“The freelancer economy is a bubble waiting to pop.”
“The freelancer economy is here to stay.”
Which statement you deem accurate largely depends on the prism through which you view the freelancing business model. A recent Forbes article suggested that, while investment firms continue to pour money into the sector, hype in the gig economy may have outpaced reality. Lawsuits have brought attention to freelance worker rights (think of Uber and others), and it looks as though regulation is just around the corner.
But the question at hand: bubble or no bubble? In an interview with PYMNTS’ Karen Webster, Michael Ting, SVP at Hyperwallet, pointed out that the freelance economy has some notable attributes that improve its sustainability compared to previous eras. “The technology is much more advanced, more evenly distributed, and the network effect of these businesses is quite different as well.” According to Ting, there is no evidence that “these companies are operating in a space that is above their weight class.” Nevertheless, Ting admitted that there are some inefficiencies in the freelancer system — “a number of ‘me too ventures’ that haven’t thought about how to stay relevant in the long term.” Additionally, investment activity from angel investors and other backers may be “enabling the smaller group of companies and giving them false confidence.”
But as Ting pointed out, those who dismiss freelancing platforms based on valuations and funding might miss the larger trends. These companies aren’t just job engines; they’re technology platforms. And it is the platform model that Ting believes is flexible and extensible enough to sustain this rapid growth. The model itself has been around for a long time (Ting gave a nod to social selling platforms Avon and Mary Kay), and the adoption of technology is only its most recent iteration. Evolution is central to the on-demand platform model’s viability.
While he doesn’t foresee a "bursting" of the freelancing economy, Ting asserted that there are a number of changes that need to be made within the industry. Though freelance or contract workers can be attractive to employers — particularly given the potential to reduce overhead — all involved parties need to better understand the subtleties of the freelancing relationships. The firm and the worker, said Ting, “must enter into the relationship with eyes wide open.” Highlighting the lawsuits filed by drivers against Uber, Ting argued the need for clearly defined expectations on both sides of the freelancing equation. Uber simply acts as a lead generator of sorts, and drivers need not follow through on every ride offered. But if they accept a job, it is to be on terms clearly understood by worker and firm.
Without such transparency, the demand side of the equation may dry up, and that would truly be a threat to the freelancer economy. “We may reach a saturation point,” offered Ting. “The metric will not be how many ventures have gotten into [the freelancing space] but how well they satisfy market demand.”