How Fiverr Makes Money: Their Business Model Uncovered

Fiverr is a platform where freelancers can register their services and compete for gig work.
The site covers a wide range of services in the digital economy, from design to content and much more.
Fiverr earns revenue through transaction and service fees, software subscriptions, and course sales.

Shai Wininger and Micha Kaufman founded Fiverr in 2010, with headquarters in New York City. The duo ran a successful online company before starting the Fiverr website. They got the idea for the site after observing behavior in the eCommerce market.

Although sites like eBay and Amazon were gaining traction, there was nowhere for digital marketers and content specialists to offer their services to the market.

With the Global Financial Crisis of 2008 causing a huge spike in unemployment, many people were out of work and looking for jobs online in traditional marketplaces like Craigslist. And then Fiverr came along.

What does Fiverr do?

Fiverr offers an online marketplace where users can register their services.

The platform focuses on categories relating to the digital economy.

There are dozens of categories where designers, writers, developers, and other digital specialists can register their services.

The platform experienced rapid growth through word-of-mouth, with thousands of independent "gig" workers registering their skillset and services on the site.

Initially, the site carved its niche by offering services for $5, or a "Fiver."

However, after a few years, the company adjusted its model to allow users to charge whatever they like for their services.

How does Fiverr work?

Fiver operates a marketplace where gig workers can register their services.

Visitors to the site can browse the listings in specific categories, choosing the best provider for the job based on reviews left by people previously hiring the user for a gig.

This approach is different from other platforms like Upwork, where people register jobs and gig workers compete for the work.

Sellers on Fiverr can offer "gig packages," where they provide a range of services at different price points.

There are dozens of categories on Fiverr, including programming, graphic design, writing & translation, video production and editing, and much more. Buyers can read the seller's profile information before ordering the service, allowing them to choose the vendor they feel provides the right fit for their project and budget.

How Fiverr makes money

Fiverr makes money by charging service and transaction fees to its users, course sales, and subscription fees.

Let's look at Fiverr's business model in more detail.

Service and transaction fees

Fiverr generates the bulk of its revenue through its service and transaction fees.

Sellers pay a transaction fee of 20%, and buyers pay 5% of the total transaction cost.

The Fiverr business section of the site lets companies tap a pool of vetted and qualified freelancers to complete their tasks.

Fiverr monetizes this service, charging $149 per year for up to 50 users per account.

Software subscriptions

Fiverr built its "Workspace" feature for agencies that handle dozens of client requests daily.

They offer a free tier and a subscription model for this service.

The free model offers users limited functionality, with seller integrations, contracts, and payment processing options.

The Unlimited subscription gives users access to business analytics, custom-branded docs and contracts, and priority support for $24 per month.

Course sales

Fiverr also offers online courses hosted by top vendors in their respective fields.

Some of the courses on offer include viral marketing strategies, landing page design, and how to dominate your niche by advertising with Facebook or TikTok.

Future growth engine

Fiverr relies on its users to scale up its marketplace.

The site focuses on improving the user experience for the buyer and seller. The recent addition of "subscriptions" makes it easy for buyers to work with their preferred sellers on a regular basis.

However, with the global economy contracting, analysts expect Fiverr's forward CAGR to slow down to 13.72% by 2023.

However, the consensus shows that analysts expect the gig economy marketplace to increase at a CAGR of 15.3% between 2022 to 2026.