Earlier this month, CEO of Euro Freelancers Marco Torregrossa spoke at Arcadier Inspire, a virtual summit and competition for online marketplaces. With his experience as a workforce and labor market advisor, Marco has specialized insights on how entrepreneurs can better design, scale and govern freelance platforms.

The labour economy is facing disruption

The freelance economy is on the rise. In his presentation, Marco shared that there has been a 45 per cent increase in freelancers in Europe since 2004, and the freelance workforce grew three times faster than the employee workforce since 2014. It also seems like no sector can escape from the trend of becoming more flexible. Even professions like medicine, engineering and law that once seemed invulnerable will be affected. At this rate, the future of work will see the number of freelancers outgrowing the freelance economy. With more work and less conventional ‘jobs’ in the future, it means that everyone, from students, employees and employers to organizations, should look ahead and prepare themselves for this reality.

For companies, it is time to find out how to leverage the freelance economy to get work done more productively. For employees, income may have to come from various sources, not just from a job. People will have the option of being just an employee, a freelancer, or both. Whatever the case, Marco predicts that the future of work will see a symbiotic relationship between employees and freelancers.

How can entrepreneurs scale their freelance platforms?

At present, freelance platforms are still considered a novelty. While there are some large freelance platforms like Upwork and Fiverr, there is room for more. In his presentation, Marco categorized the current majority of freelance platforms into three categories - platforms that provide technology services, (such as software development), platforms that connect clients to specific services (such as copywriting) and those that offer generic services. This means that there are many verticals which aspiring freelance platform entrepreneurs can consider exploring.

As the sharing economy and freelance work have become more common, corresponding technologies have emerged to expand these sectors. Take Arcadier for example - with Arcadier’s easy-to-use marketplace technology, entrepreneurs are no longer limited by the lack of technical expertise. Aspiring freelance platform entrepreneurs can leave the technical aspects to Arcadier and focus on building and scaling their freelance platforms.

On the topic of scaling, Marco identified four clusters of freelance platforms. Leaders are those which are highly rated by users, with substantial market presence. Similarly, contenders are highly rated by users but have yet to achieve the market presence of leaders. High performers have significant market presence but need to work on enhancing user satisfaction ratings. Lastly, platforms that don't have significant market presence fall into the niche cluster.

Marco’s advice for new freelance platform operators is to first develop a strong market presence, then focus on creating  strong user satisfaction. In other words, Marco recommends a strategy to develop a niche freelance platform, then scale up to being high performers, followed by becoming contenders and eventually achieving the leader status.

What are the biggest shortcomings of the freelance economy?

Marco shared three main challenges that freelance platforms face. Firstly, users may be turned away by the high fees that platforms charge. There are many revenue models that platform operators can experiment with, but Marco recommends the use of a commission model for freelance platforms that are attempting to break into the market. Charging a small commission per transaction would encourage more freelancers to post their services on the platform with no concerns about loss. Further, when fees are affordable or competitive against other platforms, it would be more attractive for users to use the platform. At a later stage, when the platform has gained traction and market presence, the platform may gain the power to consider higher commission rates while enjoying the larger pool of users.

The second issue that freelance platforms face is the issue of trust. Initially, service users and providers would be cautious of intermediaries. The question of whether the platform has their best interests in mind needs to be answered. To enhance trust, platform operators can enhance the quality and consistency of their service providers by qualifying the freelancers before allowing access to assignments.

Finally, there’s the question of portability and data ownership. Most freelance platforms do not facilitate the easy extraction of data from their platforms. If freelancers are unable to export their data for their personal use and move to other platforms, they will be less willing to joining the platform. Platform operators will need to understand the needs of their users and meet them to convince even more users to come on board.

Tips for freelance platforms

With the freelance economy set to expand and disrupt the labour market further, platform entrepreneurs would do well to learn more about the freelance economy. Freelance platform entrepreneurs should consider themselves as the next generation of HR specialists. Having a keen understanding of the positions of freelancers and the needs of users will help in enhancing platforms to meet those needs, expand their business and influence the growth of the freelance economy.

Watch the entire Arcadier Inspire Summit talk by Marco Torregrossa: