The Information recently reported that Microsoft subsidiary LinkedIn has been working on a service called Marketplaces that will allow users to find and book freelancers. Marketplaces could launch as soon as Sep 2021. The effort has been underway since at least Apr 2020, when LinkedIn hired the founders and staff of UpCounsel, a marketplace for legal services. (UpCounsel’s former CEO, Matt Faustman, is now the product lead for Marketplaces.)

Marketplaces is expected to replace LinkedIn’s ProFinder, which is a free service for US clients and service providers with a LinkedIn Premium Business account ($60/month). ProFinder began life in 2016 as a proposal-based matching service for professional service providers (e.g. consultants, writers, designers, accountants). Over time, ProFinder became more integrated into LinkedIn’s core business-networking platform – including ways for freelancers to showcase services in profiles and search results, and enabling clients to reach out directly to freelancers. To date, ProFinder has 807K service providers but is still an insignificant part of LinkedIn’s business in terms of revenue.

Marketplaces will let clients compare rates, book and pay freelancers directly on the LinkedIn platform, as well as post their own proposals. While confirmed details are few, business models reportedly being considered include LinkedIn taking a cut of transactions and paid ads by freelancers. Payments might be taken via a digital wallet that Microsoft has under development, which could also be used elsewhere on LinkedIn (e.g. for content subscriptions, contributor “tips”) as well as potentially other Microsoft properties.

The Marketplaces offering hopes to tap into a growing gig economy that was boosted by the pandemic. According to a Sep 2020 report by freelancing platform Upwork, 36% of the US workforce (59M Americans) had performed freelance work during the previous 12 months – representing $1.2T in annual earnings (up 22% over the prior year). Upwork and Fiverr, the two leading freelance marketplaces, collectively made $563M in revenue on $3.2B in gross volume in 2020 – up 38% from 2019.

Within the rather fragmented freelance marketplace space, LinkedIn Marketplaces competes with the more generalist platforms such as Upwork, Fiverr, and Freelancer.com as well as expert networks like GLG. It may also compete with more specialized platforms, given its grand ambition of scaling UpCounsel’s model to 100 vertical marketplaces across industries (including, but not limited to, legal services). Given 740M LinkedIn users and 807K ProFinder service providers, Marketplaces will be a contender to become one of the largest freelancer platforms.

With freelance marketplaces, however, bigger is not necessarily better. Size can be a barrier to success, given that a high-quality freelancer network is a key differentiator for marketplaces. Networks such as Toptal, CrewScale, Experfy, Braintrust, Paro, and Communo, for instance, have pinned their respective value propositions to an intensive vetting process that can ensure quality. Fiverr and Upwork also have premium services (Fiverr Pro, Expert-Vetted Talent) that incorporate manual screening.

How LinkedIn Marketplaces will vet talent is still an open question. While clients will be able to post reviews, that may not be sufficient to ensure quality. Microsoft/LinkedIn will likely seek to apply AI to the screening and recommendation processes, though the heterogeneity of user profiles could prove to be a barrier. Without a differentiated approach to screening/recommendation, it’s unclear what value Marketplaces would offer beyond existing platforms.

LinkedIn has long been viewed as underplaying its hand. It has incredible and distinctive assets, with few real competitors (and arguably none) in its core professional-network business. It saw $8.8B in revenue in calendar-year 2020 – which might seem decent until put up against Microsoft’s $153B in the same period. Also, only about 1/3 of LinkedIn’s revenue came from advertising, a pittance compared to Facebook’s $84B or Google’s $147B or even Amazon’s $21B. Furthermore, while LinkedIn has been one of Microsoft’s faster-growing businesses (with 20% revenue growth in FY20), it has not been very profitable.

For Microsoft, Marketplaces represents a world of opportunity – with potential tie-ins to its Microsoft 365 productivity suite, Teams collaboration platform, Azure cloud, GitHub code repository, and even its recently-launched Viva employee experience platform. If Marketplaces can tap Microsoft’s enterprise know-how to meet the flexible-talent needs of large companies and fit into their HR and functional workflows, it could be powerful in the marketplace. The real question is whether LinkedIn can execute on the promise.

Nov 6 2020 (3 Shifts): California’s Prop 22 & Prop 24 set a new tone for the gig economy and data privacy

Jan 10 2020 (Brief #19): Uber & the gig economy are facing headwinds

Earlier this week, BigCommerce – a Shopify-like SaaS ecommerce platform – announced a partnership with Walmart that would enable BigCommerce merchants to join Walmart’s invite-only, 3rd-party seller Marketplace. BigCommerce serves 60K+ online stores in 150 countries. While many are small to mid-sized businesses, its platform also powers well-known larger brands such as Ben & Jerry’s, Sony, and Vodafone. Through the partnership, eligible BigCommerce merchants will receive an expedited review process to sell on Walmart Marketplace, and also enjoy $0 commission on their first month’s sales.

Walmart’s partnership with BigCommerce is akin to its Jun 2020 deal with Shopify, in which it agreed to add 1,200 Shopify merchants to Marketplace. Shopify – the leading SaaS ecommerce platform – had a monster year in 2020, driven by the pandemic. Hundreds of thousands of brands/merchants were forced online, with many using Shopify’s tools to sell directly to customers through websites and social platforms. Shopify customers surged from 1M+ at the end of 2019 to 1.7M+ in 2020 – driving 86% revenue growth and 96% GMV (gross merchandise volume) growth last year. Shopify’s explosion is emblematic of the broader adoption of SaaS ecommerce platforms that has emerged from the pandemic – which Walmart is hoping to tap into with its recent deals.

Amazon – which saw its share of the ecommerce market drop from 44% in 2019 to 31% in 2020 – is alarmed. On Black Friday, Shopify outperformed Amazon in 3rd-party seller sales ($5.1B to Amazon’s $4.8B). Amazon has lately seen vendors leaving its own marketplace for Shopify – often due to the difference in fees (Amazon typically takes a 30% cut while Shopify charges 2.4-2.9% + $0.30 for payments processing). Amazon felt threatened enough that it created a special task force (“Project Santos”) dedicated to studying Shopify to see if it could copy aspects of its business.

This past week, Amazon confirmed that it acquired small Shopify competitor Selz for an undisclosed amount. The acquisition is especially telling because Amazon had previously decided against providing Shopify-style services. It had shut down its homegrown version called Amazon Webstore in 2016 – and transitioned Webstore customers to Amazon’s preferred partner at the time, Shopify.

The battle to capture 3rd-party sellers – and grow services footprint with them – is still in the early stages. A Nov 2020 McKinsey report found that only 60% of consumer-goods companies felt “even moderately prepared” to capture ecommerce growth opportunities. As more brands look for help as they come online, the heat is on among Shopify, Walmart and Amazon to use whatever levers they can to draw more merchants into their marketplaces, and in turn, attract more consumers. We’ll see them get aggressive and go beyond payments integrations and fulfillment services to lower fees, price subsidies to ensure low prices, and perhaps advertising perks.

We will see if the challengers can maintain their momentum vis-à-vis Amazon as pandemic lockdowns subside. Walmart saw a robust 69% growth in ecommerce sales in its most recent quarter, but sales are slowing relative to prior quarters and it has warned of moderating growth in the future. Shopify – whose fate is closely tied to the continued health of the small-business sector – has already warned that sales in 2021 will likely not reach the heights it saw in 2020.

Mar 26 2020 (Brief #27): Grocery delivery, ecommerce & the renewal of Walmart

Nov 11 2019 (Brief #12): Why Amazon’s recent challenges are rooted in its business model

On Wednesday, India approved 5 global and 10 domestic manufacturers for a $1B Production Linked Incentive (PLI) scheme to encourage domestic manufacturing and export of IT hardware such as laptops, tablets, PCs and servers. The scheme offers manufacturers 1-4% of incremental sales of products made in India over the next 4 years (compared to the base year of 2019-2020). The Indian government expects the PLI plan to help India export $33.5B in IT goods.

India’s IT hardware PLI comes as foreign big tech firms are diversifying their supply chains away from China and making new forays into India. Last week, it was reported that Apple is looking to start manufacturing iPads – which have mostly been made in China – in India through one of its 3 in-country contractors (Foxconn, Wistron, Pegatron). Similarly, Amazon announced last week that it was launching its first device-manufacturing line in India. Amazon will start out by making “hundreds of thousands” of Fire TV Stick devices annually for Indian consumers through a Foxconn subsidiary in Chennai.

This is the next move in the progression towards a “self-reliant India” with its own high-tech domestic-manufacturing industry that can support its rapidly digitizing population’s needs. In this past week's announcement, the Indian government cited that the country’s $4.6B+ consumer market for laptops and tablets was “largely met through imports” from large global manufacturers. The announcement went on to say that “it is imperative that these companies expand their operations in India.”

The IT hardware PLI plan is similar to a $6.6B incentive scheme for mobile-phone manufacturing that was approved in Oct 2020. It builds upon the success of that mobile-phone PLI in attracting manufacturing from companies such as Samsung and Apple – the latter is reportedly planning to start producing its latest iPhone 12 in India as soon as this quarter. The growth of domestic electronics manufacturing – and mobile phones and accessories in particular – even got a mention in the Finance Minister’s annual budget speech earlier this month. A similar PLI is reportedly in the works to boost Indian manufacturing of wearables such as smartwatches.

Firms are beginning to recognize that an over-emphasis on short-term financials has left them less prepared for disruptions in their supply chain, from the ongoing pandemic to the recent chip shortages. With global supply chains in the spotlight of late, India is benefitting from the growing wariness about overreliance on Chinese manufacturers.

China-India relations, however, continue to sour and supply-chain dynamics between the bordering nations could be adversely affected as a result. For instance, iPhone production in India has seen delays from India limiting its number of visas for Chinese engineers and also asking Apple to use non-Chinese manufacturers. Electronics manufacturers will have to step lightly to avoid getting caught in the middle of the two countries’ growing feud.

Oct 9 2020 (3 Shifts): Apple & Samsung shift manufacturing to India, encouraged by a $6.6B incentive scheme

Apr 4 2020 (Brief #28): Global supply chains diversify away from China