In today’s investment idea, we explore the key drivers behind our investment in Upwork Inc. (UPWK) and Fiverr International Ltd. (FVRR) two of the main players in the ‘gig economy’.

An Alternative for those who can’t get jobs

On the labour demand side, higher wage demands, labour laws and trade unions have made hiring an employee highly costly. For businesses, Fiverr & Upwork lower labour costs, instead of employing they can just get a freelancer to do it without meeting all the labour law requirements in favour of employees. The investment idea is based on the premise that going forward businesses will ‘hire’ and engage freelancers ‘as-and-when’ they are needed for projects instead of hiring full-time.

On the labour supply side, graduates are still being pumped into the market even at record-high graduate unemployment levels. The number of job applicants/candidates is still very high relative to job openings people can’t get jobs but still need to make ends meet. Fiverr & Upwork become a way for people to monetise their skills without having to take up lower-income jobs. Fiverr is the perfect solution for those who, on one end, can’t get a job and on the other hand, don’t want to ‘hustle’ and start a business to ‘be their own boss’.

Some of the risks to the company has been that businesses will take advantage of the rise of artificial intelligence (AI) tools as alternatives to certain freelance services. For instance, tasks like content creation or basic graphic design can now be performed by AI, reducing the need for freelancers and impacting the number of active buyers seeking such services

Fiverr and Upwork are two of the most prominent players in this space. While Fiverr focuses on a vast array of microservices—from graphic design and digital marketing to programming and writing—Upwork caters to larger, more complex projects with a market share of about 40%, compared to Fiverr’s 15%. This competitive landscape means that both platforms have their unique strengths and cater to different segments of the freelance market.

Fiverr: Investment Idea

Our main investment is in Upwork as it presents better fundamentals (business and financial results) and is the market leader. However, we provide our analysis on Fiverr to avoid repetition.

Fiverr (FVRR) sits at the crossroads of a transformative labor market, leveraging the growing shift toward flexible, on-demand work. The platform’s dual revenue streams—primarily transaction fees (74%) and service fees (26%)—are well positioned to benefit from businesses’ cost-cutting initiatives in place of full-time hires, as well as from a vast supply of freelancers eager to monetize their skills amid high graduate unemployment.

However, several challenges lie ahead:

User Metrics & Engagement:

The persistent decline in active users and the lack of transparency around key metrics such as GMV suggest that current platform engagement is weakening. This raises concerns about Fiverr’s ability to drive repeat purchases and sustain transaction volumes over the long term.

Risks from AI & Technological Disruption:

The rapid evolution of generative AI tools poses a dual challenge. While AI can substitute for lower-skilled gigs—potentially reducing demand—it also offers an opportunity if Fiverr successfully integrates AI (through its Fiverr Go initiative) to empower freelancers and drive efficiency.

Ambitious Strategic Initiatives:

The management’s operating plan, including the launch of Fiverr Go, the Freelancer Equity Program, and an upmarket expansion strategy, is bold and plans carry significant execution risks, and any missteps could further erode user engagement and market share.

Overall Outlook:

Fiverr’s future lies on its ability to reverse declining user trends, navigate competitive pressures, and integrate new technologies effectively. While macro trends in the gig economy remain favorable—with a projected CAGR of around 16%—the company must overcome internal challenges and external disruptions to unlock sustained top-line growth. Investors should closely monitor upcoming earnings for signs of improved user engagement, robust GMV reporting, and successful rollout of strategic initiatives, as these will be key catalysts in determining Fiverr’s long-term success.

Upwork: Tapping Into Bigger Opportunities

In contrast, Upwork has carved out a niche for itself by focusing on larger, longer-term projects. With a robust bidding system that allows businesses to post detailed job listings, Upwork attracts a wide range of professional services. Its emphasis on building long-term client relationships and providing secure payment systems has made it a favorite among businesses looking for reliable, scalable freelance solutions.

For individuals, Upwork represents an opportunity to engage in projects that are more complex and, often, better compensated than the quick gigs found on Fiverr. The platform’s global reach means that freelancers can access a diverse pool of opportunities, even when local job markets are tight. Yet, like Fiverr, Upwork is not without its challenges—chief among them, intense competition and high fees that can erode take-home earnings for freelancers.

Conclusion

Both Fiverr and Upwork are well-positioned to benefit from ongoing macroeconomic trends:

• Cost Efficiency for Businesses: As companies continue to seek ways to lower operational costs, outsourcing project work to freelancers becomes an attractive alternative to full-time hires.

• High Supply of Talent: With an ever-increasing number of job seekers looking to monetise their skills, freelance platforms are seeing a steady influx of talent ready to work on a flexible basis.

• Digital Transformation: The acceleration of digital initiatives across industries fuels the demand for services like graphic design, programming, and digital marketing—all areas where freelancers excel.

At the same time, potential risks loom. Advancements in artificial intelligence could disrupt certain low-skilled gigs, and fluctuating user engagement metrics indicate that maintaining a loyal customer base is an ongoing challenge. Yet, the adaptability of these platforms—and the innovative strategies they’re deploying—suggests that they will continue to play a crucial role in the future of work.

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