Future of Work

Gig & Creator Economy

February 1, 2023

Executive Summary

The gig economy is a rapidly growing industry where freelance professionals work on a temporary or project basis, providing flexibility for workers and cost efficiencies for consumers. The global gig economy market is estimated to be worth $455 billion (Velocity Global), with double-digit subvertical CAGRs. The industry is evolving in conjunction with the growth of remote work. Successful players include Uber, Lyft, TaskRabbit, Fiverr, Upwork, and Postmates.

1. Market Dynamics

Overview

The gig economy, also known as the creator economy, is a growing trend of independent workers who offer their skills and services on a temporary or project basis. This includes freelancers, gig workers, influencers, and creators who use social media and online platforms to monetize their content and build their personal brand.

Market Segments

Ridesharing - Dominated by Uber, Lyft, and Beijing-based Didi Chuxing. Significant brand recognition and large user bases make it difficult for new entrants. Niche players targeting specific geographic regions or customer segments can still find opportunities.

Food Delivery - Highly competitive with DoorDash, Grubhub, and Uber Eats vying for market share. They compete on delivery speed, pricing, and restaurant partnerships.

Freelance Marketplaces - Online platforms featuring different kinds of work including industry-specific tasks, “odd jobs,” software development, and content creation. Popular platforms include Upwork, Freelancer.com, Fiverr, Guru, and TaskRabbit.

Vacation Rentals - Dominated by Airbnb, which exited with an IPO in 2020 at a $47 billion valuation. Niche players like Vrbo and OneFineStay focus on specific property types.

Market Size

A 2021 Gallup survey found that 36% of US workers had participated in the gig economy, up from 29% in 2019. McKinsey Global Institute estimated the gig economy could grow by 15 to 25 percent by 2025, generating up to $2.7 trillion in annual gross volume globally. The US gig economy could be worth over $1 trillion.

Key submarket sizes:

Ridesharing - $85.8B in 2021, projected to reach $185.1B by 2026 (CAGR 16.6%)
Food Delivery - $221.65B in 2022, growing at CAGR of 10.3% until 2030
Freelance Marketplaces - $4.43B in 2022, projected to reach $12.01B by 2028

Industry Personas

Cam Customer - Value-conscious buyers who prioritize savings over quality
Owen Outsourcer - Busy professionals who hire gig workers for time efficiency
Frank Firm - Platforms acting as middlemen connecting gig workers to customers
Randy Regulator - Policymakers balancing gig economy with employee rights

5 Types of Gig Economy Workers

Henry Hustler - Earns extra money alongside a traditional job (~$7,600/yr, 19% of income)
Sarah Substituter - Supplements income while job hunting (~$9,400/yr, 22% of income)
Frances Freelancer - Diverse, satisfied group seeking experience (~$9,700/yr, 26% of income)
Bob the Builder - Supplements existing business, own boss (~$12,300/yr, 30% of income)
Pam Passionist - Fulfills passion through gig work, highest per-hour earnings (~$9,000/yr, 25% of income)

As the world adjusts to post-pandemic life, companies have experimented with new workforce strategies as society considers what the “future of work” might look like. According to Peter Miscovich, managing director at JLL Consulting, the gig economy figures to play a large role in this emerging dynamic: it could account for half of the workforce by 2030. A few key trends are driving this development.

2. Industry Headwinds

Increasing Regulation

The Labor Department and President Biden proposed in late 2022 to lower the rigor of the employee classification test, which may classify millions of janitors, construction workers and rideshare drivers as employees rather than independent contractors. This protects workers with benefits (minimum wage, overtime, Social Security) but increases costs for platforms.

Competition & Consolidation

Larger platforms will acquire smaller platforms as they grow. This reduces bargaining power of gig workers, meaning lower wages and lower quality of work. Fewer platforms with larger presence will compete between each other, which can result in price wars.

Technological Disruption

With the influx on artificial intelligence and automation tools, the services provided in the gig economy may become less useful. A company that automates a given task best will win significant market share.

3. Industry Tailwinds

Rapid Technological Advancement

Companies such as Uber, Lyft, Airbnb, Fiverr, and Upwork can better connect freelance workers with customers through advances in data collection methods and software. Applications allow customers to easily book services, track progress, and provide feedback.

Corporate Contribution

Some corporations are beginning to use gig workers to supplement their traditional workforce. For example, Walmart utilizes freelancers for content design, marketing, and tech support. There is a growing marketplace of freelancers with specialized skills.

Growth of Influencer Marketing

Influencer marketing platform market was valued at USD 7.36 billion in 2021 and is expected to reach USD 69.92 billion by 2029. Brands are investing heavily in leveraging influencer trust and credibility.

4. Investable Opportunities

Automation

Automation could significantly disrupt the gig economy. One area already seeing automation is delivery of goods and services - Amazon and Domino’s have experimented with drones and robots.

Services

Services to help gig workers may become more necessary as their numbers rise. Blockchain technology might be used to build decentralized marketplaces. Platforms may develop to assist with managing finances, locating healthcare, or gaining access to training. New social safety nets offering security for workers without regular employment benefits may be necessary - healthcare, retirement planning, and unemployment insurance. Traditional financing options, including bank loans, might not be available to gig workers who lack a steady source of income or a history of regular employment. This might encourage the development of alternative finance techniques like peer-to-peer lending.

The need for technological solutions that enable organizations to manage gig workers more efficiently may increase as they depend more and more on these individuals. Platforms that assist organizations in finding and hiring gig workers, tracking their hours and performance, and managing payments and invoicing are just a few examples. There may be a rising need for adaptable workplace solutions that support this kind of work as more individuals choose to work from home or as independent contractors. This can include co-working areas or shared offices that provide variable renting terms or short-term contracts. The gig economy significantly relies on technology, from mobile apps that let employees manage their schedules and check their earnings to internet platforms that link gig workers with clients. Technology firms may have chances as the gig economy expands to create new tools and solutions that make it easier for gig workers and enterprises to operate more effectively.

Home Healthcare Services

Gig workers who provide home healthcare services may profit from new technological advancements that facilitate scheduling and patient communication. Innovative healthcare delivery models adapted to the needs of gig workers who lack access to standard healthcare insurance may be advantageous. There may be chances for ride-sharing companies to work with traditional transportation businesses to develop more effective and sustainable transportation solutions.