- What is Upwork, and how does Upwork work?
- How does Upwork make money?
- Subscription Revenue (from Clients and Freelancers)
- Service and Transaction Fees
- Purchases of Connects
- Upwork Payroll
- Managed Services
- Upwork profit and revenue
- What is the Upwork business and revenue model?
- Upwork funding and market cap
How does Upwork make money? Here is a full, in depth, breakdown of their five (5) revenue streams and the different products and services they offer, as well as the Upwork business and revenue model, how much Upwork makes per year, and how Upwork works.
What is Upwork, and how does Upwork work?
Upwork is a freelance marketplace that connects clients to freelancers to hire them for more than 8,000 skills offered by the talent on Upwork.
The two founding companies, Elance and oDesk, merged in 2013 and rebranded themselves as Upwork in 2015. A short time later, Upwork began trading on the NASDAQ on October 3, 2018, under the ticker symbol “UPWK”.
Today, Upwork is now one of the largest freelancer marketplaces in the world with over $3.54 billion in gross services volume (GSV) in 2021 alone.
How Upwork works for clients: They first need to create a client account. Then, once the account is created, they can start hiring freelancers by either posting a job on the marketplace and waiting for proposals, browsing pre-built projects by freelancers, or reach out to freelancers directly.
How Upwork works for freelancers: Once they create a freelancer account, freelancers can start submitting themselves to jobs posted by clients on the marketplace.
How does Upwork make money?
According to Upwork, Upwork handled $3.54 billion in gross services volume (GSV) in 2021 and has more than 145,000 core clients. Upwork describes “core clients” as clients who spent at least $5,000 over the last 12 months on the marketplace.
So how does Upwork make money off of all those freelancers, clients, and transactional volume?
Below is a breakdown of how much money Upwork makes and its revenue model. Including all revenue streams and how much they charge for their services.
Here are the 5 ways of how Upwork makes money in 2022
Upwork has a revenue model that makes money in five (5) ways; subscription revenue, service fees and transaction fees, purchases of Connects, Upwork Payroll, and managed services.
#1. Subscription Revenue (from Clients and Freelancers)
One of the ways Upwork makes money is through the subscription services they offer to both Upwork clients and freelancers.
Upwork offers three (3) subscription tiers for its Clients; Upwork Plus, Upwork Business, and Upwork Enterprise. And two (2) subscription tiers for their Freelancers; Freelancer Plus and Agency Plus.
- Freelancer Plus Cost: $14.99 to $20 per month
- Upwork Plus, Business, and Enterprise Cost: $49.99 to $499+ per month (depending on the plan)
Note: Upwork has a monthly subscription service for both the clients and the freelancers.
#2. Service and Transaction Fees
Upwork also makes money through the service and transaction fees it collects from both the freelancers and clients on each transaction made on the marketplace.
As noted above, Upwork handled $3.54 billion in gross services volume (GSV) on their marketplace in 2021. Of which, Upwork takes a 5% to 20% service fee as well as a 3% transaction fee from all of it. Which you can see the breakdown below.
Upwork Fees (for freelancers)
- $0-$500 in earnings from a client: 20%
- $500.01-$10,000 in earnings from a client: 10%
- $10,000.01 or more in earnings from a client: 5%
Upwork Fees (for clients)
- 3% of the total bill
Note: Upwork charges both the clients and the freelancers a fee on each transaction. When combined, Upwork is making 8% to 23% in fees on every transaction made on the marketplace.
#3. Purchases of Connects
Upwork also makes money by selling virtual tokens called “Connects” to their freelancers.
What are Connects? Upwork Connects allow freelancers to bid on projects on the Upwork marketplace. Some projects demand different amounts of Connects to bid, while some require none at all.
So, how does Upwork make money from Connects? Upwork makes money by selling Connects to their freelancers. Though paid freelancer accounts receive Connects for free every month, Connects can also be purchased.
Connects cost $0.15 USD each and are sold in bundles of 10, 20, 40, 60, and 80. Agencies can also purchase bundles of 150 or 300, if their balance allows.
Upwork Connects Cost:
- Connects are sold in bundles of $1.50 to $45 ($0.15 per Connect)
#4. Upwork Payroll
Another service Upwork offers and makes money on is Upwork Payroll; a service for employers looking to simplify and cut costs on managing and paying their freelancers.
To use this service, Upwork charges employers 23%. As Upwork describes it, 10% of that goes to Upwork as their fee and the remaining 13% goes towards covering the overhead payrolling costs.
Upwork Payroll Cost:
- 23% (10% to Upwork, 13% to cover payrolling costs)
#5. Managed Services
Lastly, Upwork makes the remaining portion of its money from what they call “managed services”. Which, in 2021, generated $40.45 million for Upwork.
Managed services, according to page 4 of Upwork’s 2021 Form 10-K, is where they “engage talent directly or as employees of third-party staffing providers to perform services for clients on our behalf, directly invoice the client, and assume responsibility for work performed.”
Upwork profit and revenue
In 2021, Upwork reported $502.8 million in revenue.
Note: Because Upwork Inc is a publicly traded company, under the Securities Exchange Act of 1934, they must file continuous financial filings with the U.S. Securities and Exchange Commission (SEC). You can find all of Upwork’s publicly released financial reports, including annual reports, through Upwork’s investor section on their website.
What is the Upwork business and revenue model?
Upwork makes money through a few revenue models that they combine within their company, they are:
- Two sided Marketplace business model
- Subscription based business model
- Fee-for-service (FFS) business model
- Transaction based business model
- Business to business (B2B) business model
Upwork funding and market cap
According to Upwork’s Crunchbase profile, Upwork has raised $168.8 million over 12 rounds and has a market cap of $2.41 billion as of June 2022.