In the US alone, the consumer service economy is valued at almost 10 trillion dollars.
What makes this more impressive is the fact that among these services, only 7% are digital.
Service marketplaces, or platforms that offer services instead of goods or products, are considerably fewer than product marketplaces.
This is because most services, even now, are still offered offline and can be complex.
Here are five of the most successful service marketplaces in the world, in no particular order.
Upwork as One of the World's Top Service Marketplaces
Touting itself as the "world's work marketplace", Upwork began as Odesk in 1999, founded by two California programmers, Odysseas Tsatalos and Stratis Karamanlakis.
Odysseas and Stratis envisioned a platform that will bring freelancers directly in contact with employers, having struggled with finding jobs as freelancers.
In 2005, their company was acquired by Elance for 1 million dollars.
Then 2 years later, they rebranded as Elance-Upwork.
8 more years later, they once again rebranded as Upwork.
And today, their platform has generated over $1 billion in gross services volume, as of April 2022.
According to Upwork, they grew 27% year over year.
What made it work
Upwork has attracted more than 12 million registered freelancers as of 2017, as well as around 5 million clients.
Upwork boasts over 145,000 core active clients in 2022 or employers who spend at least $5000 for projects annually.
Employers on this platform spend a combined $2.52 billion every year.
This growth has been positive and steady throughout the years, and this year, Upwork was established as one of the Times 100 Most Influential Companies.
Upwork made freelancing convenient for people.
Creating a profile on the platform is free and easy, and it connects freelancers to various resources to safely and successfully bid for projects.
Additionally, it incentivizes continued use, particularly for freelancers.
For the first $500 a freelancer earns on Upwork, the platform charges a commission rate of 20%.
But the more money a freelancer makes, the lower the commission becomes.
Freelancers can also count on secure payments for fixed-rate projects through Escrow, which requires clients to deposit the agreed amount once a contract has been made, and releases the funds to the freelancer upon confirmation of completed deliverables.
For employers, Upwork uses advanced algorithms to help clients find the most ideal freelancers for their job posts.
How the Fiverr Service Marketplace Started with $5 Services
Starting in 2010 Micha Kaufman and Shai Wininger, Fiverr was envisioned to offer an alternative way to work instead of the usual 9-to-5.
It was launched in Tel Aviv in Israel and within five years, it opened other offices in Europe and the United States, including London, Berlin, New York and San Francisco.
According to Kaufman, the first 10 to 20 people he talked to about Fiverr told him the idea was crazy.
But through "productizing services" and solving market friction and inefficiencies with software, Fiverr grew into a multimillion-dollar company that has facilitated more than 50 million transactions between 5.5 million-plus buyers and 830,000+ sellers.
What made it work
More than offering a platform that would solve freelancing needs for both sellers and buyers Fiverr operated with a very simple premise: introduce a single price point to make things easy to manage, and ensure that users could easily navigate the website.
Things eventually changed, and gigs on Fiverr are no longer just $5, but the simplicity in its pricing generated a lot of interest and contributed to its important and early growth.
Additionally, Fiverr offers nine verticals, under which are 300 more service categories. These verticals are:
- Graphics & Design
- Digital Marketing
- Writing & Translation
- Video & Animation
- Music & Audio
- Programming & Tech
- Lifestyle; and
And it's available in over 160 countries.
Thumbtack's Online Marketplace Tackles Hiring Professionals
Founded just when the gig economy was starting to take shape, Thumbtack now reigns supreme over the on-demand services market.
It was established by four people who believed that hiring a professional in their area should be as convenient as buying a book.
And more than a decade after, this consumer-facing service marketplace has a valuation of around $1.7 billion.
And estimated annual revenues of over 500M dollars, at a rate of 125% year-over-year.
What made it work
Thumbtack functions as a two-sided service marketplace where clients can find professional services.
These professionals work in various industries, from home improvement to legal services.
And unlike traditional platforms like Google or Yelp, Thumbtack uses a unified system that matches specific queries with specific professionals.
For example, while you can search for a gardener on Google, there's no assurance you'll find listings for the specific type of gardener that you need.
Thumbtack improves the search process by filtering results to include only the filtered down professionals.
And for registered professionals on the platform, finding and choosing customers is also streamlined.
Thumbtack professionals can set targeting preferences for their work schedules, locations, and others.
Today, Thumbtack has recorded over 70 million projects started in 500+ categories through more than 200,000 professionals, with over 8 million five-star reviews.
Uber's Marketplace App Simplifies Hiring a Ride
Founded in 2009 as UberCab, Uber was established when their founders realized how difficult it was to hail a cab on a snowy night in Paris.
Since then, it has gone through significant upheavals to, first, fight for its position in the traditional taxi and cab market.
Eventually, it transitioned into becoming one of the biggest providers in the sharing economy services market, with net revenues of over 17 billion dollars in 2021.
Today, it's available in more than 900 cities all over the world and completes 17.4 million rides every day with a fleet of over 5 million drivers.
What made it work
What made Uber so successful is the way it simplified the entire experience of getting or sharing a ride with one single app.
Users have access to precise fare estimates, check car arrival times, view vehicle makes and models, and can even split the fare with other individuals.
Uber was revolutionary in that it pioneered ride-sharing. Even when it faced some stiff competition, it still brought in 25 times more revenue than its closest competitor.
As a service marketplace, it has now broadened its horizons.
Uber does not just connect commuters with drivers, it also enabled bike-sharing, Uber Eats, and air taxis.
It has even branched into drone food delivery and has received around 24 billion dollars in funding as of 2019.
Airbnb's Marketplace Pioneers Renting Out Homes
In 2007, Airbnb founders Brian Chesky and Joe Gebbia wanted to raise enough money to help them afford their San Francisco rent.
And they found the perfect opportunity in renting out air mattresses to conference attendees when they realized all the hotels in the area were booked.
They called their business venture Air Bed and Breakfast.
And in so doing, they disrupted the entire hotel industry with a revolutionary service marketplace.
Today, Airbnb is available in over 220 countries all over the world, with more than 150 million users booking more than 1 billion stays.
What made it work
One reason why Airbnb grew into one of the biggest brands in the sharing economy is its focus on personalizing the customer's experience.
Whereas hotel guests have to pick from accommodation options that, for better or worse, look similar to each other, Airbnb users have the privilege of finding more intimate lodgings with a local touch and personality.
6 guests reportedly check into an Airbnb listing every second.
Hosts and guests promote the uniqueness of the platform with featured stories that provide a closer look at the kind of experience that the platform helps enable.
By using AirBnb, hosts on the platform are said to earn $13,800 every year.
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