{"id":17909,"date":"2023-11-07T15:31:09","date_gmt":"2023-11-07T20:31:09","guid":{"rendered":"https:\/\/d3.harvard.edu\/platform-digit\/?post_type=hck-submission&p=17909"},"modified":"2023-11-07T15:31:09","modified_gmt":"2023-11-07T20:31:09","slug":"fiverr-scaling-productized-services","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-digit\/submission\/fiverr-scaling-productized-services\/","title":{"rendered":"Fiverr: Scaling Productized Services"},"content":{"rendered":"\n\n\n

Fiverr is a marketplace of services that connects freelancers (sellers) to people or businesses looking to hire (buyers). In Bessemer\u2019s investment memo, these services are referred to as \u201cgigs\u201d and are smaller than the projects sourced through marketplaces such as eLance and ODesk, but require more skill and creativity than the tasks performed at Mechanical Turk. Fiverr\u2019s strategy was to \u201cProductize services with transparency\u201d with the idea that \u201cyou don\u2019t hire people, you buy products\u201d that are created by people. Fiverr\u2019s cofounder, Micha, says on an NFX podcast \u201cThese products are being performed by people, but you know exactly who you work with because of our reputation system and the way you look at profiles. You know exactly what you\u2019re going to get because it was predefined when you\u2019re going to get it and exactly how much you\u2019re going to pay. That level of transparency never existed before for businesses.\u201d
<\/p>\n\n\n\n

Initial Scaling Strategy <\/h2>\n\n\n\n

Fiverr started in 2010 as Workdeal during a personal challenge the founder faced when having to set up a customized blogpress website. He realized there was an untapped market for a wide variety of services that required some level of knowledge and skill, but did not require a full professional to accomplish it. <\/p>\n\n\n\n

This idea led to two of the key principles that drove their early growth. First, any legitimate service can be offered by anyone regardless of their qualifications or background. This allowed them to appeal quickly to their supply side. The second was that every service would be priced at $5 (eventually leading to their name, Fiverr) to appeal to the supply side of the market place by asking with the question of \u201cwhat would you do for $5\u201d in an attempt to populate the site with any and all gigs. This principle had a two-sided effect. On the supply side, while it allowed any kind of seller to offer any service, it also forced them to differentiate on quality of service and be extremely efficient in their offerings. More importantly, on the buyer side, $5 was a low enough price that it removed the friction of deciding whether a service was a worthwhile purchase. Fiverr charged 20% of the transaction value as fees.<\/p>\n\n\n\n

Upmarket Disruption<\/h2>\n\n\n\n

By 2012, with 650,000 services listed on Fiverr, they had captured a significant portion of the untapped low end of the market and saw an opportunity to move upmarket. They launched Levels, a reputation-based promotion system to help entrepreneurs build their business and earn more revenue. After sellers successfully complete at least 10 transactions, they unlock advanced up-selling tools to offer Gig extras and charge more for their services. Within 6 months, over 30 percent of Fiverr transactions are greater than the site\u2019s starting price of $5. This allowed them to access the more premium services market.\u00a0
<\/p>\n\n\n\n

\"\"<\/a><\/figure>\n\n\n\n

Scalability and Sustainability <\/h2>\n\n\n\n

While Fiverr has been mostly successful in its attempt to curb disintermediation by preventing contact details exchange, they have a demand issue. While most marketplaces are supply constrained, Fiverr is demand constrained. Micha said on the NFX podcast \u201cThe reality is that freelancers came to us organically. We never acquired supply. We\u2019ve actually had plenty of it.\u201d Fiverr launched Industry Stores to bundle services in specific verticals. They changed their organizational structure to reflect this concept, with \u201cvertical managers\u201d responsible for specific industry\u2019s and related gigs. While the Chinese company ZBJ saw a similar strategy as moving towards being a \u201cgeneral contractor\u201d where they took on the role of breaking up larger tasks, Fiverr viewed this as \u201cproductizing services\u201d with gigs related to a specific industry living together in one store.\u00a0
<\/p>\n\n\n\n

\"\"<\/a><\/figure>\n\n\n\n

A key issue Fiverr will face in its growth moving forward are the Gen AI tools available. The kinds of tasks Fiverr has relied heavily on where you don\u2019t need a professional to accomplish it, like logo or website design, can be done in seconds for free by a myriad of tools available today. I believe a three-step strategy is required for Fiverr to continue its growth with AI: <\/p>\n\n\n\n

    \n
  1. Use completed gigs as templates for users that can be used for a lower charge. For instance, if a seller has already designed a logo for $5, make the logo available to a buyer for a price lower than Gen AI tools charge. <\/li>\n\n\n\n
  2. Integrate AI tools within Fiverr and change sellers into \u201ceditors\u201d in addition to their current role. While Gen AI tools do a great job at the first task, users often find it difficult to make edits. Access to assistance while users attempt AI tools increases the likelihood they will use Fiverr to do it.<\/li>\n\n\n\n
  3. Integrate tasks within industry stores that would have to be done separately with different tools.\u00a0
    <\/li>\n<\/ol>\n\n\n\n

    Listen to the podcast with NFX here: https:\/\/podcast.nfx.com\/episodes\/micha-kaufman-fiverr<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

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