While virtual gigs thrive, physical gigs die

By Carmel DeAmicis , written on August 19, 2013

From The News Desk

Ever since the economy took a nosedive in 2008, the gig economy has been thriving. Massive layoffs led people to look for freelancing jobs, and it didn't take long for startups to notice. Companies like Fiverr and TaskRabbit launched in the aftermath, giving people a platform to turn to for some extra cash.

Now, years later, the economy has been slowly recovering, and the gig-based startup landscape has turned into survival of the fittest. Companies focused on facilitating physical errands and odd jobs between strangers are struggling or pivoting, whereas those that expedite virtual tasks -- like design work or copywriting -- are thriving.

Case in point, in the last six months: $5 online gig site Fiverr hit 2 million gigs listed, 99designs rolled out a new $15 cash-for-design-task branch called Swiftly, and freelancing writing platform Contently expanded its features. All three of these startups facilitate tasks that can be completed online, without the receiver and provider ever meeting in person.

In contrast, companies focusing on physical tasks have not stayed their original course. Zaarly pivoted from a marketplace where people could pay others to do errands for them, to offering local online storefronts. Exec originally let people pay a set fee by the hour for errand running, now it focuses largely on house cleaning. And TaskRabbit laid off a decent chunk of its workforce and started expanding its enterprise offering, matching temp workers with businesses. All three startups, which were based on facilitating face-to-face tasks, have had to adjust their business plans.

There's a variety of possible reasons why virtual gig sites are thriving and physical gig sites are pivoting, ranging from the trust barrier for in-person interactions, to the difficulties of scaling a business tied to local, physical encounters.

Perhaps the public feels more comfortable commissioning freelance gigs from strangers virtually, versus having to interact with them in person. "It's just not that appealing to do something with a stranger if there are better alternatives," Zaarly CEO Bo Fishback told me. "If you're going to hire someone, you want them to care about what they do and have a unique ability to carry that out."

Fishback says that Zaarly decided to shift its focus to virtual storefronts because people wanted to buy from strangers when they were skilled, specialized service providers. In its initial model -- a reverse Craiglist where people posted how much they would pay someone to do a job -- Zaarly didn't see enough demand for commodity based errand runners. "We regularly see people who put a product on the market that's what we launched two years ago," Fishback says ruefully. "I wish they would call me before they do that."

Scaling is the other big consideration when it comes to the struggles of physical vs. virtual task matchers. Once you take location out of the equation it's easier to scale because the pool of people on supply and demand is bigger and steadier, right out of the gate.

"Dealing in the virtual world is significantly easier," 99designs CEO Patrick Llewellyn says. "You can build a much larger qualified crowd by being able to pull from the world's freelance community."

Not to mention the fact that virtual companies can service demand from people all over the world. A company like TaskRabbit has to ask the question: how many people in San Francisco want someone to do their laundry? Whereas 99designs gets to ask the question: how many people in the world want a design task done for them?

The big exception to the physical gig struggling rule, obviously, is car-sharing services like SideCar and Lyft, which seem to be scaling quite well. Maybe that's because car sharing falls in the realm of Airbnb: it's about capturing the value of a latent asset, not leveraging a human resource.

Zaarly's Fishback says, "I do think there is a perspective on patience for people building a service based on local businesses. You better have investors who are patient and a team in it for the long haul. There will be no Instagram built in this section of the economy."

[Image courtesy dickuhne]