketing costs. I have worked with client companies much smaller than Upwork that spent $1-2 million/month in Google Ads alone.


Then again, that UFO-like marketing by Upwork is literally nowhere to be seen in any of those highly acclaimed places like Computer Arts (I'm in D&C but I can bet that it's exactly the same in other categories), Print (Print Mag) and such; or heck, even Behance. Not a single word. Ever.


I just Googled "hire web designer" and "freelance web design" and Upwork ads were listed in the 3rd and 2nd paid slots, respectively. 


I just did too on both those. In either cases Upwork ads were not eve in the paid slots. One the first one they were the first non-paid listing but that was it. One the other they were the second and third non-paid listing.

 

I will note that one certain freelance site was the second paid slot in both searches. 

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