Right. We're going to go ahead and get started. I'm Doug Anmuth, J.P. Morgan's Internet Analyst. Very happy to have with us Fiverr's co-founder and CEO, Micha Kaufman, and CFO, Ofer Katz. Fiverr is a global marketplace that connects freelancers and businesses for digital services in more than 700 categories, from graphic design and copywriting to voice-over, music, AI services, many more. In the past 12 months, more than 3.5 million customers bought a wide range of services from freelancers working in over 160 countries. Micha is the founder, CEO, and chairman, and CEO since the beginning, 15 years ago, serial entrepreneur who has also founded and led several other tech ventures. Ofer has served as Fiverr's president since February 2021 and full-time CFO since July of 2017. So welcome, both of you.
Thank you.
Thanks for having us.
Okay. Let's talk kind of big picture about the freelancer market. In the U.S., you talked about a kind of TAM of around $250 billion, including international. This would obviously be that much bigger. Maybe you can talk a little bit about some of the friction points that you feel like you need to address to unlock more of this TAM opportunity.
I think, first and foremost, it's about awareness. A lot of the freelancing activity in the world currently is very fragmented and still very old-fashioned in the sense that when people require assistance from freelancers, they call their friends or they're looking for local agencies. That is disregarding the fact that the efficiency of marketplaces is so much higher. The time spent on finding talent and engaging with talent is significantly shorter. The average time that it takes to find a freelancer outside of marketplaces is about 30 days. The time that it takes a visitor on Fiverr to place an order is about 15 minutes. That's a compression of efficiency in very few words. With time, obviously, the awareness is growing up.
In terms of brand awareness, Fiverr is the leading marketplace in the world in that, but there is still plenty of room to grow into. Some of that has to do with the fact that historically, Fiverr started as a marketplace for microservices, for micro-businesses. Over the years, we've extended the platform to engage larger customers with more complex needs. Today, we have transactions of anything between a few tens of dollars for very, very simplistic tasks all the way to hundreds of thousands of dollars of spending with customers. I think the awareness for the higher-end market is growing, and it's a strategy that we've been going through in the past two years. We're actually seeing very nice results in the past few quarters, as we've outlined in the letter to shareholders. There is a lot of information and use cases there.
Yeah. Let's talk about that a little bit. Certainly, a key strategic priority is going up market. You've had good success with Fiverr Pro. Maybe you can just talk more about how that product has evolved over the last couple of years, what kind of adoption you're seeing as you go up market.
Sure. In recent years, we've done a concentrated effort to address this mid-market all-the-way-to-enterprise. Essentially, what this has transformed us into is not just being a marketplace, but becoming a platform. The marketplace is still the leading product within the platform, but there is a suite of different solutions and tools that allows more advanced customers to do more complex things. I'll give just a few examples. Rather than just thinking about simple tasks, our larger customers are actually thinking about projects. Project management is definitely one of them. Having engagement with talents that are open-ended. You can't actually have a set price in advance because you don't actually know what the engagement is going to look like over a period of time. We've added the option to contract based on an hourly basis.
This has been extending the ability to help customers understand how to break their goals into tasks and what involves in actually orchestrating a project and how to assembly that project to the end. That could be very complex projects like software development, digital transformation, all of this. We've seen as a strategy, we've been focusing our acquisition efforts on those types of customers, meaning that we've developed the technology and know-how of how to identify those customers as they come into our funnel, do a proper KYC to understand who this customer is and what brought them to Fiverr, and then bringing them or suiting them with the right solution so that they have a great experience from which we can actually create a relationship and have customers engage with us over a longer period of time.
Got it. Okay. Maybe you can talk a little bit about the other key strategic priorities as you think about 2025 kind of beyond Fiverr Pro and going up market. What are the three to four things that you're most focused on?
Obviously, it's a very dynamic marketplace. You said it in the introduction. We operate in close to 800 different categories of services. As a natural movement of this marketplace, categories come and go. It was very important for us to create a very effective machine that knows how to respond to these changes. As an example, when LLM, ChatGPT burst into our lives, that was, what, November 2022? By January 2023, we had 30 different categories relating to AI, from model training to tagging to agent development to software development integrating AI to anything you can think of in the AI world. This continues to be a focus for us because we want to make sure that as new jobs are being invented that never existed before, you would find them first on Fiverr. That is a critical thing.
The other, which also relates to AI, is the investment in utilizing AI, not just as a team to work better and faster, but use these tools to make the customer experiences better. I make the statement that I think Google search is dead. You may agree or disagree with me that I do not use search anymore for many months. It feels outdated. I mean, you see words and you get blue links. That is weird. It feels like the 1990s. To me, the same applies for any modern search, meaning that even search within marketplaces needs to change, right? You stop thinking about keywords; you start thinking about prompting. What can we learn outside as a result of that to improve the experience of utilizing the marketplace in a smarter way? How does this inform the way we do matching?
How does this inform the way we think about not just tasks, but projects and so forth? We have been announcing a whole host of new products around this. Fiverr Go is one of the leading products, but there is a ton of them being built right now. I think it is going to challenge the way marketplaces are being used and would encourage people to utilize more of the efficiency and the power of marketplaces to do more.
I do want to go back to Fiverr Go in a minute, but just to touch on your earlier comment, your view on search, I think, was in an internal or at least included in an internal email.
It's leaked.
Leaked. Okay.
It leaked on LinkedIn, so it's not that leaked, but.
Basically, what you said was that AI is coming for your job. You wrote this to your employees, essentially.
My team and also the community on Fiverr. I mean, if you're a freelancer, that holds true for you as well.
Okay. Maybe tell us if you can talk about that a little bit more and some of the stuff that you talked about there because I'm assuming not everybody has necessarily seen that.
Yeah. I mean, the title of this email was The Unpleasant Truth. And actually, what I wrote there was, more than anything else, it was just a validation of the things that people feel on a daily basis. Whether you're a programmer or a legal consultant or being in finance or customer support or sales, you do understand that there's plenty of tools that are coming and are reshaping the way we work as individuals and teams. The point was being that these tools are actually giving us superpowers. But if we continue disregarding them instead of using them, then we're working like it's 2024, and that's a bad idea.
Essentially, as I was gathering this and following this email, I said, "I'm happy to have conversations with anyone who wants to talk about how their jobs are going to look like." What I said there was that, "Look, AI is incredibly powerful, but it's not almighty. It cannot do everything. Most of all, what it does is actually automate a lot of the things that we used to do manually, right?" If you're—I don't know—if you're preparing a presentation or you're studying something, before, what you've done is you went to Google and you followed some links and you read articles and you analyzed and you summarized and you took points and then you presented this in a presentation. This could potentially take half of your time, maybe more.
If you're still doing it, you're going to be out of job in a year because there's no reason why you should do it. To make the point there, I said that in an ideal world, what each of us should do is we should strive to automate 100% of what we do and let technology do this. This would not make you obsolete. This would make you indisposable. The reason is that if you can now put 100% of your time into automation, you have 100% of your time free to do more strategic things that human beings are special at doing. I think that maybe in a funny way, I think that AI in many ways allows us to discover our humanity again because it's really the thing that makes us special. It's the special taste that we have.
It's the special eye for things. It's the special attention for details. It's the creativity, the ability to come up with unconventional ideas. This is what human beings are good at, and this is what we should be focusing on. That was my point. My point was that we should strive as an organization to utilize these tools to the maximum so that we can devote more of our time to actually do things that are worth our time and also reduce the cost of failure. Why? Because if it took us three months to build something that later on turns to be a failure, and we can now spend three days doing that, then the cost of failure is much, much lower, which means that by definition, we have more time to figure out what works, which means that we can, as an organization, move much, much faster.
It increases our velocity. It just improves our output per unit of time and the quality of our work. To me, not doing this is a sin. I was like, "It's..." That was the overarching idea of this email. It was received very well because people like when you're honest and you treat them as adults and not kids. I refer to it as radical candor, which is coming from a place of care, not to fight. It was well received, and for whatever reason, it went viral.
Right. Okay. So how does—you can talk about how Fiverr Go kind of plays into this. Newer product recently launched specifically addressing kind of the AI opportunity that you're talking about for both sellers and buyers on the platform.
Yeah. So there's a very deep philosophical background to how Fiverr came to be. What I recommend, because we don't have enough time, is just go on YouTube and see the keynote that I've given when we launched Fiverr Go two months ago in New York because it's just 15 minutes of your time. I think it's a good outline of what was the background, but essentially, I'll do a quick summary for you. Essentially, the idea was that there's plenty of ways of actually designing AI in the first place. The way most of AI is designed right now is a little bit exploitive in the sense that AI is eating everything, everything we've ever created, and it's remixing it, and it's generating stuff without giving rewards or compensation to the actual creators, which if you're a creator, that's not good, okay?
My fear as a human being—and it has nothing to do with Fiverr—is that if it continues to be the case, then people's motivation to continue creating and sharing is going to reduce over time, which for humanity is bad news, okay? What we've done with Fiverr Go was really to introduce a different take. Whether it's the perfect one or not, who knows? History will judge. Essentially, the underlying idea was that you can build AI for creators that serves customers in a great way. What we've introduced is we've introduced the technology, both generative and the LLM technology, that learns specifically from each creator and becomes their own AI. It's not general AI. You can obviously see it's going to be accumulative models. You can create agentic. Essentially, it's becoming your AI.
We've introduced one of the first products that we've introduced, which after two months, I can tell you that it's a huge success, is a personal assistant for creators. Essentially, learning their entire body of work and their entire history of conversations and basically now becoming their personalized AI assistant. By doing so, you can actually take all the admin work that creators do by ingesting information from customers, by answering the same question for the 400th time, by giving a price quoting, by giving examples of work, by creating even samples of work, convincing customers that this is the right choice, this is the right creator to work with. The number one KPI for that was conversion. It is not only absolutely converting much better than the actual freelancers, it's converting faster, and it's involving less effort in conversion. It's incredible.
What's beauty about this is customers love it. By the way, most customers hate speaking to chatbots. What we've done there by humanizing the agents, reducing the likelihood of hallucinations, we've created something super powerful, and it's working really well. This is just one example of how we can utilize the power of AI to actually empower creators to succeed more, convert better, give better experience to their customers. This was just the first taste. We wanted to do it. It's not. Now we're moving into scale mode, and we're going to introduce a line of new products around this.
So you started with the creation model, kind of moved an AI assistant, as you just talked about. How do you expect things to evolve kind of from a product perspective? I mean, you don't want to give too much away for sure, but.
Yeah. As I said, I think that the notion of free markets and the place of a marketplace in our future is there. It's not going away. People love the ability to have selection and to be able to select. If you can make that experience better, I think this is true for every marketplace, right? If you pay the most basic functionality of a marketplace, it's search. When you do search on Amazon, you do search on Airbnb, you do search on Etsy, you search on Fiverr, that experience is going to look like something very different a few years from now. It's important for us to be pioneers in that because I think we have the ability to actually create these types of experiences from the ground up.
We do know that the better they will become, the more active customers are going to be because their experience is just going to be easier and faster.
Okay. Let's shift gears for a minute. You've been operating, and Ofer maybe you'll jump in here a little bit too, been operating in a default backdrop for a couple of years with SMBs and everything. Maybe you can just give us an update on how you're thinking about that now. What do you kind of see? What are the things that would kind of need to happen for the market to improve in your view?
We start by saying that SMB is a huge market. The potential is ahead of us. We do experience some headwind in the SMB, and I think the overall sentiment is negative. For us, to be a GMV study in this environment is a challenge by itself. We do believe that the market is going to change. As much more will improve, SMB will go back to some of the decisions and invest back in their business and their growth. If SMB is more positive, we'll be willing to take more risk by investing and not optimizing and provide a low run on their profit. I think that what we offer is relevant for SMB, for business owners, to build organizations.
Over time, as Micha said earlier with the Fiverr Core, we are looking into bigger organizations that have less volatility and bigger wallets. We do that by optimizing the product, making sure we have the best market fit, but also by focusing our marketing efforts into this class of customers where lifetime value is higher and lifetime value to product is higher as well. That is how we increased this company over the last few years. You can see that it is a very consistent growth in the amount of dollars that each customer spends on Fiverr is doing over time. I think that as we continue to go up market, it can continue and evolve.
Maybe you can just flesh that out a little bit in terms of kind of broad expectations and active buyers and spending to hire, assuming kind of current environment continues.
Yeah. I think that as long as the current environment continues, I think the dynamic of buyers going up and active buyers declining, approximately the same rate, will continue. I think the sentiment, once the sentiment in the market changes, will be more optimistic and double down a lower of value, active buyers that can offset the decline. We do not see that coming soon or until the market dynamic is changing. I think it does not make sense for us to acquire a buyer with negative ROI. This is something that we did not do before. As long as SMB are not spending much, we are focusing on the class of customers that keep investing in the business.
Okay. All right. Let's talk a little bit about services revenue, where you've seen really strong growth over the last several quarters. Maybe you can just talk more about kind of what the key components are, what's driving such strong growth there, and then how you think about trajectory a little bit going forward.
Yeah. I think the main key component within this services revenue is seller tools, seller products. It's a set of tools where we offer a freelancer value-added services in order to better utilize Fiverr and eventually get more traffic and demand. That's the first layer. The second is Fiverr Ads or Remoted Leads, which is our platform that, again, allows sellers to take themselves and get more traffic. This is a product that we launched three or four years ago, and it's still expanding. The last piece is Fiverr DS, which is a subscription-based platform that allows for dropshippers to find products, to market themselves, to build the digital shop, and on and on. I think the three components are growing and will continue to grow throughout the year.
It starts with the subscription and the seller products, where we are planning to launch additional features, payable features. One good example is the Fiverr Go that we launched two months ago and will extend throughout the year. We have the Fiverr Ads from AutoDS that has some more opportunity, more inventory that we have not monetized against, and it is a plan, again, to extend this product. Lastly, AutoDS that is expanding nicely after the acquisition with the integration with Fiverr, which allows for both platforms to contribute to the other. We do expect that the Seller Plus revenue will contribute approximately 20% of the overall revenue in this year. At the beginning of the year, it is growing very potentially. We do expect some overlap with the acquisition at the second half, but it will continue to grow, but at a slower pace.
Got it. Okay. So maybe we can just kind of roll that a little more into the numbers. You've seen good revenue growth, low teens. More recently, your 2025 revenue growth outlook of 10%. So it does imply decel kind of into the single digits in the past half. How do you kind of think about normalized growth rates?
Again, normalized is depend on for us, it's much depend on the macro. I think that the overall sentiment in the shopping for professional services is negative 16% last year. We are growing against the shopping index of professional services. We think that when macro change, when interest is down, when SMB are back in business, we definitely see double-digit growth. We think that in terms of potential buyers, there's a lot of room. The average spend for SMB and freelancers is approximately $16,000 a year. We still get a small portion of that, so there's plenty of room. In terms of the number of active buyers, SMB is huge. It's more than 30 million. We serve approximately 2.5 million per year globally, which means that the U.S. is approximately half. There is plenty of room to grow both spend and active buyers.
We do believe that there is room for us to grow much faster in a different macro environment.
Okay. Let's talk about profitability a little bit. Just as you've kind of been in a tough environment, and you can talk about some of the ways that you've managed expenses, been able to continue expanding margins, and what that means for you as things kind of ultimately improve.
Yeah. I will start by saying that we have a high level of discipline. We navigate throughout this period while not only growing but also improving EBITDA. Our long-term target growth is 25%. We haven't changed that over the last few years, and we plan to get that by 2027. If you track our quarterly number in the last few years, you can see how we make a path through there. It's joined by R&D to have a little room and more room to be efficient on the sales and marketing. I think that as we are relying on retained customers and we go up market and are able to increase lifetime value to product, and there is room for us to expand further the sales and marketing, as percentage of revenue doesn't mean that we are going to spend less.
It just means that the percentage of revenue, it has some room to further decline, and that's the plan. I think that's the plan with highly measurable business. Every dollar that we spend on campaigns is measured against the outcome. We have done that throughout the last few years, actually, and we plan to continue doing that until we get to the long-term target of 25%.
Okay. Micha, if you were advising young people just entering the workforce, what would you tell them?
I think, "Don't." Look, I think that this has been one of the most challenging questions. I mean, what would you advise your kids to go study? I mean, the rate of change is really high. Look, I do believe I don't believe in this idea that developers are going away and there's not going to be any more OBs, or the same goes for marketeers or any of these professions. By the way, the fact that some professions are not going to survive over the years is not a new concept. There was a study published in The Economist that was done in 2018, and it showed that out of the jobs that exist in 2018, 60% of them didn't exist 50 years before. I mean, think about this. How many jobs of your parents' generation survived to our generation or grandparents? It's natural. It's evolving.
I don't think that a lot of the professions that we know today are going to go away, but I do think that they're changing. Their nature is changing. The type of labor, the things that we do as a professional are changing. If anything, I mean, they've asked me once if I think that AI is going to replace professionals, and I said, "No, I think that professionals that are going to master AI are going to replace professionals who don't." I think that this summarizes everything. I think that there's plenty of opportunities. I'm super optimistic. I do think that because we were given these new tools, the nature of work is changing. I think that this would create tremendous opportunities for entrepreneurs to start new businesses. There's never been a better time to start a business.
We're going to see many more billion-dollar companies with teams of three people, five people. It's not going to be a, it's going to be a common thing. If anything, I would encourage people to probably not waste time on going to institutions to study, but actually sit down and put time on. There's so much information online. There's everything online. You can study anything. If not for the booze and the parties, I would actually spend more time studying on my own and getting into practice as fast as possible because it is doable, and this was something that was not possible 30, 40 years ago.
Okay. All right. We're going to leave it there. Thank you very much.
All right. Thank you.