Before Atlassian became Australia’s undisputed innovation poster child, there was Freelancer.
For a while – in the days before anyone really talked about the “gig economy” – the online outsourcing marketplace was considered the great hope of the nation’s tech industry.
Now – just as concerns about the impact of the casualisation of work on society begin to mount – analysts say the company is at a crossroads.
Back in 2013, Freelancer listed on the ASX, after rejecting overtures from overseas exchanges and offshore trade buyers. It was a triumphant moment for the fledgling local tech industry. According to reports at the time, CEO Matt Barrie rang the opening bell so hard it broke.
The float was a coup for the the local exchange, which is dominated by mining and financial services stocks, and known for a dearth of quality tech companies. It was the first significant internet listing on these shores since the dot com bust at the turn of the millennium.
Freelancer’s shares initially soared, valuing the business, ever so briefly, at $1 billion. Now, nearly four years later, and the picture is markedly different. Last month, Freelancer’s shares slipped below their 50¢ IPO price. And last week the stock closed at 46¢, equalling its lowest level since listing.
All up the share price has fallen 69 per cent over the past year. Over the same period, the All Ordinaries Index (which has significantly lagged other developed markets in recent years) has risen 4 per cent.
What happened? Freelancer is a classic example of an online marketplace business. Like Uber (and all the businesses you see described as an “Uber for” something else) or eBay, or a real estate listing’s portal or even a stock exchange, it is a platform where buyers and sellers meet to transact. The marketplace makes money by taking a cut from each transaction on its platform.
On Freelancer, people and companies post projects – anything from coding and software development, to graphic design, to transcription and translation services. Users from around the world (Freelancer’s top five markets for users are India, the US, the Philippines, Pakistan and Indonesia) bid to complete them.
Competition in this field is fierce. Rival platforms include Upwork, Fiverr (which counts Melbourne’s Square Peg Capital as an investor) and 99designs (whose origins are in Melbourne).
Despite this, Freelancer has managed to grow its users (it has more than 25 million of them now) and the number of projects posted to its sites. But revenues have been stagnant, and since it is priced as a high growth tech stock, that has been a problem.
Cannacord Genuity analyst Owen Humphries told clients in August the company’s “conversion rate” – the ratio of completed projects relative to the amount posted – was running at record lows. “The stock is at a pivotal crossroad given the apparent lack of revenue growth and cash generation,” he wrote.
Meanwhile, UBS analysts downgraded their forecasts, and no longer recommend clients buy the stock. “Revenue growth (or lack of) will be a key consideration for investors,” they wrote following the result. “Until we see this flowing through, it is hard to have a high degree of confidence.”
The company declined to comment ahead of a quarterly update to the ASX this week.
Barrie, an outspoken critic of Sydney’s lockout laws, is described by industry sources as a polarising figure. But he is respected for running Freelancer efficiently, and for listing a tech business in a country where that industry has, historically been shunned.
Most recently, he hit headlines after warning that Australia has still failed to embrace innovation.
“Australia is basically a property bubble floating inside a mining bubble inside a commodities bubble inside a China bubble, and that lucky free ride is about to go pop,” he said at an Australian Financial Review conference last month.
Describing the technology industry as “the greatest wealth and productivity multiplier there is,” he also savaged university funding cuts. Few would disagree with these sentiments.
Yet Freelancer and other online outsourcing platforms, together with on-demand services like Uber and Deliveroo, have been criticised themselves for fuelling a race to the bottom in wages and working conditions. That’s a complicated issue to resolve.
For Freelancer to escape its race to the bottom on the stockmarket is much simpler. It needs to show signs of growth.