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December 02, 2007

Elance in the sweet spot for social commerce

Elance by Josh Bernoff

I just met with Elance President and CEO Fabio Rosati.

If you don't know the site, it's best described as an eBay for services. Need a logo, some code, or a contract reviewed? Search for providers. Need work? Bid on projects.

Timothy Ferris has endorsed it (video right on the home page) which makes sense -- Elance is quite useful if you're trying to outsource most of your job and get a 4-hour workweek.

The company claims 70,000 active members, split nearly evenly between those doing the hiring and the freelancers who do the work. At the current run rate they're processing $48 million a year of business. Elance makes money from membership fees and taking a 6.75% to 8.75% cut on transactions. That sounds high, but it also includes the credit-card fees. Not everyone is happy with the fees,  but Fabio claims as the number of members goes up he'd like to bring the fees down.

While this is a successful formula -- they help you find trusted people by tracking their reviews, like eBay -- and we expect it to continue, here are a few nuggets that came to mind:

  • We find it interesting that the company is concentrating on the small business market. Small businesses often don't have all the skills they need and need to outsource, but don't have a big bureaucratic process for hiring freelancers. We've seen that small business is a sweet spot for lots of service-oriented communities, like Constant Contact's ConnectUp! and Quickbooks' community. If you're in the B2B space and have a choice, start with a small business community.
  • Having established a community of 70,000 people, there's a lot more to make out of Elance. Like Quickbooks, they should set up discussion forums about solving small business and freelancer problems (e.g. how to get the word out, how to hire your first employee, dealing with family members who want free stuff) that they all have in common.
  • Elance concentrates on "virtual" services that can be delivered electronically (think proofreading, graphic design, technical writing). But small businesses need lots of other kinds of freelance help (on-site bookkeeping, interior design, photography). The difference -- the suppliers need to be local. Fabio told us the site is beefing up its local search -- now they should expand the types of services that can be sold.

Would you use this service? How would you improve it? And if you've had experience with these guys -- good or bad -- send me a comment.

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Comments

Rebecca Rachmany

I haven't looked at Elance for a while, but in general, as a freelancer, it has limited use. The first users have a huge advantage over anyone who starts up there, and the prices plunged rapidly.

This makes sense in a global market. For many of the services, there simply is no way that US based freelancers can compete with those in India. It's a good business model, but mainly for low-cost suppliers. High-end and suppliers positioned for a specific niche will find it practially useless.

Alex

We've been working at Elance as a service provider for maybe 5 or 6 years, and are now rated as one of top providers. About half of our business goes through Elance. Last year Elance started to reconsider their business strategy and implement new features of their site, new payment plans etc. What we value most in these improvements, is that Elance people really ask for our feedback and thoughts about upcoming functionality. We do hope that Elance will keep attracting more and more startups with interesting and innovative projects.

Alex
HireRussians @ Elance.

Michelle

Good post, Josh. I wanted to point you to another site, oDesk (http://www.odesk.com), that helps small businesses successfully outsource projects. In addition to a network of over 30,000 tested and rated providers, oDesk offers a full platform to help manage remote workers.
One of the things you mention are discussion forums. oDesk has a great network already involved in the forums, touching upon topics such as how to get started on the site and how to successfully manage your projects.
I'd invite you to take a look through the site and see oDesk's solution to outsourcing for small- to medium-sized businesses.
Best,
Michelle
oDesk
mkeller @ odesk.com

Concerned Provider

just two days after you posted the article, elance changed its terms of service to make it more expensive for providers to bid on projects, by limiting the number of bids that are included in subscriptions. Providers can purchase additional bids, but given that each bid does not guarantee winning an award, it will result in a lot for service providers choosing to pass of bidding on a project they would have in the past until they find one that they think they have the best shot of winning with their proposal. The net result is that the small businesses will be left with less choice on who to choose. In the end, the only providers who will be able to buy enough bids to ensure a steady income stream will be the largest of the providers - in most cases, large agencies that are freelancing and not individuals.

Kare Anderson

As you mentioned, I'd expand the services beyond the virtual ones that can be offered online. Would attract more prospects

Funny Michelle (above) found the policy change just as we did so I turned to my network at LinkedIn for recommendations instead and got three within an hour. - Kare, movingfrommetowe

Small Business Marketing

I totally agree with the small business sector as a good target market. They really do not have the infrastructure to do the necessary due diligence.

Small Business Marketing

I totally agree with the small business sector as a good target market. They really do not have the infrastructure to do the necessary due diligence.

Lynn

I'm new to Elance, coming off a long agency stint following twenty years of freelancing. I've been reading some complaints about Elance. I don't think people realize that the problem of 'dummy' projects is no different than in the 'real' world of RFPs. It's called being 'column fodder'. My experience with ridiculous lowballing by Indian providers so far is that it happens on jobs that are very low-talent, the sort of job agencies get 'Scan Boy' to do. The other thing people gripe about is slow payers. As a freelancer in a medium-sized city I often waited two to six months for payment because the agency was waiting for their cleint to pay. Expecting payment up front sounds smart, but it's a big risk for inexperienced buyers of creative. And then there's 'free' work. This is spec work and is often demanded by major corporations when choosing a new partner or even when renewing. Yes, sometimes your ideas will be stolen, but small business buyers just can't make the imaginative leap from your portfolio to their job.

Spaider

For buyer elance is not a place to be. Project posting is easy, but after.. I just don't want to remember, it was so painful.
They even refused my request when I asked to remove my profile. I'm registered forever!

Fabio.. please help!

chronis

hello friends i have come up with very good concept that is combination of freelancing and job site .
MarketRaise Corp. is an American based company that employs a large number of High Skilled IT staff that are ready to work for you. We offer a wide range of hourly rates which allow you to pick a pricing structure within your budget range. We provide the user with a project chart that allows you to track your employee and or project daily with a breakdown of hourly and daily work that has been completed. Click below to find out which package best fits your needs and requirements.
Why choose MarketRaise compared to ordinary job sites and freelance / bidding sites?
Choose a pricing structure that best fits your budget
Have total control over your employee(s)
Feel secure that a NY, American Based company will be handling your work
Feel secure that a company not a freelancer is taking care of your work.
You can always pick up the phone and call us toll free.
Monitor and track your worker and or project with our daily tracking and reporting system.

Danut

I'm top100 on elance www.dcrsolutions.biz aka connects.elance.com and would like to clarify several aspects:

1. Last year Elance changed their subscription plans and got expensive by intrducing the "connects", since then I grown my business with 150%, why? so simple, quality. (avg project on me is above 3k right now)

2. If you're looking to get something done professionally and you do not have a development background, then that's the way to go; if you know programming and looking for a 100job, then rentacoder.com is the best fo you; I'd strongly suggest to avoid using sites like guru.com that encourage people submitting templated bids.

3. There is an earlier comment that encourages virtual assistance; maybe... however, I really doubt someone can tell me better how to achieve my goals, especially when that person is a marketing 3rd party with the main objective to increase market i.e. spend your money.

4. Even Elance, as the largest such business and as being in business for over 10 years, has bugs into that marketplace; it's very hard for me to believe there is some other super market super professional and without any problems; (and I do makrting all day long, not only through Elance).

Good luck!

Yani

Elance is a great place for freelancers. I make my living there. A good blog for tips is here: http://freelancemoney.wordpress.com

Yani

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