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Upwork: Difference between revisions
→Upwork Business Model
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The fee that Upwork derives from marketplace and managed service users makes up the take rate. Upwork's take rate has been growing since Q2 2022 when the company introduced a new pricing structure for clients<ref>https://www.investmentwiki.org/wiki/Upwork#:~:text=Once%20clients%20hire%20a%20freelancer%2C%20they%20pay%20a%20processing%20fee.%20This%20is%20usually%205%25%2C%20but%20some%20US%20clients%20who%20are%20eligible%20for%20ACH%20bank%20transfers%20pay%203%25.</ref>. According to the former CFO Jeff McCombs, the new pricing structure boosted the take rate in Q2 and Q3 of 2022. However, going forward, the take rate will benefit from the enterprise segment which has a higher take rate and is growing faster than the non-enterprise segment. The take rate will also rise due to project catalog and talent scout which also have a higher take rate<ref name=":4" />. Enteprise segment has a take rate of 10%<ref>https://support.upwork.com/hc/en-us/articles/218373797-Work-with-Enterprise-Clients#:~:text=Upwork%20Enterprise%20contracts%20generally%20have,a%20flat%2010%25%20service%20fee.</ref> while project catalog and talent scout are likely to have a take rate of 20% as those using it are mostly new users<ref>https://www.upwork.com/i/how-it-works/freelancer/</ref><ref>https://support.upwork.com/hc/en-us/articles/1500011272182-Talent-Scout-for-Clients</ref>. Given that clients are not obligated to use the enterprise tools, project catalog or talent scout, we believe that the rising take rate will not make the site less appealing. [[File:Upwork Market Share.png|thumb|370x370px|https://seekingalpha.com/article/4447421-upwork-perfectly-priced-reflecting-slowing-revenue-growth]] | The fee that Upwork derives from marketplace and managed service users makes up the take rate. Upwork's take rate has been growing since Q2 2022 when the company introduced a new pricing structure for clients<ref>https://www.investmentwiki.org/wiki/Upwork#:~:text=Once%20clients%20hire%20a%20freelancer%2C%20they%20pay%20a%20processing%20fee.%20This%20is%20usually%205%25%2C%20but%20some%20US%20clients%20who%20are%20eligible%20for%20ACH%20bank%20transfers%20pay%203%25.</ref>. According to the former CFO Jeff McCombs, the new pricing structure boosted the take rate in Q2 and Q3 of 2022. However, going forward, the take rate will benefit from the enterprise segment which has a higher take rate and is growing faster than the non-enterprise segment. The take rate will also rise due to project catalog and talent scout which also have a higher take rate<ref name=":4" />. Enteprise segment has a take rate of 10%<ref>https://support.upwork.com/hc/en-us/articles/218373797-Work-with-Enterprise-Clients#:~:text=Upwork%20Enterprise%20contracts%20generally%20have,a%20flat%2010%25%20service%20fee.</ref> while project catalog and talent scout are likely to have a take rate of 20% as those using it are mostly new users<ref>https://www.upwork.com/i/how-it-works/freelancer/</ref><ref>https://support.upwork.com/hc/en-us/articles/1500011272182-Talent-Scout-for-Clients</ref>. Given that clients are not obligated to use the enterprise tools, project catalog or talent scout, we believe that the rising take rate will not make the site less appealing. [[File:Upwork Market Share.png|thumb|370x370px|https://seekingalpha.com/article/4447421-upwork-perfectly-priced-reflecting-slowing-revenue-growth]] | ||
=== Business Model Developments === | |||
March 16, 2023. Upwork abolished freelance reducing-tier fee of 20/10/5%. As such, effective May 3, 2023, the freelancer service fees will be 10% for all new contracts regardless of contract value. The company said that "Contracts that already qualify for a 5% freelancer service fee will continue at 5% through the end of 2023." The new pricing will not affect Upwork Payroll, Any Hire, Direct Contracts, Bring Your Own (BYO), Enterprise Clients, and Talent Scout<ref>https://support.upwork.com/hc/en-us/articles/211062538-Freelancer-Service-Fees#exceptions</ref>. | |||
Upwork also contract initiation fee. Effective April 26, 2023, Upwork will charge clients on its Marketplace and Project Catalog a one-time contract initiation fee of $4.95 per contract on new contracts. This is in addition to 5% (or discounted 3% for US eligible clients) transaction fee<ref>https://support.upwork.com/hc/en-us/articles/4660220468499-Client-Marketplace-Plan</ref><ref>https://discord.com/channels/978370501237932092/980154415216476180/1088080968167993395</ref>. | |||