Fiverr makes money primarily through transaction fees and service fees. The company follows a two-sided digital marketplace business model, where it needs to attract buyers (SME businesses) and sellers (freelancers) that enable the platform to grow. The company looks at two key metrics for its growth over time, repeat buyers and the spending per buyer over time. Fiverr generated $297 million in revenues in 2021 from 4.2 million active buyers with a spend per buyer of $242.
Business Model Element
Analysis
Implications
Examples
Value Proposition
Fiverr’s value proposition includes: – Diverse Services: Offering a wide range of digital services, from graphic design to copywriting and programming. – Freelancer Accessibility: Providing access to a global network of freelancers with various skills. – Cost-Effective Solutions: Delivering cost-effective services compared to traditional agencies. – Streamlined Platform: Offering an easy-to-use platform for service discovery and transactions. Fiverr appeals to businesses and individuals seeking a cost-effective and diverse range of digital services.
Attracts businesses and individuals seeking diverse digital services. Provides access to a global pool of freelancers with various skills. Offers cost-effective solutions compared to traditional agencies. Streamlines the process of finding and hiring freelancers for various tasks. Delivers a comprehensive value proposition in the gig economy.
– A wide range of digital services. – Access to a global network of freelancers. – Cost-effective solutions compared to traditional agencies. – An easy-to-use platform for service discovery and transactions.
Customer Segments
Fiverr serves the following customer segments: 1. Businesses: Companies looking for digital services, including startups and enterprises. 2. Entrepreneurs: Individuals seeking freelancers for project-specific tasks. 3. Freelancers: Individuals offering their services on the platform. 4. Agencies: Marketing and design agencies outsourcing work. Fiverr caters to a diverse range of customers, including businesses, entrepreneurs, freelancers, and agencies.
Attracts businesses in need of digital services for various projects. Provides a platform for entrepreneurs to find freelancers for specific tasks. Attracts freelancers looking to offer their services. Offers agencies a source for outsourcing work when needed. Diversifies customer segments for a broader market reach.
– Companies seeking digital services for projects. – Individuals looking to hire freelancers for specific tasks. – Freelancers offering their services on the platform. – Marketing and design agencies outsourcing work.
Distribution Strategy
Fiverr’s distribution strategy includes: – Online Platform: Operating a web-based platform for service discovery and transactions. – Mobile App: Offering a mobile application for on-the-go access. – Marketing and SEO: Utilizing digital marketing and SEO to attract users. – Rating System: Implementing a rating and review system for quality assurance. Fiverr ensures accessibility through its online platform, mobile app, digital marketing efforts, and a reputation system for quality control.
Provides convenience through a web-based platform and a mobile app. Attracts users through digital marketing and SEO efforts. Ensures quality through a rating and review system. Implements a multi-channel distribution approach for user accessibility.
– Operating a web-based platform for service discovery and transactions. – Offering a mobile application for on-the-go access. – Utilizing digital marketing and SEO to attract users. – Implementing a rating and review system for quality assurance.
Revenue Streams
Fiverr generates revenue through several streams: 1. Service Fees: Charging a percentage fee on transactions between clients and freelancers. 2. Fiverr Pro: Earnings from the premium service that connects clients with top-rated freelancers. 3. Fiverr Learn: Income from online courses and educational content. 4. Fiverr Business: Revenue from subscription-based services for businesses. Fiverr diversifies its income sources through service fees, premium services, education, and subscription-based offerings.
Earns revenue from fees charged on transactions between clients and freelancers. Generates income from premium services connecting clients with top-rated freelancers. Benefits from online courses and educational content. Adds to revenue through subscription-based services tailored for businesses. Diversifies revenue streams for financial sustainability.
– Earnings from fees charged on transactions between clients and freelancers. – Income from premium services connecting clients with top-rated freelancers. – Revenue from online courses and educational content. – Income from subscription-based services for businesses.
Marketing Strategy
Fiverr’s marketing strategy involves: – Digital Advertising: Running digital advertising campaigns to attract users. – Content Marketing: Providing educational content and blog articles. – Partnerships: Collaborating with other platforms and organizations for promotions. – Referral Program: Offering referral incentives for users who bring in new clients or freelancers. Fiverr focuses on digital advertising, content marketing, partnerships, and referral programs to build brand awareness and attract users to the platform.
Runs digital advertising campaigns for visibility and user acquisition. Provides educational content to showcase the value of freelancers. Collaborates with partners for joint promotions and marketing efforts. Encourages user referrals to expand the user base. Implements a well-rounded marketing strategy for brand growth.
– Digital advertising campaigns to attract users. – Educational content and blog articles to showcase the value of freelancers. – Collaborations with other platforms and organizations for promotions. – Referral incentives for users who bring in new clients or freelancers.
Organization Structure
Fiverr’s organizational structure includes: – Executive Leadership: Led by the CEO, responsible for strategic direction. – Service Categories: Organized teams managing specific categories of services. – Customer Support: Providing customer support services to address user inquiries. – Technology and Development: Overseeing platform development and innovation. Fiverr maintains a structure aligned with core functions for efficient platform operation.
Led by the CEO, responsible for strategic direction and growth. Manages teams organized by service categories. Offers customer support for user assistance and inquiries. Focuses on technology and development for platform enhancement. Maintains a well-structured organization for efficient operation.
– Led by the CEO, responsible for strategic direction and growth. – Teams organized by service categories. – Customer support for user assistance and inquiries. – Technology and development for platform enhancement. – A well-structured organization for efficient operation.
Competitive Advantage
Fiverr’s competitive advantage stems from: – Diverse Freelancer Pool: Offering access to a global network of freelancers with various skills. – User-Friendly Platform: Providing an easy-to-use platform for both clients and freelancers. – Cost-Effective Solutions: Delivering services at competitive prices compared to traditional agencies. – Fiverr Pro: Attracting clients with premium freelancers for high-quality work. – Fiverr Business: Catering to the needs of businesses with subscription-based services. Fiverr’s strengths in freelancer diversity, user-friendliness, cost-effectiveness, premium services, and business offerings make it a competitive player in the online freelance marketplace.
Distinguishes itself with a diverse pool of freelancers worldwide. Offers a user-friendly platform for convenient transactions. Provides cost-effective solutions compared to traditional agencies. Attracts high-quality work through Fiverr Pro. Serves business needs with subscription-based services. Enjoys a competitive edge in the online freelance marketplace.
– Access to a global network of freelancers with various skills. – An easy-to-use platform for both clients and freelancers. – Cost-effective solutions compared to traditional agencies. – Premium freelancers for high-quality work (Fiverr Pro). – Subscription-based services for businesses (Fiverr Business). – A competitive edge in the online freelance marketplace.
Two Israeli entrepreneurs, Micha Kaufman and Shai Wininger, had an idea for a two-sided digital marketplace that could offer any “micro gig” on their platform.
Thus, in 2010, they launched Fiverr. The marketplace went live in 2010 with a few live categories.
Today Fiverr offers services in many categories ranging from web design to editing, writing, development, and more.
Our mission is to change how the world works together.
Starting from the mission statement helps understand where Fiverr unlocked customers’ value that helped it scale over time.
Often this mission is a simple idea that solves a simple issue.
Indeed, Fiverr started with the idea that people “should be able to buy and sell digital services in the same fashion as physical goods on an e-commerce platform.”
On the premise of that idea, Fiverr developed as a marketplace for digital goods and services, which got built similarly to e-commerce selling physical products, with a built-in efficient search and smooth transaction process.
To understand what problems Fiverr solves, we need to look at its value proposition and break it down.
Breaking down the Fiverr value proposition
When a company successfully unlocks growth, that happens for several reasons and the alignment of several factors.
One of the key ingredients that help reach a scale is a real understanding of a problem to solve for a group of people. Be them a hundred, a thousand, or over a million.
In most cases, allowing a business model to be viable takes more than just figuring out how to deliver a product and a service.
And in many cases, a business model becomes viable only if it enables several players to gain something in interacting with the organization that built and delivered that business model.
That something can be related to advantage, pain relief, or emotional relief.
But it needs to be designed to address several needs based on the key players that will make the business successful in the first place.
Buyers: businesses of all sizes that need to outsource digital activities
And sellers: mostly freelancers looking for the opportunity to gain some financial freedom for themselves
It is important to remark that often those changes are part of broader societal and cultural changes enabled by development in technology.
Thus, when an organization spots a pattern affecting society, it can capture that to offer and craft its value proposition.
Some of the macro changes and trends that affected Fiverr success can be traced back to some key trends:
What Fiverr calls the “Do-it-for-me movement,” or the willingness of professionals to outsource part of their work to freelancers
More companies are relying on temporary talent, as digital platforms allow those organizations to hire freelancers on-demand
Flexibility and choice: freelancing grows in popularity as more professionals want to have the option of when and where to work
Technology and digitalization enable those shifts by allowing on-demand transactions from anywhere in the world.
Fiverr value proposition to buyers
Source: Fiverr F-1 Form
(The buyers’ experience on the platform: Buyers can browse hundreds of services and look at reviews from other buyers to assess what is the most suited freelancer for the job)
The company points out five many values buyers get out of the platform:
Value for money: Through a frictionless platform with a wide array of digital services catalog with filtering functions, which reduced the time needed to find the right freelancer for the job
Extensive inventory of digital services:As of 2019, Fiverr offers 200 categories of services with prices ranging from $5 to thousands of dollars
A diverse pool of freelancers:In 2019, Fiverr already had hundreds of thousands of freelancers with a broad set of skills
Clear price, the scope of work, and quality of service:With a buyer-driven rating system, the company claims to provide a “transparent quality rating mechanism” to make informed decisions.
Trusted brand: The company focuses on dispute resolution and customer service to enable repeat purchases on the platform
Fiverr value proposition to sellers
Source: Fiverr F-1 Form
(Example of The Seller Analytics Platform that enables sellers to track their progress and see all their transactions on the platform)
Maximize project pipeline: Fiverr directly matches freelancers with buyers looking for the service they provide so that they can focus on the service offering.
Flexibility and control:Freelancers can offer their services wherever they want.
Frictionless payment processing
Credentialed storefront (seller page): Where freelancers can showcase their services. This is almost like a website but easily manageable through the platform.
Business support: This helps sellers manage support to the customers acquired through the platform.
Success management and support:Sellers also get support from the platform on managing their services, for instance, with tools to track their performance over time.
Unlocking the marketplace liquidity by generating network effects
The Amazon Flywheel or Amazon Virtuous Cycle is a strategy that leverages customer experience to drive traffic to the platform and third-party sellers. That improves the selections of goods, and Amazon further improves its cost structure to decrease prices that spin the flywheel.
In Fiverr’s case, that is the selection of available and competent freelancers on the platform.
To do that, the company has used several injections of capital (over a hundred million in total funding by 2019, before the IPO) to inject liquidity on the offering side.
Indeed, although the company popularized the term “Gig,” which is a microtransaction starting at $5, in 2011, just a year after its launch, there was the first transaction that passed the $5 mark.
In 2015, as Fiverr needed to expand its freelancers’ basis further, it allowed them to set their minimum prices.
Another critical metric the company uses to track its success is repeat buyers.
Those that come to the platform make more purchases throughout the year.
Thus, the Fiverr intended flywheel looks something like the following:
Seller support services help freelancers worry only about providing a good service, attracting freelancers looking to make a living.
Buyers can browse through hundreds of freelancers and look at their reviews and seller reputation to understand who will provide the best service at an affordable price.
Buyers complete transactions successfully.
When completing transactions, they are offered discounts to refer to the service.
More buyers join in, and one-time buyers become repeat buyers.
At the same time, sellers can further build their reputation on the platform.
The seller base grows, which allows Fiverr to expand its catalog of “Gigs.”
Thus making the overall platform more valuable to users.
And allowing more buyers to join in.
Breaking down Fiverr overall business model
Fiverr makes money primarily through transaction fees and service fees.
As a marketplace model, most Fiverr revenue comes from transaction fees and service fees based on the total value of transactions processed through the platform.
In 2021, the company made over $297 million in revenues and over $65 million in net losses.
As a marketplace trying to grab shares of a new industry, Fiverr is in blitzscaling mode, and this can also be noted by the fact that, as of 2021, the majority of the company’s expenses are in sales and marketing activities.
As the company has not had a direct sales force, those expenses are driven primarily by aggregating online advertising spending across various channels, including search engine optimization, search engine marketing, video, and social media used for buyer acquisition.
According to SimilarWeb data, Fiverr had more than sixty million monthly visits in the last months.
With an age distribution primarily skewed toward 25-34 years old.
Coherently with being a digital marketplace, Fiverr’s extensive digital reach enables it to attract almost forty million visits on the platform each month.
It’s important to remark that for a company to have a viable business model, it also needs to align its profit formula to manage an efficient cost structure and processes that drive growth over the years.
Fiverr revenue is diversified from a broad mix of digital services spanning 200 categories and eight verticals that go from:
Graphics & Design,
Digital Marketing,
Writing & Translation,
Video & Animation,
Music & Audio,
Programming & Tech,
Business and Lifestyle
Fiverr North Star metrics
Each company has to have a few key metrics to measure its business’s success.
Of course, each internal department will have different parameters based on what processes they have control over.
For instance, the SEO department might look more at the organic traffic acquisition over time or the conversion rates of buyers based on ad spending.
However, at a financial level, the company has two key metrics to measure its success:
Repeat buyers.
And spend per buyer.
Indeed, in 2021, the company grew its repeat buyers compared to first-time buyers.
In 2021, Fiverr’s revenue growth was driven primarily by the growth of active buyers and spending per buyer.
For the years ended 2021, 2020, and 2019, its revenue was $297.7 million, $189.5 million, and $107.1 million, respectively.
These favorable dynamics provide us with revenue visibility and predictability.
As repeat buyers keep using our platform, placing additional orders, and ordering higher value and cross-category services, we benefit from growing buyer lifetime value.
Repeat buyers generally increase spending on Fiverr over time.
For 2021, repeat buyers contributed 59% of Fiverr revenue on its core marketplace, up from 55% in 2020.
Marketplaces usually rely on as many value propositions as many are the key players interacting on the platform. As a two-sided platform, Fiverr has to offer a compelling value proposition to both buyers and sellers
As the company has not a direct sales force, it spends most of its resources on acquiring buyers through digital acquisition channels, like search engine optimization, search engine marketing, and social media
The company still runs at an operating loss, which makes its business model still lack the profit formula
Any company has to have a few key metrics to assess its success over time. Fiverr, in particular, looks at the repeat buyers and the spend per buyer as critical metrics.
Key Highlights
Business Model and Growth Strategy:
Fiverr operates as a two-sided digital marketplace connecting freelancers (sellers) with businesses (buyers) seeking digital services.
The company focuses on attracting both buyers and sellers to enable growth.
Key growth metrics are repeat buyers and spending per buyer over time.
Fiverr generated $297 million in revenue in 2021, with 4.2 million active buyers and a spend per buyer of $242.
Background and Mission:
Fiverr was founded in 2010 by Israeli entrepreneurs Micha Kaufman and Shai Wininger.
The company’s mission is to change how the world works together by offering a platform for buying and selling digital services.
Fiverr started with the concept of “micro gigs” and has since expanded into various service categories.
Value Proposition to Buyers:
Buyers benefit from value for money through efficient search and filtering options.
The platform offers a wide array of digital services across 200 categories with transparent pricing.
A diverse pool of freelancers with varied skills is available.
Clear pricing, scope, and quality information, along with a buyer-driven rating system, help in making informed decisions.
Fiverr’s focus on dispute resolution and customer service builds trust for repeat purchases.
Value Proposition to Sellers:
Sellers are directly matched with relevant buyers, allowing them to focus on their services.
Freelancers enjoy flexibility and control over their work.
Frictionless payment processing and tools like the Seller Analytics Platform are provided.
Credentialed storefronts allow freelancers to showcase their services, enhancing their online presence.
Business support and success management tools assist sellers in managing their services and performance.
Marketplace Liquidity and Network Effects:
Fiverr’s success relies on the availability of competent freelancers on the platform.
The company has injected capital to expand its freelancer base and improve the selection of services.
The platform’s flywheel involves attracting buyers and sellers, encouraging repeat purchases, and expanding the seller base, leading to an ever-growing selection of services.
Revenue Model and Financials:
Fiverr generates revenue primarily through transaction and service fees.
The company reported over $297 million in revenue in 2021 but incurred net losses of over $65 million.
As of 2021, sales and marketing expenses are significant due to online advertising for buyer acquisition.
Key Metrics:
Fiverr’s success is measured by the growth of repeat buyers and the spending per buyer.
Repeat buyers accounted for 59% of revenue in 2021, showcasing the platform’s ability to retain customers and encourage higher spending.
Overall Takeaways:
Fiverr’s marketplace model is based on two-sided interactions between buyers and sellers.
The company has capitalized on societal trends like outsourcing, temporary talent, and the growth of freelancing.
While Fiverr has achieved revenue growth, it continues to operate at a loss as it focuses on rapid expansion.
Critical to Fiverr’s growth are its digital marketing efforts and the ability to maintain network effects through a growing selection of services.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
