How Fiverr works and its Economic model

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14 Nov 2023

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Fiverr operates an online marketplace platform that allows freelancers to list and sell a wide range of digital services as "gigs" at pre-set prices, starting at $5. Buyers can search for specific services or browse categories to purchase gigs and work with freelancers.

Key components of Fiverr's platform include:

Gig Listings - Freelancers create gigs detailing the services they offer, prices, delivery timelines, and packages. Gigs start at $5 but can be offered at higher tiers.
Service Catalog - Buyers can search or browse Fiverr's catalog categorized by graphics & design, digital marketing, writing, video, programming, and more.
Ratings & Reviews - After completing orders, buyers and sellers leave public ratings and reviews to establish reputations.
Requests & Messaging - Buyers can send requests to discuss project details and message freelancers before and after ordering.
Gig Packages & Add-ons - Sellers can create custom packages and additional a la carte add-ons to expand their offerings.
Order Tracking - An online dashboard allows buyers to track order statuses and progress.
Digital Delivery - Completed orders are delivered directly through Fiverr's platform. No physical goods.
Fiverr Payments - Fiverr processes payments from buyer to freelancer after order completion, taking a commission.
Mobile Apps - iOS and Android apps allow managing gigs and orders on-the-go.

This marketplace model connects buyers and freelancers directly for purchasing digital services online in a seamless way.

Economic Model

Fiverr earns revenue through a variety of transaction-based fees from the freelancers selling services on its platform. This allows Fiverr to benefit and scale as freelancer business grows.

Key aspects of Fiverr's economic model include:

Gig Fee - Fiverr charges the seller a $0.50 fee per gig purchased. This applies to all base packages.
Service Fee - Fiverr also takes a 20% service fee from the first $500 a freelancer earns on orders each month. Above $500, the fee drops down to 10%.
Additional Fees - Additional surcharges apply for purchases of gig extras, subscriptions, tips, and having faster delivery speeds.
Fiverr Pro - Freelancers pay monthly subscription fees of $9.99 to $129 to be highlighted as Pro sellers and reduce service fees.
Withdrawal Fees - When withdrawing earnings to bank accounts, freelancers are charged a fee of $1 to $2 depending on withdrawal method.
Level Up - Fiverr's training courses and coaching packages for freelancers range from $29 for online courses up to $599 for 1-on-1 coaching.
Advertising - Freelancers can pay to promote their gigs and have them featured prominently in search results.
Upselling Features - Sellers pay additional fees for upgrades like highlighting their gig profiles, adding badges, or being featured in newsletters.

Fiverr benefits from a growing active user base on both the buyer and seller side by taking a share of the transaction value without the overhead costs of managing freelancers.

Benefits for Freelancers

Joining Fiverr offers independent freelancers some unique advantages:

Minimal Startup Effort - Can create an account and launch a gig listing in minutes. Easy for beginners.
Low Barrier to Entry - With gigs starting at $5, new freelancers can quickly start building sales and reviews.
Preset Pricing - No need to set hourly rates or bid on projects. Pricing is controlled by the freelancer.
Buyer Traffic - Exposure to millions of active buyers browsing Fiverr for services daily.
Turnkey Delivery - No long-term projects. Most services can be delivered directly through Fiverr's system.
Flexible Work - With preset gig packages requiring minimal effort, freelancers can come and go as they want.
Potential to Upsell - Can offer upgraded packages, add-ons, and subscriptions to loyal customers.
Global Reach - Fiverr handles translation and marketing to buyers worldwide.
Rating System - Completing orders and earning 5-star reviews builds a seller's reputation for more sales.
Promotion Opportunities - Top rated sellers get designated badges, placement in newsletters, and are highlighted to buyers.
Keep 80% Earnings - Fiverr's 20% base service fee means sellers keep most of what they earn.
Payment Handling - Fiverr handles collecting from buyers, resolving disputes, and paying sellers securely.

Fiverr makes launching a freelance business very quick and simple for anyone with skills to share online.

Benefits for Buyers

For buyers, purchasing services through Fiverr offers the following advantages:

Low Cost Services - The $5 starting prices allow businesses to get digital work done affordably.
Flexible Purchasing - No commitment required. Buy individual services or bundles on-demand.
Fast Turnaround - Many gigs are delivered within 24 hours. Good for urgent needs.
Results-Only - Buyers only pay for the end product or service delivered through Fiverr.
No Negotiation - Gigs have pre-set pricing so no need to negotiate or compare bids.
Quality Vetting - Can view seller stats, reviews, and portfolios to evaluate work quality.
Clear Expectations - Gig packages and inclusions are presented upfront so buyers know what to expect.
Service Variety - Choose from over 300 categories from writing to animations to voice overs and more.
Order Tracking - Dashboard allows monitoring gig progress from start to finish.
Secure Payments - Fiverr handles payment exchanges and mediates disputes for buyer protection.
Global Access - Remove geographic limits and hire freelancers from around the world.
Scalability - Can purchase one-off gigs or build ongoing relationships with top sellers.

By standardizing services and pricing, Fiverr makes hiring freelancers online easier, faster, and less risky for buyers.

Fiverr Impacts

By creating an e-commerce platform for freelance services, Fiverr has contributed to several innovations shaping the future of work:

Mainstreaming the Gig Economy - Fiverr has introduced the idea of buying and selling independent freelance services to the masses.
Microjobs - The platform powered the concept of microgigs and micro-outsourcing tasks starting at just $5.
Broader Access - Fiverr has enabled small businesses and solopreneurs to access talent and capabilities previously only accessible to large companies.
Clear Pricing - Preset gig packages bypass the need for complicated contract negotiations for basic services.
Rating Sellers - Public gig reviews and star ratings help buyers evaluate freelancers and make informed hiring decisions.
Talent Incubator - Fiverr serves as a platform for skilled individuals to monetize their talents online when just starting out.
Diversifying Services - The variety of categories covers digital needs beyond traditionally outsourced skills like design and writing.
Globalizing Work - Buyers and sellers are no longer limited to local talent pools and can access skills internationally.
Increasing Convenience - Buying and selling is streamlined entirely online, automated, and integrated on one platform.
Leveling the Playing Field - By standardizing gig pricing and deliverables, Fiverr removes advantages of larger agencies and incumbents.
Efficient Transactions - Both buyers and sellers can transact quickly through pre-defined scopes of work and terms.

In summary, Fiverr built a two-sided online marketplace where independent freelancers can monetize digital services by creating gigs purchased by business buyers worldwide. Its pricing and fee model incentivizes growing transaction volume by taking commissions per order. By standardizing purchases, making transactions efficient, and expanding accessibility, Fiverr aims to be the platform shaping the future of freelancing around the world.