How is Fiverr making money?

In the world of online marketplaces and services where consumers can buy or sell anything for one dollar, there's no such thing as free lunch. You pay with your time and effort to get what you want, but so do other people who are selling their products or services in exchange for that same amount.

This concept has been around since the early days of eBay when sellers would offer goods at prices lower than they were actually worth just to attract buyers. In this case, it was called "bidding wars" because users paid extra in order to win an item over another buyer. Since then, many new companies have tried to mimic this success by creating markets where anyone could list items for sale at any price they wanted without risking losing out on potential profits through competition.

One company that came close to replicating these tactics was Fiverr -- which now stands as the largest crowdsourcing platform of its kind in the U.S., according to The New York Times. Over 1 million active monthly users use the site to buy and sell everything from custom T-shirts to virtual assistance. And while some businesses like Amazon Marketplace and Etsy take a cut of transactions made within those platforms, most don't charge anywhere near the 30 percent fee that Fiverr charges.

The question remains, though: How exactly does Fiverr generate revenue, and how big of a slice of that pie does it take home each month? We spoke with Scott Griffiths, CEO of Fiverr Media Limited (the parent company behind Fiverr) about the company's funding sources and earnings. Here's what we found out.

How does Fiverr earn money?

First off, let's talk about what Fiverr offers to both buyers and sellers. On top of being able to place ads on certain pages of the website, shoppers can also complete tasks for others. Sellers can choose to post jobs or projects that need someone to perform specific actions like transcribing videos or doing data entry work. Customers looking for help can browse listings posted by workers across dozens of categories including graphic design, writing, translation, gaming, social media management and more.

Of all the types of content available on Fiverr, the majority focus on personal services. As of May 2019, roughly 65 percent of offerings fell into that category. However, Fiverr also hosts job postings related to technical skills, such as web development and programming. Some employers even look for freelancers with specialized training in areas like science, medicine and education.

While everyone needs something done professionally, not every task requires a highly skilled professional. For example, if you're trying to find someone to proofread your manuscript before sending it to an agent, you might be better served finding someone local who knows how to read English rather than searching for someone overseas who only speaks Chinese. This is why Fiverr allows customers to reach out directly to potential employees instead of relying solely on posting job descriptions.

It should come as no surprise that Fiverr doesn't share information regarding how much individual contributors bring in each month. That said, the median annual income reported among Fiverr workers is $19,000 per annum. While that may sound low compared to industry standards, Fiverr says this figure represents the average hourly wage earned by individuals during the last three months of 2017. At the end of 2018, the company had more than 1.2 million global members working for themselves.

Another way Fiverr earns revenue is through transaction and service fees charged to both buyers and sellers. According to Griffiths, Fiverr takes 15 percent of every completed transaction regardless of whether or not it involves payment via credit card. Additionally, merchants who opt to use Fiverr's payments system will receive 2.5 percent of funds collected through debit cards and 3.4 percent of funds raised using Apple Pay.

Finally, Fiverr earns a portion of revenue from subscription services offered exclusively to paying clients. These include premium plans that allow subscribers access to advanced tools and features unavailable to non-paying members. Revenue generated from these services comes out after Fiverr pays for marketing expenses associated with running them.

Does Fiverr make profit?

Yes! Even after accounting for costs incurred in offering services, Fiverr still generates enough cash flow to cover operating expenses. Though Fiverr didn't provide exact figures on how much profit it brings in annually, the company told us that revenues grew between 40 and 50 percent in 2015 thanks to increased advertising rates in addition to higher membership renewal rates.

As far as profitability goes, the numbers speak for themselves. Unlike other similar services, Fiverr isn't taking a huge chunk of revenue out of transactions. Moreover, unlike traditional tech giants Google and Facebook, which rely heavily upon ad dollars to fuel growth, Fiverr doesn't rely on third parties to keep itself afloat. Instead, the bulk of the company's funding comes from two main sources: direct contributions from investors and affiliate programs.

Griffiths explained that the company started generating significant interest back in 2012, leading to investments from private equity firms and venture capital firms specializing in technology and digital industries. From 2014 onwards, however, Fiverr decided to give up control of its own finances by becoming publicly traded on NASDAQ under the ticker symbol FFIV.

According to CNBC, the company took in $92.9 million in total investment throughout 2016 and 2017. More recently, Fiverr received a boost of $150 million from Greenoaks Capital Partners and Norwest Venture Partners in October 2018.

As for affiliates, Fiverr partners with several major ecommerce sites to reward visitors who sign up to become part of the network. Most notably, the company partnered with Walmart to promote its wares on Fiverr starting in September 2018. When visiting Walmart.com/fiverr, shoppers interested in buying merchandise listed on Fiverr can either shop directly on the retailer's page or click the button located next to the search bar. After selecting a product, the shopper receives a notification informing him or her that Walmart uses cookies to track his or her browsing activity. If he or she agrees to continue, a pop-up window appears asking if he or she wants to join Fiverr. Clicking Join Now redirects the user straight to Fiverr, allowing the company to collect data from Walmart.com visitors' shopping habits. Users who decline joining Fiverr won't see the prompt again until they revisit the site.

Lastly, Fiverr benefits greatly from partnerships with popular brands. Not only does the company reap additional exposure from promoting partner products, but the brand gains valuable consumer insights courtesy of Fiverr's large pool of engaged followers.

What percentage does Fiverr take?

When asked how much of Fiverr's bottom line gets eaten away by overhead, Griffiths replied that the company tries to operate leanly as possible. He noted that the vast majority of Fiverr's spending occurs in the form of marketing, customer support and infrastructure. As such, the company spends less than 10 percent of its overall budget on administrative and operational costs.

To put things in perspective, Fiverr spent approximately 5 percent of its gross profit on employee salaries in fiscal year 2017. Of that number, nearly 80 percent went toward marketing staff. Meanwhile, only 20 percent of Fiverr's revenue covered actual labor expenses. The rest consisted of payroll taxes, fixed asset purchases, stock-based compensation, office space rental, insurance premiums, etc.

How much money does Fiverr make per year?

Forbes estimated that Fiverr pulled in $165 million in net revenue in 2017, meaning it brought in slightly more than half of what it spent. Considering that Fiverr doubled its workforce that same year, it seems safe to say that the company probably pulled in significantly more money in 2018.

If you add together all indirect and direct revenue streams, Griffiths estimates that Fiverr pulls in somewhere between $200-$250 million in annual profit. To break down this figure further, Griffiths pointed out that 85 percent of Fiverr's profit falls under the umbrella of direct revenue, leaving only 15 percent going to indirect channels like advertising and subscription services.

However, although Fiverr boasts a high level of financial stability, the company hasn't forgotten where it came from. Griffiths said that the founders initially envisioned Fiverr as a side project launched as a means to fund their passion of designing games. With that said, the original plan included launching a crowdfunding campaign where people could donate small amounts towards game ideas. Although that never happened, Fiverr did launch a fundraising tool known as CrowdfundX in late 2015.

Users who register on the site can create campaigns that ask for donations from friends and family. Donors aren't required to contribute larger sums of money, nor do they need to match the fundraiser goals set forth by contributors. Simply fill out an application explaining what type of contribution you'd like to raise money for, attach photos and write personalized messages describing your cause. Once you've submitted your proposal, Fiverr provides donors with a dashboard showing how much money your campaign has raked in thus far.

Crowdfunding platforms like GoFundMe and Kickstarter have proven effective ways to crowdsource money. But Fiverr aims to stand apart from competitors by not charging fees for transactions. Rather, Fiverr hopes to reinvest any leftover money earned from successful campaigns into growing the company.

You've probably heard about the popular gig-economy app Gigwalk or its other competitors like Upwork and People Per Hour. But there's one platform that has been getting increasing amounts of attention lately — and it allows you to earn revenue through gigs for yourself while also working with brands and businesses.

That platform is called FIVERR. What sets this app apart from others in similar niches is how it generates income. While up until now most companies have relied on advertising dollars to generate revenue, FIVERR uses different ways to do so. That includes charging users fees for transactions and services, selling premium subscription packages, and even taking a cut of any product sold by freelancers using their platforms.

In 2020 alone, FIVERR made over $100 million in gross bookings (meaning before taxes), according to a document filed with the Securities & Exchange Commission. In 2021, they're aiming for nearly double that amount. How exactly are these numbers calculated? By looking at how many hours people spent interacting with FIVERR during the year and multiplying them by an hourly rate. So what types of jobs can be done on FIVERR? Freelancing, consulting work, event planning, social media management, web design, translation, etc.

So how did we get here? And why should anyone care if you want to start earning some extra cash? We spoke with FIVERR CEO David Sacks to learn more about his vision behind the app and where he sees itself going into 2022. Here’s a breakdown of everything we learned.

How much does FIVERR make per day?

According to Sacks, FIVERR takes roughly 5 percent fee off each transaction. “The way our system works...is basically when someone buys something, we essentially give away part of the sale price back to the buyer,” said Sacks. The idea being that “the person who is buying gets a discount, but [we] don't lose anything, because we need to cover all costs."

This means that buyers pay less upfront for products or services, but the seller still receives full compensation. For example, let’s say I wanted to buy a pair of shoes online via Amazon. If I bought those same shoes directly from Amazon myself, I would pay around $200 plus shipping charges. On the other hand, if I purchased my shoes through FIVERR, I'd end up paying somewhere between $50-$150 depending on which payment method I used. However, once I received the shoes, I was charged the exact same price as if I had ordered directly from Amazon ($200). This means sellers keep 100 percent of profits.

Sacks says that this percentage might seem high compared to market standards, but he believes that "it's not out of line," especially considering the fact that FIVERR covers all overhead expenses associated with running servers, hosting data centers, providing customer support, guaranteeing security, etc. He further explains that since the majority of purchases happen within 24 hours, the fees will likely go down as time passes.

"We're trying to build a longterm business. There's no reason why the cost shouldn't come down," he added.

At first glance, this seems counterintuitive to FIVERR's mission statement to provide value for consumers. After all, wouldn't lowering prices lead to fewer customers? Not necessarily, according to Sacks. As long as the quality stays consistent, customers won't feel pressured to use another provider simply because the price went down.

He adds that although lower prices may mean higher competition in general, there are plenty of examples throughout history when increased competition actually led to better products for everyone involved. Think of Walmart launching Sam's Club instead of just opening stores everywhere. Or think of Google competing against Microsoft for dominance in search engines.

It's important to note that FIVERR isn't doing very well yet. According to documents released earlier this month, FIVERR lost close to $80 million last quarter. Still, Sacks is confident that things will turn around soon.

"I'm hopeful that we'll see growth continue to grow exponentially in the next two years," he told us in March.

Is FIVERR a profitable company?

While losing millions is certainly not ideal, FIVERR appears to be stable. They haven't missed payments to vendors in months, and they plan to stay debt free forever. At least for now.

Although FIVERR doesn't break out monthly profitability reports anymore, Sacks shared that in Q1/Q2 2019, they brought in $22.5 million in net revenues (which excludes marketing and office expenses) and paid out $18.3 million in total operating expenses. This resulted in positive earnings of almost $4.8 million. Based on this information, he estimates that FIVERR earned approximately $10 million in 2018.

With regard to losses, he explained that FIVERR had incurred significant capital expenditures due to rapid expansion and new technology systems coming online. He expects these expenses to decrease significantly in 2022 after they stabilize.

Interestingly enough, FIVERR has seen large increases in traffic despite having only launched publicly in October 2017. Currently, the site claims to have 20 million registered accounts worldwide, including 10 million active ones.

And although there aren't official figures available, FIVERR reported more than 2 billion pageviews in January 2020.

How much of your profit does FIVERR take?

Aside from transaction fees, FIVERS takes 15 to 30 percent commission of certain goods and services providers. These include credit card processors, digital currency exchanges, and professional coaching firms.

For example, if someone sells a physical item via PayPal and then decides to purchase a virtual good via Bitcoin, PayPal takes 3 percent of this transaction. Similarly, if you sell items on eBay and decide to accept cryptocurrency donations, PayPal takes a percentage based on the type of donation. Cryptocurrency exchange Coinbase, on the other hand, takes a flat fee of 1 to 3 percent for every trade completed.

On top of that, FIVERR takes a 10 percent cut of courses offered through its Learning Marketplace section. Although it currently offers a limited selection of various skill categories, such as graphic designing, coding, photography, writing, health and fitness, leadership development, etc., it plans to add hundreds more later this year.

These percentages vary slightly across countries and states, but FIVERR provides detailed explanations for discrepancies in case anyone tries to exploit the loopholes.

Another major source of revenue comes from annual subscription fees. Users can choose whether or not they wish to subscribe to premium features on the website. Those who opt out receive standard access.

Currently, FIVERR has three tiers of membership: Free, Pro, and Premium. With Free memberships, you gain access to basic tools and functionalities such as profile customization, background removal, editing photos, etc. You can upgrade to Pro for $9.99 per month or $89.99 annually, or sign up for the Premium package for $19.99 per month or $199.99 annually.

Premium subscribers enjoy additional benefits such as advanced video filters, unlimited storage space, priority technical support, multiple team collaboration capabilities, etc.

Of course, none of these options require you to spend money. Instead, you can try out premium features for free before deciding to join.

How does FIVERR make money 2022?

As mentioned previously, FIVERR derives most of its revenue from transaction fees and services provided by third parties. However, the company is also exploring additional opportunities to bring in more cash.

One opportunity is creating partnerships with content creators. Right now, the company has agreements with several influencers whose audiences range from 12K to 7M followers. Their goal is to launch deals with thousands of individuals with huge followings in 2022.

They're also hoping to expand beyond individual contracts and create recurring revenue streams by offering premium bundles of skills. For instance, if you run a small business, you could rent out dozens of freelance workers in specific areas without worrying about managing payroll.

Additionally, FIVERR wants to offer corporate clients a dedicated dashboard for tracking and analyzing interactions on their websites. They envision this feature becoming particularly useful for companies looking to promote themselves among potential employees.

FIVERR also recently announced that it's partnering with Deloitte Consulting LLP to develop AI solutions aimed at helping small businesses improve efficiency.

All in all, FIVERR hopes to become a global leader in cloud computing, artificial intelligence, machine learning, big data analytics, cybersecurity, mobile development, etc. To achieve this, the company needs talented developers and engineers willing to help shape its future goals.

Online marketplaces have come to dominate the internet economy. As of this writing, there are thousands upon thousands of online marketplaces for everything you could possibly imagine -- from finding someone in your area who can help with moving or cleaning services to buying tickets to concerts. But what about those that allow users to buy low-cost "services" like web design, marketing skills, translation services, etc.? These sites operate under different names but all share one thing in common: They're built around an idea where consumers get paid by other consumers (or businesses) instead of directly from advertisers.

One such site is Fiverr, which launched in 2011. The company has grown significantly since then, acquiring competitors and expanding its platform into new areas throughout 2016. In fact, it's now so big that if you had told me five years ago that I would be using a website called Fiverr to source some freelance work, I'd never believe you.

But how exactly do these types of websites make money? And more importantly, why should they matter to people looking for cheap goods and services? To answer both questions, let's first look at how Fiverr generates revenue.

How much does Fiverr cut from buyers?

First off, Fiverr isn't technically a traditional marketplace because no products are sold through it. Instead, individuals post gigs ("gigs," short for "jobs") seeking specific tasks done over email, text message, Skype, Facebook Messenger, etc. Consumers looking to fill certain needs will contact potential providers, negotiate prices, and proceed from there. Unlike most payment processors, however, Fiverr doesn't receive any portion of that sale. So while freelancers might earn anywhere between $5-$500 per gig, Fiverr only gets 50 cents. That means when you search for something via their system, you'll see advertisements for providers offering similar services elsewhere, often for less than half the price you just saw.

This is true whether you want to hire a graphic designer, voice actor, editor, writer, photographer, virtual assistant, or whatever else. You'll also notice that the majority of advertised jobs aren't necessarily for paying gigs. For example, Fiverr advertises a job for a person willing to dress up as Santa Claus for photos taken during Christmas celebrations. Another posts a request for someone skilled enough to draw a cartoon character for free. Still another wants someone fluent in Italian to translate a document. While none of these sound very glamorous, many people use them regularly to find simple things others wouldn't think to ask.

In addition, Fiverr charges a 2 percent fee for transactions above $10 and a 3 percent fee for purchases made via credit card. This includes items bought directly through the site itself as well as items purchased outside of Fiverr. If you were to purchase a product through Fiverr, say a pair of headphones, and then decide later to go somewhere else to buy them, you'd still owe the same amount of money (minus shipping costs).

While this may seem unfair to you, keep in mind that Fiverr isn't trying to compete with Amazon, eBay, Etsy, or even larger companies like Google Shopping. Rather, they're competing against Craigslist, Gumtree, TaskRabbit, Zaarly, Gigwalk, PeoplePerHour, VWorker, iWantMyPage, Zilok, GetAReallyGoodDeal, and countless others. At least some of the competition here offers better customer support and higher quality goods.

The bottom line: Unless you absolutely need a particular item right away, you won't save anything by shopping exclusively on Fiverr.

What percentage does Fiverr charge?

Aside from the aforementioned fees, Fiverr takes two additional cuts out of each deal. First, Fiverr receives 30% commission from vendors whenever anyone clicks on their ad or buys a service. Second, Fiverr pays 10% commissions to sellers every time someone completes a task for a buyer. This covers not only completed orders, but also abandoned ones due to refunds or cancellations. Sellers who complete tasks faster than others typically receive special recognition within Fiverr.

These payments add up quickly. A single order submitted via Fiverr earns a vendor $15, while a seller who provides multiple services receives $30. Vendors must meet strict requirements before becoming eligible for either type of payout. For instance, to qualify as a vendor, one must provide high ratings among past customers and pass background checks. Additionally, vendors must supply professional references and written testimonials showing previous successes. On top of that, Fiverr requires that vendors accept PayPal as payment method.

As far as why Fiverr uses a combination of these rates goes, CEO Micha Kaufman explained it best in an interview last year after his team faced criticism regarding their own payout structure. He said: "[W]e wanted to give our sellers room to breathe."

If you've ever used Fiverr, you know that it's possible to find great deals. However, the process involved in getting those bargains is not always easy. Some users complain that Fiverr sends too many emails, that bids don't update automatically, and that the interface looks outdated. Others argue that Fiverr unfairly targets women, non-English speakers, and people from developing nations. There are even suggestions floating around Reddit forums that Fiverr is somehow connected to human trafficking rings. All valid points, I'm sure.

Whether these criticisms impact Fiverr's long term success remains to be seen. According to data compiled by SimilarWeb, the site received 4 million unique visitors in July 2015 alone. By September 2017, Fiverr ranked third overall in terms of traffic behind giants like LinkedIn and Indeed.com. If you haven't heard yet, Fiverr recently acquired a social media startup called Wunwun and plans to roll it out soon.

That being said, Fiverr isn't perfect. Here are three ways the experience can improve going forward.

1. Make bidding easier/more intuitive. Since launching in 2012, Fiverr has been criticized for confusing users attempting to place bids on ads. Many claim they accidentally clicked on other people's ads or didn't realize how to submit theirs until it was too late. While this likely happens to everyone occasionally, it seems especially prevalent among newcomers.

To combat this problem, Fiverr rolled out changes earlier this month aimed specifically at helping novice bidders understand how to navigate the bidding process. Now, when clicking on a provider's listing, you'll see a button labeled "Submit bid." Once you click it, you'll immediately see a breakdown of pricing information, including hourly rate, total cost, estimated delivery date, and average rating. From there, simply enter your desired number of hours and hit continue.

2. Offer more flexibility in payment methods. Currently, Fiverr allows users to choose between paying with PayPal, Stripe, Apple Pay, MasterCard, American Express, Discover, Visa, and eCheck. While PayPal is undoubtedly popular, allowing limited options for payment processing is limiting.

Going forward, we hope Fiverr adds Bitcoin as a viable option to increase user privacy. After all, the company claims to care deeply about protecting consumer data.

3. Improve customer service. Although Fiverr appears to treat its community fairly, it sometimes fails to live up to expectations. For example, several users complained last week that Fiverr sent them incorrect addresses for deliveries. Others claimed they couldn't cancel appointments without incurring fees. Yet others noted that Fiverr failed to respond promptly to messages left on their profiles.