What are the competitive advantages of horizontal and vertical gig marketplaces, and how do they compete with each other in the industry?

For horizontal versus vertical labor marketplaces, it comes down to the size of the transaction - the frequency multiplied by the price. If you’re doing smaller size transactions -  that is, low frequency and low price – you're going to need a horizontal platform.  When the size of the transaction is not very big, unless I have different categories, I'm not going to be able to make up the cost of acquisition of the demand and/or supply-side. So for the frequency low and price low services, you need to be a horizontal like Thumbtack for home-services. Here you want to offer adjacent services to the demand-side so it’s not a question of having to re-acquire the demand every-time.

On the other hand, if you need a specialized or regulated supply with a specialized selection and buying process - then a vertical-only makes sense - like Vivian Health for healthcare clinicians or Vangst for regulated cannabis industry workers. The vertical platform has to manage the frictions of creating the supply or the nuances of the hiring process materially better than any horizontal. 

As for the famous Craigslist unbundling chart—those were completely different services that were being delivered on that platform - you had discussion boards to personals, to jobs, to someone selling an old bike. The point is there were very, very different classes of service that were getting basic liquidity on the Craigslist platform that got unbundled. 

When you look at a labor marketplace like Upwork, it's much less horizontal than you think, if you compare it to the whole scope of services that I talked about earlier, all the different types of work. Upwork, for example, is really just focused on digital work that's remote. By definition, that's going to be information work. But there are many categories within information work. The question is, will what happened to Craigslist happen to Upwork? 

If you look at something like one of the IT-focused labor marketplaces, like Turing, TopTal, etc. there's a big overlap with Upwork in the skills offered on them - obviously IT, software-development etc. 

In terms of the duration or the size of the contract – Upwork— right now, at least—is more in the mid-range, slightly more commoditized work that’s serving more of an SMB client. Whereas something like a Turing operates higher up in the sense of higher quality, more specialized work. There is a slight difference on that dimension.

Then you have the buying process, and that's really where the biggest differences are. With something like a Turing, these vertical-marketplaces are much more curated. Basically the value prop is around vetting of the candidate and the curation of the ultimate match. On the Upwork side, it's very scalable, it's all automated, it's all quality signals within the platform. On the Turing etc. side, there’s more vetting going on, more human interaction, and it's also highly curated, you don't get multiple proposals . That’s the big difference here. 

I see Upwork and Turing/TopTal as competitive at the higher end but not in the mid-range SMB space. So the middle + bottom of the pyramid is an Upwork, and the top is something like a Turing. Basically, there's a big, huge commoditized or mid-range bulk where, because of the size of the transaction, the frequency of the transaction, you have to be horizontal. But then, there’s space for a higher end, higher cost layer. They would co-exist - it's not like an unbundling, it's more like a high touch, high price layer on top of a bulk marketplace. 

We’ll have to see how Upwork, whether it can move up, how well it can move up, or not. Upwork is introducing features to go up there - the Talent Scout is essentially a higher-touch recruiting service that's layered on. The Enterprise capabilities, again, are a new thing that they've launched that allows them to move upscale. 

This kind of dynamic plays in the other categories too, like in Creative Services, where you'll have a more commoditized horizontal marketplace , because the transaction sizes are smaller, the frequencies are less. Once you acquire an SMB customer, you want the client to buy multiple things, otherwise it's not cost-effective, generally speaking. And yes, there’s competition at the higher end, with higher-touch and higher prices. 

Now you mentioned Preply, and that’s more of an education or tutoring market with a consumer focus. Upwork hasn’t been going after the consumer, per se - I don't see them as competitive  because it's a different service. How you deliver the tutoring, it’s completely different compared with B2B information work.