Upwork should start building up its anti-circumvention unit

[25005175]

So, this change is going into effect soon (unless Upwork decides to modify the plan before they initiate). As threads such as

• Announcing new, simpler fees on Upwork 
• what's happened to upwork? 
• Invitations have dropped DRASTICALLY for months 
• Is anyone else struggling to land jobs lately? 

showcase, many high-earning individuals on the platform are planning to or are already moving from Upwork. With the loss of the 5% fee tier, there will be little to no incentive to keep high value, long-time contracts on the platform. Previously, the value of automated billing/invoicing was high enough for freelancers to keep good, easy relationships on the platform at a 5% rate. A 10% cut, as many freelancers testified in the feedback to the announcement, exceeds the value of the platform at that stage.

But what about the 2-year restriction? The fact that Clients are required to pay a huge fee to convert any relationships with freelancers off of the platform before that 2-year mark. Well, I predict that the number of "circumventors" will spike. It is already immensely common for Clients to post jobs without hiring. Hire rates under 30% are not uncommon. In that context, it will be very easy for Clients and Freelancers to meet via Upwork and then surreptitiously end the interview without hiring on Upwork, electing instead to work together off-platform. How would Upwork notice? With over 4 million active accounts (Freelancers only, Clients only, and both) and hundreds of thousands or millions of job postings each year, it is obvious to see that circumvention - even in mass quantities - will go largely unnoticed.

If Upwork's Trust and Safety team isn't able to keep up with spam postings - even with the assistance of Freelancers! - then I find it extremely unlikely that the Anti-Circumvention taskforce (or whatever they are called) will be able to identify new relationships that simply used Upwork as a networking hub or identify existing relationships that chose to leave the platform. Yes, if suddenly consistent earners/buyers stopped earning/buying on Upwork but were still involved in many interviews, that could be a reliable indicator. But if parties played it smart and simply reduced their Upwork contracts, then there will be no reliable indicators. No smoke. No herrings - not even red ones.

Upwork, have you heard of focus groups? I find it hard to imagine that you ran this plan to eliminate tiers through a number of your consistent high-earning Freelancers. Or even your consistent mid-earning Freelancers. Because as the feedback thread clearly demonstrates, they would have told you that it would cost you some or all of their business. Or maybe this announcement WAS your idea of implementing focus groups. If that's the case, this was a really, really poor method of idea testing.

Your ship. Just know that it will take a lot more than tar for your anti-circumvention unit to patch the holes through which your cargo will be dumping - nay, jumping! - into the sea.

ETA: corrected a missing negative.

[celgins]

Well said.

Well, I predict that the number of "circumventors" will spike.

Without a doubt. Upwork knows that both freelancers and clients circumvent the marketplace, which adversely impacts their business model. It will only get worse. They also know that changes to their pricing models exposes them to adverse conditions. This, too, will likely get worse.

I think the client contract initiation fee (up to $4.95) alone, might drive a few clients away too. It probably won't be a concern for enterprise clients, but smaller clients subjected to an initiation fee could be a deal-breaker.

[25005175]

It occurs to me that the cast-a-wide-net methodology used by Clients like Preston H just became significantly more expensive. I wonder how Preston will modify his normal hiring practice.

[yofazza]

If I get this right, hiring lots of freelancers in a same contract requires a single fee.

Nevermind.

[bilal1983]

I'm also curious to hear what he thinks about the recent changes.

[tlsanders]

I think the client contract initiation fee (up to $4.95) alone, might drive a few clients away too. It probably won't be a concern for enterprise clients, but smaller clients subjected to an initiation fee could be a deal-breaker.

This may be the goal. Small one-off contracts are expensive and problematic for Upwork to host and manage. They've been reluctant to outright rule them out, but letting clients with $10 projects self-select out would probably be beneficial.

[yofazza]

I think they should focus on how to provide benefits on long term relations (if that's even possible and which they just did something bad at it recently) rather than thinking about a taskforce.

As you said:

I find it extremely unlikely that the Anti-Circumvention taskforce (or whatever they are called) will be able to...

Related to my other comments around this matter, most likely they are wrong if they plan to focus on long term relations because it's almost impossible for a "middle-man" to provide additional values on long term relations.

If they managed to have this task force that is so great in detecting circumventor then what? They ban everyone caught? Which are not necessarily good and might also a little the opposite with their other policy (of opening the gate to have an unlimited supply of freelancers for milking their connects. 😁)

They might eventually follow another policy of one of their competitor (aside the 10% flat-fee) by no longer caring about 2nd job being done outside.

[celgins]

They might eventually follow another policy of one of their competitor (aside the 10% flat-fee) by no longer care about 2nd job being done outside.

Agreed. And I think they will eventually have no choice about purusing this route.

Upwork has openly acknowledged the negative effects of changes to their pricing model, including increased user dissatisfaction and and increased circumvention. They have seen this in the past, they see it now, and they expect to see it in the future.

[25005175]

Upwork has openly acknowledged the negative effects of changes to their pricing model

---

Where did they do that? It feels you know something that I don't. I am most intrigued.

[celgins]

They have spoken about this for years in their SEC filings. As a publicly traded company, they don't have a choice but to acknowledge it. 😂

Edited: SEC and investor documentation is quite boring (some of it is to me, but not all of it), and Upwork acknowledges the negative impacts of their business models in quarterly reports, annual reports, and some other filings.

[abixbg]

Are those SEC fillings publicly available to read? I am really curios to check them.

[25005175]

https://investors.upwork.com/financials/sec-filings/

[bilal1983]

Did you find anything on the negative effects of changing prices in there?

[bilal1983]

I went through the SEC filings, and found a document which mentions some interesting points. I have copied these from different parts of the 118 page document.

• We continue to evolve our business strategy, offerings and pricing model, and changes that we make can adversely affect our business and make it difficult to evaluate our future prospects.
• Our sales efforts are increasingly primarily targeted at large enterprise and other clients and prospects with larger, longer-term independent talent needs, and as a result we may encounter greater pricing, implementation, and customization challenges, and we may incur additional costs, each of which could adversely impact our business and operating results. 
• Both clients and talent may stop using our work marketplace and related services if the quality of the user experience on our work marketplace, including our support capabilities or our ability to provide a secure, reliable, and trustworthy work marketplace, does not meet their expectations or keep pace with the quality of the user experience generally offered by competitive products and services. Clients and talent may also choose, and in the past have chosen, to cease using our work marketplace if they perceive that our pricing model, including associated fees, is not in line with the value they derive from our work marketplace, or for other reasons, including cost-cutting measures. Additionally, one client accounted for more than 10% of our trade and client receivables for each of the years ended December 31, 2022 and 2021. If users stop using, or reduce their use of, our work marketplace and related services for any reason, including the foregoing reasons, our revenue and business would be adversely affected. 
• We have over time evolved, and will continue to evolve, our sales, marketing, and brand positioning efforts, as well as our business strategy and pricing model. Recently, we have undertaken a rebranding effort and expanded our focus on large enterprise and other clients and prospects with larger, longer-term independent talent needs. We continue to evaluate and revise our current offerings and pricing model and create and test additional offerings, pricing models, features, and services to serve these and other market segments, such as our recent combination of our Upwork Basic and Upwork Plus client offerings into our new Client Marketplace offering, which simplifies the pricing model for clients of those offerings. 
• Changes in our offerings and pricing model, and the continued evolution of our business strategy and brand positioning, subject us to a number of uncertainties, including our ability to plan for and model future growth and make accurate projections regarding our future performance. In addition, we have in the past seen, and may in the future see, unexpected or unintended negative effects as a result of changes to our pricing model, offerings, and sales, brand positioning, and marketing efforts, including increased user dissatisfaction, harm to our reputation, increased circumvention rates, reductions in the rate or size of projects that get posted or completed, a failure to attract and retain quality talent or attract new clients that spend on our work marketplace or the loss of spend from existing clients. These adverse effects may negatively affect GSV, revenue, our results of operations, and financial condition, including resulting in negative period-overperiod financial results for a number of periods following the change being made. For example, we experienced a quarter-over-quarter decline in GSV in the third quarter of 2022 that we believe was attributable primarily to our consolidation of our Upwork Basic and Upwork Plus offerings into our new Client Marketplace Offering and the associated pricing change.
• Our business depends on users transacting through our work marketplace. Despite our efforts to prevent them from doing so, users circumvent our work marketplace and engage with or take payment through other means to avoid the fees that we charge, and it is difficult or impossible to measure the losses associated with circumvention. Enhancements and changes we make with respect to our pricing model, fees, offerings, services, and features may unintentionally cause, and may have unintentionally caused in the past, users to circumvent our work marketplace, such as our consolidation of our Upwork Basic and Upwork Plus offerings into our new Client Marketplace Offering. In addition, circumvention by users of our work marketplace is likely to increase during a macroeconomic downturn, as users may be more cost-sensitive with respect to our fees. The loss of revenue associated with circumvention of our work marketplace has an adverse impact on our business, cash flows, operating results, and financial condition. Moreover, certain changes we make to decrease circumvention by users have in the past and could again inadvertently result in user dissatisfaction, increased user circumvention, and a decline in user activity on our work marketplace. Our efforts to reduce circumvention may be costly or disruptive to implement, have results that are difficult or impossible to measure, fail to have the intended effect or have an adverse effect on our brand or user experience, reduce the attractiveness of our work marketplace, divert the attention of management, or otherwise harm our business. 

[melaniekhenson]

"With the loss of the 5% fee tier, there will be little to no incentive to keep high value, long-time contracts on the platform."

Making money in, potentially, an ongoing way is the incentive. Another incentive is that if you get caught, you are gone. Period.

I keep hearing about how many great people are fleeing the platform. If that's true, there are many behind them waiting to snap up the jobs in their stead. Yes, good ones, even great ones.

With that said, no smart freelancer is going to dump one of his or her several income sources because of something like this. We'll just work it into our fees instead. It's overhead. That's business.

My feeling is that the people who would pull something this amazingly, staggeringly against TOS already are. That 5% isn't making the difference.

[celgins]

With that said, no smart freelancer is going to dump one of his or her several income sources because of something like this. We'll just work it into our fees instead. It's overhead. That's business.

This makes sense. The really serious, smart and successful freelancers who operate legitimate businesses will find a way to do what a thriving business should do.

But how do you think the client initiation fees will affect existing and new clients (small and enterprise clients)?

[melaniekhenson]

---

Clark S wrote:

With that said, no smart freelancer is going to dump one of his or her several income sources because of something like this. We'll just work it into our fees instead. It's overhead. That's business.

This makes sense. The really serious, smart and successful freelancers who operate legitimate businesses will find a way to do what a thriving business should do.

But how do you think the client initiation fees will affect existing and new clients (small and enterprise clients)?

---

I don't know, but my guess would be (and I say this as a small potatoes client myself) those aren't Upwork's priority anyway. I don't mean we are treated unfairly, I mean like any business, UW undoubtedly wants the big guys with ongoing work, in order to bring in the big money.

[25005175]

It's not dumping an income source. It's cutting out the middle-man when the middle-man no longer provides any value.

[melaniekhenson]

---

Jonathan L wrote:

It's not dumping an income source. It's cutting out the middle-man when the middle-man no longer provides any value.

---

Sorry, I was answering from the freelancer's end. It's getting a little confusing trying to see things both ways on very little sleep and no coffee, LOL.

Are you a client? If so, how do you this as meaning providing NO value? I can't tell you how much work is taken off my shoulders here in vetting and other things I might otherwise have to go digging for.

And again, clients who are sleazy enough to do something like this were already doing it. You know that saying about no honor among thieves, right?

[celgins]

Sorry, I was answering from the freelancer's end. It's getting a little confusing trying to see things both ways on very little sleep and no coffee, LOL.

I wish I was big-ballin' like this; so busy on the freelancer and client sides that sleep isn't even a priority! 🤣

[25005175]

I'm speaking expressly from the Freelancer perspective. What value will Upwork provide to a long-term relationship between FL and Client? Currently, the ease-of-billing and the slight marketing impact for established FL is barely enough to merit the 5% FL fee, according to many.

But there are benefits from the Client end as well, since the 5% transaction fee is higher than standard processing fees, and they have a good chance to receive a discount since the Freelancer will no longer need to cover the overhead of the Upwork fees.

And again, clients who are sleazy enough to do something like this were already doing it. You know that saying about no honor among thieves, right?

---

Read up on the pyschology of disinhibitors. There are likely many for whom this change will tip the scale.

[melaniekhenson]

---

Jonathan L wrote:

I'm speaking expressly from the Freelancer perspective. What value will Upwork provide to a long-term relationship between FL and Client? Currently, the ease-of-billing and the slight marketing impact for established FL is barely enough to merit the 5% FL fee, according to many.

But there are benefits from the Client end as well, since the 5% transaction fee is higher than standard processing fees, and they have a good chance to receive a discount since the Freelancer will no longer need to cover the overhead of the Upwork fees.

And again, clients who are sleazy enough to do something like this were already doing it. You know that saying about no honor among thieves, right?

---

Read up on the pyschology of disinhibitors. There are likely many for whom this change will tip the scale.

---

A long-term relationship with a client IS the value. With my long-term clients (who currently make up 71% of the work I am doing here), things are easy. I know them, and they know me. I know their various styles, their brand's "voice" (all that initial homework is done), and I know they will return to me.

That's the best part, really: I can rely on them. (And they can rely on me.) They're not going to try to stiff me on some bogus complaint. They're not going to subject me to project creep. 

I'm really surprised you don't see the value in the relationship itself...and how much time and pain it saves the freelancer. That's gold.

Now. As far as a change in policy "tipping the scale" to somehow "make" a perfectly good, decent-minded client decide to throw away potential work in the future if they get caught, that's on the client. I mean this is like saying "if sales tax hadn't gone up, great people wouldn't resort to stealing." 1. Actual great people won't resort to stealing anyway. They'll figure something else out. (We've all done this in our own homes, probably - tightening our belts, OR seeking a better job or...whatever.) 2. That's not a good excuse to keep a business from making money. Fear tactics? Nah.

This is all fear in advance, really. None of this - the apparent upcoming rash of great clients deciding to hire off-platform because of a change in policy that makes UW money the same way the client has probably raised his/her rates in recent years, too - has even happened yet. And it might not happen. It almost comes off as threatening. Like: Upwork, you'd better keep things the way they were or people will steal from you...and be justified. Nope. I hope they catch a whole lot of sheisters attempting this and I hope said sheisters think twice on the next platform.

Everything is getting more expensive. And from the other direction (with the same basic result), everybody is reining in on generosity to an extent. Times are tough. If that means we're supposed to sit here and justify going against TOS, well, that's your take but it isn't everyone's take. We can agree to disagree. 🙂

[25005175]

Melanie, there is immense value in having a long-term relationship with a Client. You will not find me arguing against that, as I whole-heartedly agree with you. My point is that Upwork itself, as a 3rd party, must bring value to a long-term Client-FL relationship for that Client-FL pair to decide to remain on the platform. Nobody is arguing against long-term relationships. The argument is that Upwork's announced change will further incentivize long-term Client-FL pairs/teams to move their relationship(s) off-platform.

The question is not: should Freelancers continue their relationship with their long-term Clients? The question is: should FL-Client relationships continue to use Upwork as their joint medium?

Does that make more sense?

[celgins]

In that context, it will be very easy for Clients and Freelancers to meet via Upwork and then surreptitiously end the interview without hiring on Upwork, electing instead to work together off-platform.

I have a question about this: I think everyone agrees that this is against the TOS and unethical. However, are the TOS and ethics preserved if the freelancer/client relationship is established on Upwork; a single job is completed successfully; then both parties agree to work offline going forward?

I'm asking because I was completely unaware of the 2-year restriction for clients and I haven't researched it.

[25005175]

https://support.upwork.com/hc/en-us/articles/360048105134-Why-Can-t-I-Get-Paid-Directly-

https://support.upwork.com/hc/en-us/articles/360052511133-Circumvention-and-why-it-s-against-the-rul...

https://support.upwork.com/hc/en-us/articles/360043723533-The-Upwork-Conversion-Fee

ETA: Short answer to your query: no.

[celgins]

Thanks.

Just read through the links provided and I can see now--even more clearly--why circumvention is a problem for Upwork and why it will continue to be.

[yofazza]

I was completely unaware of the 2-year restriction.

Maybe because it's only on Upwork (afaik).

[celgins]

I am not sure either, but I can see why similar platforms would have similar policies in place. And, I am betting they have similar problems implementing said policies.

[tlsanders]

No,it's not. The restrictions on other platforms may not be exactly the same, but virtually all platforms have them. If they didn't, they'd go bankrupt, since they'd be spending more in marketing to acquire the client than they got in fees from one small job.

[melaniekhenson]

---

Clark S wrote:

In that context, it will be very easy for Clients and Freelancers to meet via Upwork and then surreptitiously end the interview without hiring on Upwork, electing instead to work together off-platform.

I have a question about this: I think everyone agrees that this is against the TOS and unethical. However, are the TOS and ethics preserved if the freelancer/client relationship is established on Upwork; a single job is completed successfully; then both parties agree to work offline going forward?

I'm asking because I was completely unaware of the 2-year restriction for clients and I haven't researched it.

---

It is definitely against TOS unless the client pays a fee of 13.5% of the freelancer's annual earnings.

https://support.upwork.com/hc/en-us/articles/360043210654-Convert-your-contract-to-move-outside-of-U...

Seriously, folks, don't. 

[data_divas]

The major problem I have with Upwork charging 10% instead of 5% on contracts over $10,000 is as a Top-Rated Plus freelancer who consistantly has 80-100% repeat long term clients is that I no longer feel recognized, appreciated or valued by Upwork for my hard work and accomplishments here.

[celgins]

I would probably feel this way too if I were Top-Rated Plus with mostly long-term clients. With the "simpler fee" approach, it appears that those high value, long-time contracts Jonathan spoke of are on the worst end of this fee update.

[25005175]

Exactly. I have a contract right now on which I expect to break $10k middle of the year. Very shortly after the 5% tier gets removed. So now, the only incentives to not go off-platform with that Client are:

1. No-hassle hourly billing and invoice management
2. Increasing revenue on my profile, which has marketing utility at my level.
3. Continuous positive impact on my JSS, which has marketing utility at my business stage.
4. Loss of Upwork network if caught and suspended. (At my business stage, that is a substantial setback)

I project that I will average $10k/yr with this Client  With the new change, I lose an extra $500/yr just in fees - $531.25 including state sales tax. I could purchase an annual book-keeping and tax preparation service, in addition to a minor marketing service, for that amount.

[celgins]

I think your list of incentives to stay on the platform is what many freelancers with long-term clients are grappling with.

As Julie mentioned--the feeling that your accomplishments and contributions are no longer being recognized, valued and appreciated--may be enough to drive many long-term contract holders from the marketplace without considering the incentives to stay.

[tlsanders]

I'm top rated plus with a lot of long-term clients, and I'm fine with it. If Upwork doesn't figure out a way to turn a profit, we'll all be making 0% on the relationships we would have formed here instead of 90%. It's faster and easier to connect with a new client and get to work here than any other channel I've ever used, and I've been freelancing for 33 years and get a lot of inquiries through referrals, LinkedIn, my website, etc. I never continue with a client on the site beyond the two-year mark, but as far as I'm concerned Upwork earns its keep by paying millions of dollars/month to draw clients here and is entitled to 10% for two years if that's what works for its business model.

For me personally, that's changing because Upwork is no longer advertising to my client base, but as long as the clients are here, I think that's a fair price. 

[celgins]

I agree--using Upwork is probably one of the fastest and easiest ways for freelancers and clients to facilitate the exchange of fees/services. I mentioned that I would likely feel less valued too, but I would probably stay for the same reasons.

[tlsanders]

Upwork is a service provider. They're not here to appreciate you for your hard work...you're not working for them. It's either profitable for you to use their services or it's not.

[dave_milne5]

---

Jonathan L wrote:

With the loss of the 5% fee tier, there will be little to no incentive to keep high value, long-time contracts on the platform. Previously, the value of automated billing/invoicing was high enough for freelancers to keep good, easy relationships on the platform at a 5% rate. A 10% cut, as many freelancers testified in the feedback to the announcement, exceeds the value of the platform at that stage.

But what about the 2-year restriction?

---

I'm not sure companies should be very happy about this either -- their best, longest term freelancers are going to raise their rates by 5% and upwork is also making new contracts more attractive. If I've worked with a client for a while, and their fee is 5%, but the fee for new work is 10%, then the other opportunity needs to be significantly better.

Upwork just leveled the fees, making new contracts more competitive with long term ones.

[d9fc6d8d]

Upwork should start working on policy changes that actually benefit the freelancers and clients, that's what they should do.

Half of my (already optimized) job feed consists of scam jobs every single day, I would say that's a more pressing issue.

[quared]

That's a very very bad decision from upwork.