Our CEO Xenios Answers: Is PeoplePerHour Really Pushing Prices Down?

In this post I want to address a question we get quite often, as to whether we are ‘driving prices down’ for freelancers.

Firstly, I believe the question should be a split one, based on what the reference point is.

1.    The micro view

The question here really is: do we as a marketplace encourage and drive prices down within PeoplePerHour?

I believe the answer is a strong no.  First of all, it would make no commercial sense for us to do that as we ourselves would make less money from it. Our interests are aligned with that of our users given that we take a % fee and not an absolute amount. And in fact we tail our fee down the more that gets billed through the site so as to encourage higher prices.

Secondly, the data has consistently shown the opposite. For the last 7 months, over 60% of awarded jobs did not get awarded to the lowest bidders. Unlike an open auction, at PPH we deliberately do not show what other Sellers’ proposed prices are so as to not encourage undercutting and a race to the bottom.

And more surprisingly, 10% of fixed price jobs and 17% of per hour jobs get awarded above the initial budget requested by the Buyer. So in fact it’s not uncommon that the better Sellers, or the ones who place more detailed proposals that justify their fee and take the time to educate the Buyer, end up convincing the Buyer to increase their budget.

To those who read this thinking ‘yes but the base is low’ – for the same period the average of all the cheaper proposals worked out at £11 per hour which is still almost double the minimum wage, and the average awarded job was at £28 per hour, which is more than double the average median income of the UK of £12 according to Wikipedia.

So the arguments we sometimes hear that people are bidding consistently lower than and earning lower than minimum wage is unfounded. On PPH it seems the average wage is a good 2.3 times higher than the UK’s average.

And we are making more effort to improve it further. Just a couple weeks ago we introduced a new feature where we actively recommend budgets in the posting form so as to help educate Buyers on what fair market prices are. That’s as close as we can get without becoming a price setter, which goes against the ethos of an open marketplace.

pricesdowninfofinal

2.    The macro view

The second part of the question is: do marketplaces in general and PPH in particular drive freelancer rates down in the economy at large over the longer term?

Well first of all, PPH is not big enough just yet to affect the whole macro economy.  Secondly as per the data above, the average wage on PPH is 2.3 times higher the average in the UK.

Beyond that, this question must be considered in the context that the overall market ‘pie’ is increasing quite dramatically. We are not entering the pizza market to undercut Dominoes and steal market share. We are in fact creating a marker that to date has been very patchy in the UK at least, virtually unknown and inaccessible to the vast majority of Small Business and potential Freelancers.

To put this in perspective: freelancing today is an estimated $1BN industry globally and projected to be $5BN in the next 5 years. On PPH some 70% of our Sellers have never worked as freelancers before. So their ‘price’ couldn’t have dropped from anywhere. Their freelance income prior to PPH was zero.  You can’t get below zero.

Granted, once we reach scale and freelancing becomes a mainstream phenomenon, as it deserves to be, the variance in prices in the market will be much wider, which is a pure economic fact: it’s what happens in every industry which goes from an unstructured cottage industry to one that serves a good % of their target market. And the world is better for it.

I will draw an analogy here, which I think is relevant. I saw an interview recently with Sir Terry Leahy, ex-CEO of Tesco, where he was accused by the interviewer of driving prices down at the expense of the local grocer. The reality is of course that Tesco does do that, but is it a bad thing overall for the consumer or the economy?

Tesco didn’t just drive down the prices of a flat market, they grew the pie substantially and – much like Walmart – took affordable quality products to rural areas where they were previously inaccessible.

Of course before the Tescos of this world were around, prices were more expensive – as I’m starkly reminded every time I have the misfortune of buying something at my local high street store. I feel ripped off! The price is 5-fold that of a chain supermarket. And the quality is the same or worse, much like the service – which in not so many words was Sir Terry’s answer. If you add value to the customer and your margins as a business are aligned with your customer, it is in the grander scheme of things better for everyone. Always. That corner shop needs to find a way to either better their products to sustain a higher price or drop their prices to be more competitive. Or close down. And as always when there is change, the smart ones see it as an opportunity and evolve. The smart corner stores are turning themselves into Delis (which are now cropping up everywhere in London) where the price is higher but the produce is arguably differentiated and thus makes higher prices justifiable. And I’m a happy customer of them.

The point is simple: in a market that goes from its infancy (or non-existence) to a much bigger audience, it’s to be expected that what was once the only solution (and thus with a monopolistic or sticky price) is now one of many solutions and the price variance grows. The concept expands to Buyers and Sellers that were previously unaware of it, so the market grows and matures. Competition is what drives the world around, not protectionism, as the UK has witnessed from the 80’s onwards when the late Margaret Thatcher embraced open free markets. And much like back then there were protest and some pain for those that were stuck to the older ways of doing things which benefited them and them alone but clearly – and time has proven this – not to the benefit of the overall economy.

I don’t want to get or sound too political here, but rather point out what I think is the obvious: our mission as a business is not to serve some against the others.  It is not to shelter a few against the many. Nor is it to artificially set prices on what suits us. It is to serve the customer at large and the market. Our mission is to allow more people to benefit from the dramatic (and to the testament of so many of our users, truly ‘life-changing’) advantages of buying and selling services online versus in the traditional world.

Our vision is that one day this will become the de facto way of working for businesses and individuals alike, and will be as mainstream and as easy as buying a book on Amazon is today.  I still remember the first time I bought a book on Amazon, after constantly procrastinating for weeks and falling back to my usual habit of going around to the nearest book store and paying more. I doubted whether the book would ever arrive. But sure enough it did, and  – much like Buyers tell us when they first use PPH – I was transformed. That became the new de facto way for me and millions of others who now buy books and other products online.

The services market has the potential to be bigger than commerce online, but as in the offline world it lags behind in maturity and development. Our job at PPH is to accelerate that and take this new and much improved way of working, with all its benefits, to every business and every person in the country. And whether prices in the macro drop or not, one thing I have no doubt about is that – much like with commerce online – the world will be a better place for it.

PeoplePerHour
PeoplePerHour
PeoplePerHour
The UK’s leading freelance marketplace. Connecting small businesses in the UK and outside, with expert freelance talent as and when needed to help them grow and thrive. The company's mission is to empower people worldwide to live their work dream, building their business from the ground up and becoming financially and professionally independent.
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Peter Hollywood
Peter Hollywood

PPH cannot avoid pushing prices down.

Your smart infographic simplifies the reality of the real issue here ignoring many of the benefits lost with regular full-time employment.

Linda Reynolds
Linda Reynolds

Hi, I totally disagree. On people per hour, as a audio transcribe/stenographer I compete with transcribers worldwide and audio typists in the far east and India live far more cheaply than someone in London. Therefore they quote peanuts and get the work.

Sophie Lizard
Sophie Lizard

In the 4 years I’ve been using PPH as a freelancer, my hourly rate equivalent has increased 500%. Without PPH, I might never have got my business off the ground at all. This is also the only freelance marketplace I’ve seen that pops up a warning if you enter a very low proposal amount, and politely tells you to bid fair instead of aiming for the bottom! To anyone who thinks PPH drives prices down, I’d say this: freelancers choose their own rates, and buyers choose the freelancer they think will do the job best. It’s up to us to… Read more »

Linda Reynolds
Linda Reynolds

Hi Sophie, Yes, I agree. I think the minimum wage is fair – but buyers won’t pay it – they go for the cheapest option and why wouldn’t they? If someone else in the world is willing to work for half the minimum wage, the buyers chose them and if I were a buyer I’d choose them too!!!

kristal k
kristal k

For the industry that i work in PPh is definately pushing the prices down. Since the clients have got access to an international market. and even if they only want to work with UK suppliers they dont want to work at a rate that trully reflects the actual cost including the associated cost to providing the service. but try to get supplier working at an hourly rate and still not wanting to pay any associated costs for providing the service. So PPh is in my opinion pushing down prices. Its like ebay for the jobs market.

Lu
Lu

What I do not understand is your reviewing process. Why allow someone to put a filming and editing job on there with a budget of £50 in the first place? If all the jobs are manually checked, then why is there no quality control on the amount that people are budgeting for the jobs. If you are going to pay a team to manually check all job postings, it would make sense if they looked for more than email addresses within the ad – that after all is only looking after your own interests, not that of the sellers/bidders. I… Read more »

Peter Hollywood
Peter Hollywood

I completely agree with Lu. Why is it PPH cannot review the ridiculously low rates particularly with filming/editing?
Even today I spotted someone wanting an online business video made for £25!
In the present climate this will encourage exploitation.

Remus R
Remus R

The answer makes little sense really. How many jobs are actually paid with the minimum wage in reality? Let’s say a programmer makes 30/hr, why would I be happy to work for 11/hr just because it’s “almost double the minimum wage”? It may be, buy my work is countless times harder than an unskilled worker’s one. Just an example but you get the idea. As someone already said, it’s the workers in South and East Asia that are driving the prices down, and as PPH said, it’s the buyers who don’t know what they really want/don’t know the value of… Read more »

Rupert Kirkham
Rupert Kirkham

I agree with Lu that the starting price for many of the video, music and photographic jobs is ridiculous in many cases. I think this reflects the expectations of the buyers. People who want services for the first time (‘a video for my website…an animation …film a conference …(and edit it)..’) very often have no idea what is involved. To expect anything for less than a day’s work in the video business is unrealistic and it’s time we told the newbies out there the truth!

Lubka Christova
Lubka Christova

Exatcly. @Remus R, I agree with you.

The problem is that you can’t educate buyers how much they should be paying, because they are buyers from any country. Same as they are providers from different countries and their life minimal wages are very different from these in UK for example.

Some other freelance websites give a buyer the option to choose providers from which countries can apply for their job. Maybe this would help to have different price guidelines depending on where you pick your worker from.

Peter Hollywood
Peter Hollywood

Btw why does it say 11 hours ago on every comment?

Suzanne
Suzanne

My problem is buyers with low budgets. One recently wanted 200 dresses made for £5 a piece. This dress had 14 seams and a long zip insertion. The volume meant I could employ someone to help, but the budget meant I could hardly pay myself. My rates are not extortionate, minimum wage + running costs + 20% profit gives me a minimum commercial rate of £12/hr. So on this occasion the buyer sacrificed quality and attention to detail, for budget. If I were to make one of these dresses for a private client, I would be charging £60, £95 if… Read more »

Suzanne
Suzanne

The other problem is buyers in London are very reluctant to outsource their work outside London. In my eyes a cushion cover can be made anywhere. Seamstresses are good at interpreting design features adding complimentary embelishments without continual supervision. Yes I understand your designs are precious, I design and make my own things, but really they have got to learn to let go a bit. I understand postal costs have to be incorporated into the product cost, but there has to be a certain amount of give and take. I am more than happy to meet return costs if the… Read more »

crow eddy
crow eddy

You get what you pay for. I have been competing in the arts for many years, there will always be buyers who are happy with cheap junk, nothing you can do about it. Then there are the educated buyers that know quality. It helps to have a good portfolio for the buyer. If a buyer gets a bad job from a cheap bid they are going to get an education also.

Colin
Colin

I do hope all these comments are being taken on board. Yes the hype is great – I wonder how much you paid someone to present such a gloss on things (ok that may be a little below the belt). But the serious side is that so much time is wasted sending good proposals to people wanting something for nothing that the hourly rate is decreased yet further! In fairness I have had a few decently paid jobs from the site – but I have lost count of those lost to lower rates.

Phil Tindall
Phil Tindall

Sorry Xenios, not convinced. Don’t get me wrong, I really appreciate PPH and other freelancing sites as a survival backstop when work gets scarce. It is better to be working for a mere £11 than to have no work at all. It buys some groceries. Great for start-ups too. Just don’t expect to pay your mortgage with it. But really, I have 20 years experience and what I have to charge on these sites is a fraction of the rate I can get through regular channels. I only hope that my regular clients don’t try getting their work through these… Read more »

Lyubka Hristova
Lyubka Hristova

I’m a bit curious on what basis PPH approves and disapproves my opinion from being posted here?

Damien Smethurst
Damien Smethurst

I’ve seen jobs on the site where people want 1000 word articles written, and after conversing with the buyer I find that they are willing to pay between 1 or 2 US dollars per article. I live in Greece, so my cost of living is much less than it was in the UK, but also much, much more expensive than it was when I was living in Prague, but at a rate of 1 dollar per article I would have to write and sell a minimum of 150 articles a week to cover my basic expenses, even when I was… Read more »

Ian Borland
Ian Borland

The truth is we are now in a Global Market. This is an unexpected side to the World-wide web. The exact same thing happened in Second Life, with its virtual economy. Even the “Official Guide to Second Life” states that making money in the virtual world of S.L. is like working in a third world country. The fact is some people (such as in India) actually will work for less and their living expenses are less. In developed countries some people will do certain things just for fun, or to supplement their studies at college/university to improve their skills or… Read more »

Mitchell Allen
Mitchell Allen

That graphic is rather disingenuous, I think. We have to find a different yardstick to measure the value of a stockroom worker as compared to a heart surgeon. Having said that, I suggest to my freelancing colleagues that you simply ignore projects that are not within the parameters of YOUR expectations. Just as you can learn to spot a fake project, with practice, you’ll be able to spot the serious players from the market testers. @Sophie Lizard: freelancers aren’t exactly free to set their own rates on PPH. As the article pointed out, sometimes we have to raise our bids… Read more »

A. Han.
A. Han.

I don’t really understand why some of the sellers here at PPH feel that the prices are pushed down. Price competition is something you can’t run away from when working in a marketplace that is accessible worldwide. If you were to choose a programmer for your website development job, would you prefer the $1000 bid which promises the same quality as another proposal that offered $700? – Think Put yourself in shoes of the buyer and you’ll realize that the most competitive and good quality proposal will make you push that “Choose” button. BTW, I’m a PPH seller too. Maybe… Read more »

Michael Watts
Michael Watts

I’ll go with the majority here – as a seller I have found that a serious proposition is passed over for a lower price… and for the effort of submitting a reasonably detailed proposal you don’t even get any feedback on how far off-the-mark you were. As a buyer, trying to pitch for a realistic budget, I have had some laughable responses with zero relevant experience. Whilst the blog has some good points, like preventing others from seeing pricing to prevent a ‘race to the bottom’, there is nothing in PPH to help match buyers’ quality requirements with those of… Read more »

Tasos Dervenagas
Tasos Dervenagas

Thank you for the great discussion, everyone. As Xenios mentions in his blog post, 10% of fixed price jobs and 17% of per hour jobs get awarded above the initial budget requested by the Buyer – this is the direct result of Sellers educating Buyers and promising a better value for money product than those of the lower price range. Many of our Buyers are small businesses and startups and they need to drive down costs for all projects since the economy is tough for everyone, freelancers and small businesses alike. But with great and informative proposals and recent improvements… Read more »

Duncan
Duncan

I agree with Crow Eddy, you get what you pay for.

Philip
Philip

Dear PPh, You are hiding behind averages! I work as a telemarketer, I’m seriously good at what I do and will usually not bother ‘getting out of bed’ for less than £25/hr. I use PPh extensively for ‘top-up’ work and am always appalled at the ridiculously low budgets set by most of your buyers. At the required rates I’d be surprised if these so-called sellers can actually work a phone let alone make a proper business pitch and communicate a sound proposition! £7/hr for a TM operative is a joke. The averages in other sectors may be twice the minimum… Read more »

David
David

To continue with the Tesco analogy – in the real world, where corner shops cannot just morph into delis, whenever Tesco (or any of the big supermarkets) move in, the local High Street is decimated, businesses close and all sorts of skilled workers end up in part-time jobs with no employment protection on minimum wage. Of course PPH drives down earnings. That will always happen where you have more than one potential employee for each job. I can understand people in the developing world wanting to work for rock bottom prices. What I can’t stomach is people in Britain happy… Read more »

Mitchell Allen
Mitchell Allen

I feel compelled to point out that nothing is to become of the talented professional if she will but stay the course.

Professional work is not a priority for cut-rate buyers, so they are perfectly matched to the bottom-feeders.

In other words, the people who want 500-word articles for £5 are not your target market.

If you’re feeling generous, you can attempt to “educate” buyers about the correlation between price and quality; however, I think that would be a wasted effort on many fronts.

Cheers,

Mitch

Phil Tindall
Phil Tindall

I think the consensus is pretty clear here, and it is at odds with the blog that heads this topic. Even those that argue that earnings aren’t being pushed down are only trying to justify it. Like A Han: “I don’t really understand why some of the sellers here at PPH feel that the prices are pushed down. Price competition is something you can’t run away from when working in a marketplace that is accessible worldwide.” So A Han which is it? It isn’t happening or it’s inevitable? Your statement is logically contradictory. I’ll go with inevitable myself. Yes this… Read more »

Maurits
Maurits

PPH should be restricted to each country, so it doesn’t put the prices down, so there is an equal bid and buy uppertunity

Thomas
Thomas

As Tindall points out – the consensus is clear; PPH is pushing the price down. The trend unfortunately isn’t limited to PPH, it’s competitors also suffer the same fate. There are countless of freelancers from countries in the far east who are charging pittance for the same work I bid on. My rates are low, but there’s only so low I can go before it becomes a “waste” of my time. This trend has also increased dramatically in the last 6 months to the point where bidding on a job is almost impossible. There may not be a solution, but… Read more »

Alison Runham
Alison Runham

It’s definitely worth pointing out – politely – to buyers that they’re aiming way below the minimum wage, especially when the jobs ask for a ‘native English speaker’ (I’m a freelance writer/editor/proof reader) so they know they’re almost guaranteed to be employing someone from England. I also think many buyers don’t give a thought to the PPH fee – they think they’re being reasonable offering £7.50 an hour, while in reality we’re getting £6.37 and just skimming the minimum wage of (from Oct) £6.31. What *is* a complete mystery to me though is the freelancers who show as having a… Read more »

Phil Tindall
Phil Tindall

It’s no mystery Allison. Some money is better than no money. To have any chance of scoring a job you have to be competitive with other folk desperate for some income. Buyers use sites like this to score a bargain so it’s a match made in heaven.
Personally I only bid on freelance sites when “real” work (for which I can charge commercial rates) series up. Better to be earning something than nothing. But better still to work for in-game-flesh clients that haven’t heard of pph, Elance, oDesk etc. While they still exist.

Phil Tindall
Phil Tindall

dries up…damned predictive text…

A. Han.
A. Han.

Phil Tindall: “So A Han which is it? It isn’t happening or it’s inevitable? Your statement is logically contradictory.”

So your point is that JUST to protect freelancers of some specific countries, there should be a minimum price set for jobs which will favor the “prices” they feel are right…

We should expect price competition at Online marketplaces like PPH and yes it’s happening because this is kind of a “Send your best proposal and win the job” marketplace, not really the “Just send a proposal and I’ll choose you” job portal.

Phil Tindall
Phil Tindall

No A. Han, that isn’t my point. In fact I was more agreeing with you that the “great levelling” is under-way and inevitable. If I sound uneasy about it that’s because freelancers from developed economies, such as Britain or New Zealand, have much higher cost structures to support than freelancers in the developing world. Living is so much more expensive and you are not going to do more than survive if you are earning third-world wages. Maybe not even that. I was merely pointing out that you seemed to be saying it wasn’t happening while at the same time saying… Read more »

A. Han.
A. Han.

Well, that makes sense. Am not from Mumbai or anywhere nearby..anyway 🙂

I personally believe that it somehow depends on the buyer’s mentality. One thing we (as sellers) should do is to avoid posting proposals on jobs saying ” Lowest bid wins or Max. $xx proposals will be entertained” where the project requires much more time and effort than what’s offered to the freelancer.

Phil Tindall
Phil Tindall

Agreed. I personally only bid on jobs for which I am the best fit and I try to be the highest bid. That way I maximise my earnings and minimise my time-wasting. But of course I still miss out to plenty of low-ballers. My clients self-select as those valuing quality and experience over low cost. But, to be close to my real world commercial rate I’d have to be double or triple the highest competing bid. I doubt I’d get any takers at that level…ever. So, you can see that freelancing has driven down my average rate, no question. So… Read more »

Kat
Kat

Without the freelance economy, I doubt I would be able to service some contracts with my clients as I have an uneven workflow. I couldn’t justify employing someone full time and I get a wider choice of skillsets by spending my personnel budget on freelance team members. I make my purchase decision based on many factors including: – star ratings – feedback reviews – portfolio of previous work – response times to my requests – professionalism and approach – care for spelling, grammar and punctuation in bid – location To those who feel they are competing against PPHers in cheaper… Read more »

read this
read this

This design is wicked! You most certainly know how
to keep a reader entertained. Between your wit
and your videos, I was almost moved to start my own blog (well, almost.
..HaHa!) Fantastic job. I really enjoyed what you had to
say, and more than that, how you presented it.
Too cool!

Nina Young
Nina Young

I’ve seen freelancers commenting on projects I’ve bid on to say ‘price too low’ and I’m often left thinking that those people (in my niche) need to brush up on their skills and learn more. In the field of web design there is plenty of reusable code and if you know what you’re doing you can put together a pretty advanced featured website in a relatively short amount of time. People stuck coding things from scratch are going to get left behind and it leaves the rest of us who are using our initiative to reap the benefits. This is… Read more »

Alex
Alex

Xenios, Is it possible to institute functionality that gives more clarification board control to buyers? To allow us to first approve comments before they are visible to everyone? The standard option has been to ask PPH customer support to do this, but sometimes it takes them over a week to take action. Freelancers post offensive and irrelevant comments complaining about the rate being too low, instead of bidding higher and trying to sell their services. This happens routinely. I would gladly hire someone who bids higher than my budget if they are truly skilled and professional and can solve problems… Read more »

Lubka Christova
Lubka Christova

I noticed something today and I thought I’d bring this subject back in the spotlight. I still receive notifications for jobs on PPH and I normally ignore them, so I don’t waste my time. Today I decided to have a look at what’s a good fit for me according to PPH – ‘a logo design + facebook cover’ job. Normally, depending on the complexity of the logo, area of business, marketing research, I would charge between £200 and £750 for designing a logo pack. The logo pack consists of a list of vector and raster files, fonts and standards of… Read more »

Alex
Alex

Jesus Christ, Brits always complain about the prices. Always. Their cost of living is high and currency exchange rates don’t favor them. But it’s always someone else’s fault. Dear Brits, you are at a disadvantage because of your local economics as it relates to the rest of the world. Yea that sucks a lot. But you want to make CLIENTS pay you more by shutting out people from India and Pakistan who can do the work for very little. Maybe you just need to find a way to be more competitive instead of complaining. Maybe you need to find a… Read more »

Lubka Christova
Lubka Christova

Alex, are you generalising now? Brits don’t offer quality work and can’t compete, you’re saying. Well… I’m not a Brit, just happened to move to London 5 years ago. Even when I lived in my home country where costs of living were a lot lower than London (one of the most expensive cities in Europe, certainly not our fault thought, neither Londoner’s choice), I never worked a whole week for £10. Actually, I’ve been freelancing for about 10 years now and competing with the low prices offered by people from India, China and Pakistan. When I started back in 2005-2006… Read more »

of a whore
of a whore

great site man

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