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Revenues are not Profits

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

I will just state the fact that some of the biggest names in (D&C) business, like Snask, Moving Brands, Mucho, Pentagram etc. (and each of them are running single projects worth like all of monthly jobs on Upwork (per category) combined), would fail to earn even $1 if they relied only on search engines and/or Google Ads.

 

Edit:

There's a difference in Google search results. I mean, it's shown differently when you're logged in or logged out, it depends on your browser cookies, third party cookies (if they're allowed or not), search and browse history (because search results are tailored according to your interests) when logged in and even devices where you're logged in with your Google acc.

So something that's shown at #1 for person A might not be shown anywhere for person B.

lakitel
Ace Contributor
Albert B Member Since: Apr 11, 2016
12 of 18

I think there's a bit of confusion still about revenue: It isn't money made, it's money generated. It's not even really income. For example, Sony could make billions in revenue from selling the PS4 but it cost them an equal amount then they haven't made any income.

 

 So there's a lot of numbers floating about, but the real number to focus on is $100 million, which is 10% of $1 Billion, that's the commission they get. From the $100million you would have to remove the running costs (which we have no idea about) and a high-ball number of 40% for taxes. So what we're looking at for profit is: $60 million - Running expenses.

 

 The disclaimer here of course is that is just going by public information, we really have no idea what the exact revenue/income/profite is, so everything everybody is saying is just conjecture. We choose to believe that Upwork must be making a profit, since they have been around so long, but the bottom line is that this is just pure speculation on our part.

 

 My personal take is that they are profitable, just not as profitable as they want to be, which is why the new fee structure has come about. Am I happy about it? Not really, and thats mostly because I don't feel the level of service for their website is up to par with what they are saying. Theoretically, I don't mind handing over 20%, as long as I'm actually seeing something for that.

researchediting
Community Guru
Douglas Michael M Member Since: May 22, 2015
13 of 18

Albert B wrote: 

 

....My personal take is that they are profitable, just not as profitable as they want to be, which is why the new fee structure has come about....


Albert,

 

Figures being bandied about by market-monitoring sites at the time oDesk acquired Elance suggested at least a paper profitability (as distinct from profit) for oDesk, while Elance was indeed, to borrow Tiffany's phrase, bleeding money. It does not follow that the acquisition was costly, or ill-advised. Upwork jettisoned Elance's infrastructure and has been cautious about adopting its operating procedures, which may have contributed to its losses. It acquired some unknown percentage of Elance's personnel, assets (the talent pool) and market share (clients), all but certainly including any high-dollar corporate clients Elance had managed to snag while the platforms were competitors.

We know Upwork has ambitious goals for increasing market share and revenue. They have also expressed many times the intention to move upmarket, which is one way, with various attendant risks, to increase revenue and/or profit. The current move is consistent with those plans.

 

Best,

Michael

 

 

lakitel
Ace Contributor
Albert B Member Since: Apr 11, 2016
14 of 18

@Douglas Michael M wrote:

 

- Snip -


 

 I think we both agree on the same thing. I wasn't judging them because they want to make more money, they are more then welcome to, that's part of being a businesses. The other part is providing a service for the money they receive, which where the rub comes in: Their services aren't up to the standards they claim they are.

 

 Now, we could argue that it's completely subjective, but from mine and others experience, Upwork has more than it's fair share of bugs and inefficiencies. I don't have the metrics to back up their system and I doubt anybody but Upwork does, so again, unless they release the unadultered information, nobody other than Upwork will know how well or how badly their systems work.

 

 Again, I'm totally fine with them moving up market, but as somebody said on the forums, it's putting the cart in front of the horse. First fix your systems (or at least show us they work) then worry about going Upmarket, and when you do, don't put the cost of that action on the freelancers. I mean, from my admittedly imperfect understanding of business strategy, the first step is to any action is finding the investment, and I wouldn't think that freelancers themselves are investors. It would make more sense for them to seek investment outside of upwork, do their upmarket action, and then based on results, raise the fee.

 

 The problem here is, I don't think they are actually implimenting this sytem to upmarket, I think they are implimenting it to increase their profits. Once the actual upmarketing comes, then it's possible we will see another fee restructuring to reflect their new position. Honestly, it's a slippery slope whichever way you look at it.

researchediting
Community Guru
Douglas Michael M Member Since: May 22, 2015
15 of 18
Albert,

Yes, I think we've been conversing, not disputing.

Elance survived as long as it did on repeated infusions of venture capital. Upwork likely does to a large extent. It is most likely the venture capitalists who dominate the board of directors who engineered the acquisition.

Be all that as it may, you are absolutely correct that Upwork's underinvestment in infrastructure—as illustrated by its being the buggiest online service I use with any frequency (Elance and LinkedIn being close seconds)—is an abiding mystery.

Companies like Amazon can own markets and continue to be investors' darlings without becoming predictably profitable. How Upwork proposes to do so without providing Amazon-style dependable and user-friendly service is anyone's guess.

Best,
Michael
lakitel
Ace Contributor
Albert B Member Since: Apr 11, 2016
16 of 18

 I'm glad we're on the same page Douglas, I just wanted to make sure 🙂

 

 I actually think you hit the nail on the head: Upwork has underinvested in infrastructure based on their position in the market. Honestly, I just hope that the new fee system goes towards consolidating their position (and their systems) before it goes to upmarketing. I'd have to have another floor added to a building that is already somewhat structurally unstable.

 

 As for Amazon, it's such a unique case, at least from the presepctive of scale. If I remember correctly, and I'm probably not, Amazon runs with an annual loss of a billion dollars. Just like you, I very much doubt Upwork can sustain that kind of model, which is probably where the new fee system comes in.

 

 Ultimately, on the 10th and 12th, Upwork is having webinars where they will be releasing some financial information, so we have to reserve judgment and stick to speculation until we have the numbers.

laitash
Active Member
Lai T Member Since: Jun 22, 2015
17 of 18

From the $100million you would have to remove the running costs (which we have no idea about) and a high-ball number of 40% for taxes. So what we're looking at for profit is: $60 million - Running expenses.

 

So they are nowhere near being as profitable as google. I think they should pay double taxes.

cupidmedia
Community Guru
Jennifer D Member Since: Feb 15, 2016
18 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.


I think the "OMG ONE BILLION' comes from a Forbes article (and Upwork's Wikipedia page, which references the article) that talks about having 1 billion dollars worth of *jobs*, which is completely different. 

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