In a return to one of it's earliest goals as pitched by Reid Hoffman to its VCs in 2004, LinkedIn is stepping into the $715B freelancer- independent contractor market. LinkedIn is piloting a marketplace for freelancers and independent professionals with LinkedIn ProFinder.
It has taken LinkedIn 10 years, but the timing couldn't be better. Uber, Thumbtack and TaskRabbit have jumpstarted getting the gig economy going and everyone from Amazon to Google are getting in. LinkedIn probably thought- we have the best database of professional talent and the people seeking them, then why fight Monster, Glassdoor and Indeed in becoming a job board and earning peanuts from subscriptions, instead of making 10x that by getting in the middle of the transaction.
This contracting field is also virgin territory and in line with Reid’s recent advice telling employees (and companies) to treat work like shorter tours of duties instead of the life long employment model.
Premium Membership Fees vs Transaction fees
LinkedIn has taken a lead generator role in this marketplace and not the actual broker in the transaction. While significantly lower compared to trying to take 20% of a gig's value, LinkedIn's large audience (400M vs Uber's 400K drivers) supports the lead gen and subscription model better.
This model also helps LinkedIn retain its premier image and keeps LinkedIn out of the inevitable problems and costs associated with manually matching buyers and sellers, resolving disputes and getting into labor law issues. Services contracts are anyways very hard to standardize and manage and are best left for the parties to negotiate.
Back of Napkin estimate- If only 10M of the estimated 50M freelancers in the US upgrade to premium and pay $20/month (which is similar to the new pricing model from Upwork) to receive leads, it would give Linkedin $2B in revenues. More expensive services like Legal and Financial Advisors would pay 10x that for high quality leads that Linkedin should be able to generate for them.
LinkedIn is already one of the most curated talent marketplaces with recommendations and trust built-in. Once the lead gen model which doesnt involve much risk, is honed and the results analyzed, Linkedin could evolve its model into a commision based model ala Upwork. Hire a contractor through our curated marketplace for a 10% transaction fee. So instead of $10 lead, it could make $1,000 on a $10K consulting gig.
If successful, ProFinder could upset the plans of many on-demand platforms- including some Unicorn startups like Thumbtack, Avvo and TaskRabbit and even established players Zillow and LegalZoom that introduce service professionals to buyers.
Thumbtack- which specializes in providing leads to freelancer photographers, professionals, writers, etc.
Upwork/freelancer.com/guru.com- mostly cateres to small businesses that are seeking general freelancers
RocketLawyer/Avvo/LegalZoom- provides leads to lawyers
Zillow- which makes its money providing leads to real estate brokers and other lead gen based marketplaces like RocketLawyer and Avvo for lawyers
Services Marketplaces- Translation (rev.com, unbabel.com), Design (Behance, dribbble, 99Designs)
Craigslist- which is the current solution for posting help wanted ads
TaskRabbit Fiverr- Task Marketplaces which were moving up the value chain
WorkMarket- and other freelancer marketplaces like Fieldnation and OnForce, although these marketplaces focused more on technical field services
Staffing companies and Consulting Companies- although these entities could used LinkedIn as a platform to attract business based on their consultants and workers and still provide value as the transactional piece like payroll, contracts, HR, compliance, etc.
There are a number of significant advantages that LinkedIn has over other digital labor marketplaces.
Low Cost to Acquire a Customer (Demand)
LinkedIn already has almost daily access to almost every decision maker- in small, medium and large businesses and knows what they may be looking for. They can easily suggest a professional to help them. All LinkedIn needs to do is look into what the user has been researching and plop an appropriate professional right there. Unlike Thumbtack or UpWork, LinkedIn doesn’t have to pay Google to attract buyers.
Low Cost to Acquire Seller/Freelancer (Supply)
Most freelancers already do significant work in promoting their LinkedIn profiles, getting recommendations, writing blog posts, uploading portfolios, etc. LinkedIn doesn’t need to spend much to get freelancers on their site.
Professional Reputation and Graph
Marketplaces like UpWork, Rocketlawyer or Zillow might have transactional reviews of their contractors, but these are often meaningless and often given under the threat of a reverse bad review. LinkedIn’s recommendations are different in that they are given by long term colleagues for the world to see. It is based on trust and are open so they are more trustworthy. (the same can’t be said of endorsements sadly because of the spammy way LinkedIn collects these). The professional graph can also help Linkedin make much better targeted recommendations based on which freelancers may share connections with a potential buyer. After all wouldn't you rather hire a freelancer that a friend recommends rather than someone unknown with a 5.0 rating on UpWork.
Lifetime Value of Customers
If it does suceed, the lifetime value of customers would be super-high because businesses will always require temporary help and as the place where every professional hangs their hat even when they are a passive candidate, LinkedIn would be the place to find them.
This move from LinkedIn could enable a large population of their user base increase their earnings and finally get them a return on their investment of developing a LinkedIn profile. Its a strong answer to the "What's in it for me" question that many people complain about LinkedIn.
In the meantime, OnContracting is unaffected as this doesn’t target our space. Our target segment are contractors that work 40 hrs/week at companies as contractors through staffing agencies (contingent employees) rather than independent contractors looking for short gigs. So we remain humbly your Linkedin for Contractors