The overall market for online work was over $1 billion in 2012 and the top companies in the space (oDesk, Elance and Freelancer.com) are growing at 60-100% per year. As this market evolves, it’s fragmenting into different types of online work, each with a specific purpose and value proposition.
Let’s take a look at the different types of online work:
The concept here is that multiple people work small tasks. The payment for an individual task can be as little as 1 cent. Some examples include: finding company contact information, transcription or really any task that can be done by multiple people at the same time.
With 99designs a company will post a brief for a design, and then several designers compete to create the winning design. Only the winning designer gets paid. Often a company will receive over 100 competing designs. This contest approach is most commonly used for graphic design projects, but it has also been used with other types of work such as brainstorming company names.
Small fixed-price projects (requested by the employer)
This is where a company needs a relatively small project completed (usually less than $5k but sometimes up to $25k). The company posts a project description and accepts bids from workers who are willing complete the project. The average project on Elance of this type is around $200.
Small fixed-price projects (set by the worker)
This is a different approach to the concept of fixed price projects. Rather than the company posting a project description, the worker posts the project, essentially indicating, “This is the project I can do for X price”.
For example, Fiverr is a marketplace where all the projects cost only $5. PeoplePerHour.com is a UK based marketplace that is similar to oDesk and Elance, however they also have the concept of “hourlies” which is a fixed cost for what a person can do in a few hours.
Larger complex fixed-price projects
This might be to build a complex website with multi-page specification documents, and with a budget of $25k or more. My view is that these types of projects are very rarely completely successfully on these platforms because of the risk involved. It is simply impossible to predict how long a complex project will take to complete.
In most cases the specifications will change as the project progresses. Freelancers will try and negotiate hourly pay for this type of project. Some freelancers will bid a fixed price out of desperation, but in most cases the project runs into a brick wall as soon as the employer or the freelancer discovers the level of complexity involved.
Niche online work marketplaces
There are several online work marketplaces that focus on a specific niche. Some examples:
- Voices.com is the definitive leader for finding talented voice-over artists.
- PopTent.com is focused on for filmmaking and video commercials.
- InnoCentive.com is for innovation challenges.
- UserTesting.com is a simple way to test a website or mobile app for usability
Hourly occasional work
(Market leaders are oDesk.com and Elance.com)
Some companies hire people online for occasional part-time work and pay by the hour. Often the workers use software that tracks time worked and also takes screenshots of their computer screen to prove that they are working.
Hourly full time and part time work
Many companies have work that requires full time people. This is the market we’re focused on at Staff.com. In our view the biggest potential for the online work space lies in this area of long term work. While project-based work is useful for many purposes (like getting a logo built for example), a long term working relationship where employees work in the day to day operation of the business is a huge opportunity that companies are only beginning to tap into online.
In my view, the problem with part time project based work is that workers are never fully committed to the company they’re working for. They’re constantly distracted by new clients. It can be that at a critical moment that person is not available. Another problem with temporary work arrangements is that the worker may not be earning enough to sustain a living and so they end up needing to look for something else more reliable.
To end, here are some trends that I see for the future for online work:
- Continued growth in the space – I believe that all areas of online work will continue to grow, including fixed price projects. oDesk the market leader grew 60% to $360 million in gross revenue in 2012. 99designs has awarded over $50 million in prize money and hosted 205,302 contests on their site. That’s a lot of designs!
- Online work marketplaces will hit the mainstream – It’s hard to imagine a Fortune 500 company using a site such as fiverr.com (paying $5 for an individual job). In fact most of these online work marketplaces have not been built to serve enterprise customers. The work is extremely low cost, but the quality is often also low. However this is changing. Fortune 500 companies such as NBC and HP are starting to use these marketplaces, and will continue to do so in the future as they see the benefits of low cost and the flexibility of online work models.
- Quality, not rock bottom prices – The future I believe is towards companies hiring quality workers at a reasonable cost; not at rock-bottom prices. For example if you visit oDesk.com and post a job for an SEO professional you may get 200 bids, with over 80% of them originating from Bangladesh and India, in many cases at $1 per hour from people with very poor English skills. A small business might be willing to spend the time to weed through these candidates and find the person they are looking for, but larger enterprises aren’t likely to be willing to go through the pain of filtering out so many under-qualified applicants.
- Companies will hire more full time cloud-based workers – A $200 project on Elance is not going impact a Fortune 500 enterprise in any significant way. In fact it’s too cheap for a large company to take it seriously. The exciting opportunity now for more companies to consider hiring full time in the cloud.
In the future we will see a lot more flexible cloud-based hiring with workers attending interviews and working virtually from around the world. The benefits for companies hiring in this way are enormous, including the access to a global talent pool, significant cost savings, 24/7 operation of their business and greater flexibility of their workforce.
What are your thoughts about the space of online work and where the market is heading? Share us your thoughts in the comments section below!
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