Elance in the sweet spot for social commerce
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.