How Fiverr Revolutionized the Gig Economy: Insights from CEO Micha Kaufman

0:00Being an entrepreneur is a 24-7 job. And when you're hiring, you need a partner that works as hard as you do. That hiring partner is LinkedIn Jobs. When you clock out, LinkedIn clocks in. LinkedIn makes it easy to post your job for free, share with your network, get qualified candidates that you can manage all in one place. For one thing, you can post a job. LinkedIn's new feature can help you write job descriptions and then quickly get your job in front of the right people. You get qualified candidates. At the end of the day, the most important thing to your business is the quality of the candidates.

0:30And with LinkedIn, of course, you can feel confident that you're getting the best. Based on LinkedIn data, 72 % of small, medium businesses say using LinkedIn helps them find high-quality candidates. Find out why more than 2.5 million small businesses use LinkedIn for hiring today. Find your next great hire on LinkedIn. Post your job for free at linkedin.com slash altature. That's linkedin.com slash altature to post your job for free. Terms and conditions apply. We're spending more than ever. I hate my job. The price of everything has gone up. AI is threatening my job. It's crisis after crisis.

1:08Nothing is working out. I can't find a job. We're one disaster. Take control of change. I need a change. Disruption is the force of change. Stop the chaos. Stop the madness. Take control. Read James Patterson's Disrupt Everything and Win.

1:36the world's completely changing people are no longer young people and i see this from my kids i got five kids so i see this for my kids nobody's really planning the one job one career thing where okay we're going to start working at general motors or procter and gamble and for the next 45 years that's we're going to work and we're going to retire with a gold watch nobody is doing that People are looking for, you know, they have a view of their career, but they're looking for side hustles, ways to make money from home, ways to make money while traveling. And I'm not saying that people are lazy.

2:13They're actually hustling really hard. And where are all these jobs? Where are all these opportunities? Well, I had a chance to talk to Miha Kaufman, who's the founder and CEO of Fiverr.com. If you haven't checked out Fiverr.com, I would check it out. This is the place where all of those side hustles and hustles and careers are forming. There is so much opportunity. There are millions of jobs have been created from a company like Fiverr. So check out what, you know, Miha Kaufman and I, and what's the role of AI in all this is amazing because that literally could change your life. A combination of companies like Fiverr with you using AI.

2:53So check it out. I talk to Miha over this next episode.

3:24This is such a great business. I'm jealous of the whole economy you created around it. So basically, Fiverr is a platform that connects talent. And talent could be individual talent or that could be agencies with businesses that need access to that talent. So basically, it's a matching service. And since talent is global and the demand for talent is global, we operate in 160 countries. And the majority of our transactions are cross-border, which is really interesting because it goes across cultures. It adds flavor. It adds nuances into work. The idea basically at the beginning came out of two realizations.

4:10One was that when you wanted to, and this was 2009, back then when you wanted to work or find a talented person, the process of doing that was almost as bad as dating. And so at the time, though, in 2009, there were already companies like Freelancer.com, Elance, Scriptlance. So there were companies out there where it was a marketplace for finding freelancers, which I made use of extensively. I probably used all of them. Why did you think, okay, I'm going to be yet another player in this space? So I've also used these platforms. I wasn't happy with it. One of the reasons was that I thought that a lot of what these platforms were trying to do is they were trying to replicate the way you hire people offline and just do the same things online, which to me was not really harnessing the power of software and the distribution of the internet to do something much better than you do offline.

5:15And this is where the idea of Fiverr came to be, which is instead of saying, keep a system where you come with a project and people bid on that project and you negotiate and you strike a deal. Instead of that, let's flip it. Let's say if you're talented and you know what you can offer, we just put it on a catalog. if we can create an excuse system to describe the world of services through verticals and categories and the services themselves, you can price that service as high or low as you want. And people can just go through this catalog, do a quick search, find whatever they need. They have the history, they have the portfolio of the person offering the service.

6:06they have reviews by previous customers, click order and you're done. That compressed something that used to take anything between a week or two to a month into something that took five minutes. And this to me is the power of software. This is what we can create with it and what we can create with the right data, presentation, discovery system, matching algorithms, which is what we've done. So we've pioneered this approach of having a true marketplace, two-sided marketplace that connects talent with those who are seeking to hire talent for specific things. What are some of the most common services now that people use Fiverr to hire talent for?

6:56And as I've said, we think officially we passed 800 different categories of services. And all of these categories are very successful. Those who are irrelevant are no longer on the catalog. When you think about those services, you have services around things that have to do with programming, software development, graphic design, marketing, writing, video. and business or consulting, lately being a year and a half now, a lot of AI-related services, a ton. I want to ask you about that, but I'm curious in general about the rise of the gig economy over the past 15 years since you started. I remember I visited LinkedIn, I think it was in 2013, 2012.

7:44They basically said the gig economy accounted for far less than 1 % of the world economy. And I'm wondering if now because of companies like Fiverr, if that's no longer true, if now people doing gigs and making a full living at it without having to get like a full time job, how much has that become a part of the world economy? It about tripled, meaning it's about 3%. Okay. It's still early innings. When you think about the size of this economy, if you just take, so I've mentioned we operate in 800 different categories. So if you take those categories, not plumbers, electricians, dog walkers, just digital services, in the U.S., that amounts to about$400 billion in earnings by freelancers.

8:37If you take all of the platforms that are doing the online combined, 83 % of that. So it's still in many ways like e-commerce back in 1995. And what do you think is going to, I mean, obviously, everybody was afraid to use e-commerce in 1995. They didn't want to put their credit cards into this weird thing called the web. Like, what's going to change? How do you see the gig economy growing? And leaving aside AI for a second, because I want to explore the AI equation as well. I think in many ways you said it, there is an intrinsic, I think, you know, the hiring space is still very old fashioned, right?

9:24It's still resumes and it's still recruiters and it's still the same journeys of interviews and peer interviews. it takes time. And for companies, for businesses to change the way they hire is very hard. Much like it was very hard back in 1995 to convince people to shop online. It's just habits. It's kicking in and it takes time to replace the things that you're used to do with things that you're unsure of and give it a go. So I know that Fiverr, we have customers for 160 countries in the world. Some of them are micro businesses, solopreneurs. Some of them are the majority, actually, of Fortune 500 companies use Fiverr.

10:16So there is more openness, but it's still not becoming a standard. Much like e-commerce started becoming a standard at some point. But it took e-commerce more than two decades to reach, you know, 5 % and then 10%. And as you do it, by the way, one of the things, maybe we're taking 3 % of the overall market, but the market itself, we've helped grow massively. It was 15 years ago when we started the market was maybe a third of what it is now. And the amount of people that were engaging in freelancing was less than half of now. And freelancing was something that you used to do in between jobs, not as a career.

11:03And today, it's not just a career. It's also a lifestyle. And people are proud of doing it. So like people could live anywhere. You know, the idea of kind of the digital nomad, you know, it kind of grew out of this freelance economy. He says something very interesting, though, which is that companies or maybe executives or CEOs out of habit have this old way of thinking about hiring and accomplishing tasks and that you need people sitting at desks doing things to have a real so -called company. So here's how I'm thinking about this. When you run a business, you have a good grasp of what is the core competence that you have as a business.

11:42If you're a software company that specializes in these highly sophisticated algorithms, then having algorithm experts is your core competency. But what about the rest? What about sales? What about marketing? What about design? What about product? In many cases, what you can do is you can tap into the most talented people in a way that gives you flexibility to scale it up or down as you need, depending on whatever your needs are in that same moment. So we have people that are full timers. These people are usually very much focused on what we do as core competency. What is the core of what we do on the periphery of what we do at extending our team if we have a certain design team.

12:31And sometimes we need help and we need to double it, but we need double it just for a month. all of that will do flexibly. All of that will do through the platform, which makes a ton of sense. Sometimes I made the analogy for cloud computing and some people didn't like it because it was like I was comparing human beings with computers, which I wasn't. Who cares if you were? People are so sensitive. Whatever. Here's the analogy. Think about the move from hosted computers. when I started building companies 20 years ago, we hosted our servers at the office. We had a safe room and we had to buy them and we had to maintain them and we had to upgrade them and we need to secure them and we need to keep them up and running.

13:21And then came cloud computing. And cloud computing leveled the playing field because if I'm a small startup, I can still have the computing power of the largest companies in the world. I'll just pay as I use. So if I use it, if I'm not successful, I'm not going to pay a lot. If I am, I will pay accordingly. But I don't need to maintain the servers. I don't need to upgrade them. I don't need to buy them. I don't need to teach them new things, whatever they're being maintained. Think about that in the context of talent. Think about, you know, the ability to tap into this cloud of talent that is always up to date, where you can find people that know all the new things.

14:02when AI started to become a thing. I mean, we were using AI for five, six years at least. But when ChatGPT came out and everybody was starting to talk about AI, it took us probably three to four weeks to have about 15 different categories of AI experts. Okay. So this is the speed in which you can respond. And businesses on the other end, you can tap into it. It's just, it's so easy. It's all written free. That's the idea. Take a quick break. If you like this episode, I'd really, really appreciate it. It means so much to me. Please share it with your friends and subscribe to the podcast. Email me at alcatra at gmail.com and tell me why you subscribed.

14:51Thanks.

14:59Being an entrepreneur is a 24-7 job. And when you're hiring, you need a partner that works as hard as you do. That hiring partner is LinkedIn Jobs. When you clock out, LinkedIn clocks in. LinkedIn makes it easy to post your job for free, share with your network, get qualified candidates that you can manage all in one place. For one thing there, you can post a job. LinkedIn's new feature can help you write job descriptions and then quickly get your job in front of the right people. You get qualified candidates. At the end of the day, the most important thing to your business is the quality of the candidates.

15:31And with LinkedIn, of course, you can feel confident that you're getting the best. Based on LinkedIn data, 72 % of small, medium businesses say using LinkedIn helps them find high-quality candidates. Find out why more than 2.5 million small businesses use LinkedIn for hiring today. Find your next great hire on LinkedIn. Post your job for free at linkedin.com slash altature. That's linkedin.com slash altature to post your job for free. Terms and conditions apply. This message comes from Capital One. With the Spark Cash Plus card from Capital One, you earn unlimited 2 % cash back on every purchase and get big purchasing power so your business can spend more and earn more.

16:13Steven, Brandon, and Bruno, the business owners of SandCloud, reinvested their 2 % cash back to help build the company's retail presence. Capital One, what's in your wallet? Find out more at CapitalOne.com slash Spark Cash Plus Terms Supply. How did you first attract people to your site? Because again, there was some competition out there and before someone uses your site, they don't really know the difference between all the sites. Like how did you do the basic thing of getting that network effect working for you? i.e. the more people on the site, the more valuable it becomes? It's a great question and one that I've been asked a lot by many people and people that are starting companies.

16:55So essentially, when you're trying to start a two-sided marketplace, you always are driven by one side and constrained by another. And you need to figure out what it is for you. I'll give you an example. I'll touch Fiverr, but I'll give you examples from other companies. If you're Uber, you're supply constrained. So supply in the sense of drivers and cars? Yes, correct. Because if you don't have enough density of drivers, then the experience for customers is going to be terrible because they're going to wait 10 minutes. Nobody wants to wait more than two minutes these days. So you need to have high density.

17:39So you have to have supply. You have to have that in abundance. If you look at their strategy early on, they were promising the moon to drivers just to get them on the platform. And they delivered. It's a great business. Think about Airbnb. Airbnb is host constraint, meaning they need to create, again, a lot of supply, a lot of choice. And also across to have enough saturation in many major cities in the world. so that customers can use it. Well, but this is interesting. They're constrained by supply, but supply exists in the world, right? So there are many houses with empty rooms. There are many cars with willing drivers.

18:25So if you look at Amazon, or if you look at us as an example, we're supply-driven, but we're demand-constrained, meaning that essentially supply is almost free. You don't need to acquire supply. Supply wants to be there. It wants to join. And actually, in the almost 15 years that we're running Fiverr, we didn't do supply acquisition. So supply comes to us. And the constraint is more the demand. So bringing enough demand for that supply. Right, because, and sorry for interrupting, I get curious every step of the way. So if someone's a freelancer, it's not like you needed to market to them. They're already on, let's say, freelance.com, ScriptLance, Elance.

19:12They're just going to put their information on another platform. Any platform that exists, they're just going to put their information on because why not? It doesn't cost them anything. When we started, it was less about having other platforms. It was more about us versus either marketing yourself locally, which was the most, and by the way, still is the most common way freelancers market themselves. So in their really, in their physical proximity, and it's word of mouth, it's just having previous customers recommend you to others. And websites, just creating online presence. But here's the thing, the number one need of a freelancer is to get opportunities, right?

19:57But it's also the part in their business that is just cost. Meaning if you start as a freelancer and you have zero customers, what you need to do is you need to give customers. How do you do it? You start going out and marketing yourself, either with marketing dollars or you just spend men hours in just meeting with potential clients, blah, blah, whatever. This is super costly. And by the way, most freelancers hate that part of their job because they might be a super talented graphic designer. That doesn't mean that they like to do sales. That doesn't mean that they like to do accounting. That doesn't mean that they like to do legal stuff of signing contracts with customers and writing documents.

20:41So spending a ton of their time on this, for them, we were a distribution network. What we promised was to say, if you think about the Maslow pyramid of needs of a freelancer, the very bottom of it is access to opportunities. Okay. But then there's other layers. Once I get the opportunities, can I simplify a lot of the rogeries that I hate dealing, which I mentioned, accounting, contracting, negotiation, chasing the customers to get aid at the end, figuring out which communication means we should use, where do we store files, whatever. So we took care of all of this for them. For talent, you need to sign up.

21:29It's free. Set up an account. Decide what you want to offer. We'll do the rest for you. That was it. That was the promise. And so that allowed us to create a very meaningful partnership with them. Because we were taking all the things they hated doing and creating a stream of income, a stream of customers. How do they even know about you? How do they even know you existed? So when we started, I didn't even incorporate a company because I was tired from setting up companies, bank accounts, whatever, before we didn't have anything. And I said, no, this time I'm slipping it. walk. I'll hack a product, I'll put it online, I'll put a lot of energy in getting it right, having a business model from day one, having virality and stickiness built into the product.

22:22And it would either grow, succeed grassroots, or it would fail and will pivot or close or move to something else. That was kind of the idea. And so I didn't get any venture funding, It was all my money and I didn't spend, I think for the first four or five years, we didn't spend a dime on marketing. So we were lucky enough to set up the site in a way that made it super sticky and super viral. Because the initial business model, which was really the go-to market strategy, was to focus on microservices for micro businesses. And the tagline for it was the things people do for five bucks. It's great.

23:10Intriguing, right? Yeah, because your first thought as a customer of it is, oh, everything is$5. Exactly, which it was for a while. But the way people join it was even smarter. Because if you looked at the website 15 years ago, it was just a list of statements that people started with, I will then something for$5. That was the syntax. And the way I set it up is that there was a, in that homepage, you saw a list of things that people offer for$5. Above that, you had a text box with I will blank for$5 submit. And it looked, it was just, people couldn't resist it. So they clicked on it. Once they clicked on it, it took them to the second step of this form, which took two more minutes.

24:02And they were in. This created this incredibly viral product that started gaining momentum super, super fast. And at the time, there were the equivalents of today's TikTok and Instagram, whatever. And this went super, super viral. And it started having transaction on day one. And as it was starting to grow, we started building the SKUs of the market base. And, you know, we started with just five categories of services. And it was super naive. From that point, we started, you know, extending the catalog, building more categories, understanding how people were using it. It was incredible. It was a crazy ride.

24:47I mean, it must be such a pleasure to see something like that grow virally. And how did customers, like the ones purchasing, you know, services and talent, how did they find out about the site? Both sides of the equation were extremely vocal. The ones who were offering the services were just super proud of it. It was almost half funny. It was just, you wouldn't believe what I'm doing. And they were just talking about this, which attracted many other people to either offer or buying. and people that bought things were so proud of it by saying, oh my God, look at what I've just purchased for$5. You have to go there.

25:28You'll be blown away. People used to spend, on average at the beginning, 25 minutes on the site every session. It was just, people were just so curious. It was like a rabbit hole of like, Like, how deep can I go into people's imagination of what they can do for five bucks? Breaking this, the mold of$5 was one of the most complex things I've ever done as an entrepreneur. It was really hard. Yeah, because then you have to get into the realm of negotiation and specs and staging, you know, results. Which, by the way, we didn't. meaning we extended it, but we still had the same market-based model where the providers, the talent, the sellers can set their price as they like and you as a customer can opt in into it or just pick someone else.

26:26So leaving it to the forces of the market base. And the reality was that in contrast to how most people thought about this, people thought that this would be a race to the bottom. Because essentially, there's always someone who's going to come in and maybe offer something for a lower price. The reality was that the more successful you were on the platform, you had more demand. When you have more demand, what do you do? You increase prices because your capacity is limited. So you increase prices because you're famous. Everybody knows you on the platform. Your profile is extremely successful. You have enough reviews.

27:05And it's easy. And it created exactly the opposite trend that everybody was expecting to happen. AI is changing this, obviously, on both sides of the equation, right? People are offering AI services, but also AI is perhaps taking jobs. My take on this is, if AI is going to completely replace us, I have bigger problems than Fiverr. Okay. You know, or I mean, the job economy in general is going to be in shambles. and I'm thinking of younger generations that need to figure out what to study. One of the hardest things right now is actually figuring out what to do with yourself. Because whatever you're going to learn could be obsolete by the time you finish your degree.

27:51And so everything is changing. As I said, AI is going to replace some types of jobs, some types of services. That's perfectly fine. And this is what technology does when it is smarter and sometimes more creative or definitely more efficient than a human being. Probably human beings shouldn't do it. But the reality is that it's generating so many new jobs that didn't exist five minutes ago. Like what? You know, anything that has to do with the technology itself. So if you think about the AI, think about everything that has to do with the technology around AI. It's either the models, the training, the applications that are being built with AI.

28:40It's about voice synthesis in AI. It's about AI consulting for companies on how to integrate and build it better. It's about the usage of AI bots. It's about AI art. Here's the thing about AI. AI creates, for me, a new baseline. Because all of us have access to AI, so all of us can use AI. Which means that this is the new, you know, it's leveling the playing field. But it's not giving superpowers to any one of us. We have equal powers because we have access to AI. How do we create this advantage over others? It's usually by human creativity and ingenuity. And sometimes it's just about how you use AI.