Who will be the biggest losers from the Upwork IPO?

First of all, I firmly believe the world will benefit tremendously from more widespread adoption of online work marketplaces. If that is true, the IPO is not zero-sum and there will be more winners than losers.

The Upwork IPO was a massive success and assuming it will lead to faster growth in online work, the likely losers are:

  1. American Designers and Developers: Online work marketplaces essentially lowers barriers to trade in services between countries and the winners and loosers should be the same as what is seen in normal free trade in goods. E.g. cheap Chinese exports are not great for US manufacturing. In the same way, when the entire Indian subcontinent is able to work online and already speaks good english that certainly means more competition. The competition will be less fierce in Europe where local language skills adds a bit of protection for native workers
  2. Full-time workers: The advent of online work makes it much easier for firms to hire flexible workers. All else equals, more demand for flexible workers leads to increased wages to flexible workers and reduced wages for full-time workers.
  3. Potentially Freelancer.com, PeoplePerHour.com, Guru.com. There is a lot of speculation and different view-points around how the market structure will develop for online work. Today, the market structure for the services offered on UpWork (design, development, writing etc) is highly fragmented with a range of small agencies, consultancies and other small companies. Many of them use UpWork to get new leads and there is a chance UpWork will develop into a winner-takes-all solution for online marketing for all of these smaller players. If that happens the ‘pure open marketplaces’ like Freelancer, PPH and Guru will be the big losers. Sites such as 99Design.com (contests) and Fiverr.com (online checkout) have differentiated a bit more and might be more protected in this scenario. It is worth noticing that Freelancer.com, which is listed on the Australian Securities Exchange, responded positively to the surprisingly bullish UpWork IPO so ‘the market’ does not seem to worry about Freelancers prospects.

It is important to note that online work is much smaller than most people think, with a gross volume for all players combined of some $6.5B in 2017. It will be 100x that over the next decades and our view is that UpWork plays a tremendously important role in providing the ‘liquidity’ (ie. talented internet freelancers) to the market and that this will benefit almost everyone.

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