How Does Upwork Make Money? The Upwork Business Model In A Nutshell

Upwork is an American freelance platform, formerly known as Elance, Odesk, and Elance-Odesk, founded in 1998 in a Jersey City apartment by Srini Anumolu and Beerud Sheth. The company turned into a multi-billion dollar business by 2018, when it listed on the Nasdaq. Upwork makes money through service and transaction fees and clients’ memberships.

Origin Story

Upwork is an American freelance platform, formerly known as Elance, Odesk, and Elance-Odesk.

The platform was founded in 1998 in a Jersey City apartment by Srini Anumolu and Beerud Sheth. The following year, the small company of just 22 employees relocated to Silicon Valley and released the Elance Small Business Marketplace.

Operating as Elance, the company merged with similar platform Odesk late in 2013 and was later rebranded as Upwork. Today, the platform matches freelancers with individuals or businesses who require as-needed and sometimes highly specialized work. Categories include article writing, data science, accounting, and web development.

In 2018 Upwork had an IPO on the Nasdaq stock exchange, raising $187 million to be valued at $1.5 billion.

Upwork revenue generation

Upwork drives revenue via two main sources.

Service and transaction fees

When an Upwork user successfully bills a client, they are charged a service fee.

The exact amount is based on the total amount the freelancer collects per engagement relationship. That is:

  1. A 20% rate for work totaling less than $500.
  2. A 10% rate for work totaling between $500.01 and $10,000.
  3. A 5% rate for work totaling $10.000.01 and above.

It should be noted that the service fee is a sliding fee based on the lifetime earnings a freelancer receives from a specific client. In other words, incorporating all hourly and fixed-rate contracts. An agreement of $4,000 for a new project will see the freelancer billed 20% for the first $500 and 10% for the remaining $3,500.

Job supply on the platform is maintained by allowing businesses to post a job free of charge. There is also no fee to join the platform.

Upwork also charges a transaction fee of 3% for handling and then processing each transaction.

According to earnings reports, these fees account for around 90% of total company revenue. These earnings are comparable to competitors such as Fiverr that charge a flat 20% transaction fee to all freelancers.

Client membership

This is a subscription plan for businesses looking for freelancers.

The Basic plan is free of charge and enables hiring managers to vet freelancers and use built-in collaboration tools.

For those desiring more flexibility, there is a single paid option:

  1. Upwork Plus ($49.99/month) – for small businesses looking for ongoing work opportunities. Functionality includes access to a free Featured Job each month, more freelancer invitations per post, and partnering with a Talent Specialist. Service and transaction fees are still applicable on Upwork Plus.

Key takeaways:

  • Upwork is an American freelance platform, with former incarnations including Odesk and Elance. It was founded in 1998 by Srini Anumolu and Beerud Sheth in a Jersey City apartment.
  • Upwork makes most of its money via service and transaction fees. Services fees are based on the dollar amount of each project while the company charges a flat transaction fee for handling the payment.
  • Upwork Plus is a paid subscription plan for businesses who need ongoing access to talent, though it does not absolve them from paying the aforementioned service and transaction fees.

Read Next: How Does Fiverr Work And Make Money, WeWork Business Model In A Nutshell, How Does Shopify Make Money, How Does PayPal Make Money.

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