Lancers, Inc. was established in 2008 by Yosuke Akiyoshi, the current CEO. The company operates an eponymous online platform that matches freelancers who want to earn a living by using their business skills with companies that want to request work. The Lancers platform boasts 1.29mn registered freelancers (which the company calls “lancers”) and 460,000 registered clients. The gross services volume (“GSV”) by the platform was JPY9.3bn in FY03/21. Within the single Platform business segment based on the Lancers online platform, the company engages in three businesses: a Marketplace business (accounting for 59.4% of GSV in FY03/21 and 26.4% of revenue, and generating operating profit of JPY513mn); a Managed Service business (15.3% of GSV and 33.4% of revenue, operating profit of JPY26mn), and a Tech Agent business (24.4% of GSV and 37.7% of revenue, operating profit of JPY73mn).
The company’s revenue has grown 2.9x over the past five years to JPY3.9bn in FY03/21, with the GSV on the Lancers platform growing 2.6x over the same period. Among registered clients, small businesses account for roughly 90% of GSV, about 40% of which are located outside the Tokyo metropolitan area. Many of the company’s freelancers (“lancers”) are in their 20s, 30s, and 40s, and about 70% live outside Tokyo. More than 350 types of work are offered on the platform. Recently, around 90% of GSV is related to the digital transformation efforts of clients, such as getting online commerce sites up and running.
The company aspires to build a platform for matching high-quality, high-value-added, high-unit-price work. It has established rules and mechanisms emphasizing security and reliability for both clients and freelancers. IT-related freelancers account for about 70% of the pool of freelancers working in business areas requiring medium- to high-level skills. Average spend per client company was JPY251,000 in FY03/21, while Shared Research estimates average compensation amount per freelancer was JPY127,000. The latter figure in particular is much larger than that of the company’s competitors, suggesting that the company’s platform is matching work with higher added value and higher unit prices.
In the mainstay Marketplace business, clients request work directly from freelancers through the Lancers platform. The company’s main role is providing the platform, and it derives commission revenue from the system usage fees received from freelancers. Its rate depends on the contracted amount (compensation to the freelancer) of successful matches: 20% for contracted amount of JPY100,000 or less, 10% for contracted amount between JPY100,000 and JPY200,000, and 5% for contracted amount above JPY200,000. Registration and annual membership are free. The ratio of both revenue and gross profit to GSV in this business was 18.5% in FY03/21, comparable to the average fee paid by freelancers. The GSV and commission revenue of the online mentoring service MENTA, which the company is rolling out to boost retention rates of registered freelancers, are also recorded in this business. MENTA accounted for an estimated 5% of GSV, and has fees on a par with ordinary matched work.
In the Managed Service business, the company draws on its pool of registered freelancers to meet the outsourcing needs of clients at a certain scale. The company derives commission revenue from client service fees. It provides two services: Lancers Assistant and Lancers Outsourcing. Lancers Assistant consists of seven fixed monthly fee plans, while Lancers Outsourcing is tailored to specific client requests. The GPM of both services is roughly 35%. The GSV in the Managed Service business is essentially equivalent to revenue; the ratio of revenue to GSV in this business was 90.9% in FY03/21 while the ratio of gross profit to GSV was 36.3%. In terms of GSV, the ratio of Lancers Assistant to Lancers Outsourcing is estimated at 4:6. The company has announced its intention to withdraw from the Lancers Outsourcing service, given its labor-intensive nature and low anticipated operating profit margin.
In the Tech Agent business, the company, through subsidiary Lancers Agency (acquired in 2017), places candidates drawn from the group’s registered freelancers with clients seeking IT professionals. There are no placement or brokerage fees (placement fees are charged, however, if the client contracts directly with a freelancer).
The company derives commission revenue from client service fees according to the number of freelancers hired and the number of days worked. In the case of a three-month plan, for instance, if each freelancer works 1–5 days/week the monthly fee ranges from JPY80,000–JPY120,000. There is both a Lancers Agent and PROsheet service, with the only difference being whether or not the company acts as the contracting party between the client and the freelancer (Lancers Agent) or not (PROsheet). The ratio of revenue to GSV in this business was 64.4% in FY03/21 while the ratio of gross profit to GSV was 14.8%.
Looking at the company's earnings structure, against revenue of JPY3.9bn in FY03/21, the cost of revenue was 50%, the SG&A ratio was 49%, and the operating profit margin was 1%. The bulk of cost of revenue is outsourcing costs (compensation to freelancers) for the Managed Service and Tech Agent businesses, in which the company subcontracts work to freelancers as the contracting party. By contrast, the Marketplace business carries almost no cost of revenue. Just under 40% of SG&A expenses are personnel costs, with advertising and outsourcing costs accounting for more than 60%. Since FY03/15, when data on recurring profit is available, and FY03/19, when data on operating profit is available, both have been in the black only in FY03/21. The company has prioritized investing in product development and sales promotion, focusing on further growth rather than securing near-term profitability. Nevertheless, the company expects to record an operating profit in FY03/24, after which, having built a solid structure for generating profit, it will enter a phase of further profit expansion.
With its business model of operating an online platform, the company does not hold sizable assets nor require sizable interest-bearing debt. It had no interest-bearing debt at end-FY03/21, and the equity ratio was high at 53.5%.
The company recorded revenue of JPY4.1bn (+5.3% YoY) in FY03/22, gross profit of JPY2.0bn (+4.0% YoY), operating loss of JPY367mn (JPY37mn profit in FY03/21), recurring loss of JPY358mn (JPY49mn profit in FY03/21), and net loss of JPY672mn (JPY37mn profit in FY03/21). The company recorded an impairment loss of JPY220mn related to its complete withdrawal from the Managed Service business.
The company forecasts revenue of JPY5.4bn in FY03/23 (+32.6% YoY), gross profit of JPY2.5bn (+24.3% YoY), an operating loss of JPY289mn (versus a JPY367mn loss in FY03/22), a recurring loss of JPY284mn (JPY358mn loss in FY03/22), and a net loss of JPY286mn (net loss of JPY672mn in FY03/22). The company plans to bring quarterly results into the black in Q4.
The company is targeting an increase in gross profit to JPY3.0–3.5bn in FY03/24 and a return to the black for the full-year. Leading up to this, the company is working to boost work matching opportunities on its platform, roll out a site format that clearly indicates in advance the specifics and prices of skills provided on the freelancer side, and develop new educational programs capable of turning out and retaining highly competitive freelancers.
Shared Research sees three major strengths for the company. 1) The company is already one of the three major players in terms of member numbers in its business domain, where it has a first-mover advantage; 2) it has built a platform that hosts higher-value-added projects at higher unit prices, mainly online commerce site development and other IT-related business areas; and 3) it has a track record for continuously improving its platform, flexibly adopting the strong points of competitors’ models while clearly setting itself apart.
Shared Research also sees three major weaknesses for the company. 1) As the company increases the volume of high-priced projects, the commission rate declines, lowering commission revenue; 2) It is hard to clearly differentiate the business model from other major players in the industry; and 3) in a market that is still in its infancy, the company faces the need for upfront investment to boost GSV by raising awareness. (Achieving profitability within the current parameters without additional measures is currently a challenge.)
|Gross profit margin||-||-||-||-||58.9%||51.7%||49.8%||49.2%||46.1%|
|Operating profit margin||-||-||-||-||-8.0%||-8.8%||0.9%||-||-|
|Recurring profit margin||-54.4%||-20.5%||-12.2%||-18.4%||-3.7%||-9.5%||1.3%||-8.8%||-5.3%|
|Per-share data (split- and reverse split-adjusted; JPY)|
|Total number of shares outstanding at FY-end: common stock ('000)||9,000||9,000||9,000||9,000||9,000||15,505||15,650||15,745|
|Class A (preferred stock) ('000)||2,250||2,250||2,250||2,250||2,250||-||-||-|
|Class B (preferred stock) ('000)||1,585||1,585||1,585||1,585||1,585||-||-||-|
|Class C (preferred stock) ('000)||-||-||-||1,070||1,070||-||-||-|
|EPS (fully diluted)||-||-||-||-||-||-||-||-|
|Dividend per share||0.00||0.00||0.00||0.00||0.00||0.00||0.00||0.00||-|
|Book value per share||-44.48||-75.18||-101.48||-138.59||-140.55||110.58||117.40||75.48|
|Balance sheet (JPYmn)|
|Cash and cash equivalents||-||-||-||1,569||1,709||2,033||2,038||1,601|
|Total current assets||-||-||-||2,062||2,242||2,777||2,846||2,360|
|Tangible fixed assets||-||-||-||25||24||20||14||9|
|Investments and other assets||-||-||-||76||76||68||49||55|
|Total current liabilities||-||-||-||1,370||1,355||1,425||1,592||1,651|
|Total fixed liabilities||-||-||-||-||-||6||4||1|
|Total net assets||858||582||345||1,011||993||1,715||1,837||1,188|
|Total interest-bearing debt||-||-||-||-||150||-||-||-|
|Cash flow statement(JPYmn)|
|Cash flows from operating activities||-||-||-||-100||-156||-353||241||-313|
|Cash flows from investing activities||-||-||-||-113||96||-225||-280||-145|
|Cash flows from financing activities||-||-||-||710||150||902||86||15|
|% of total||62.2%||59.0%||57.8%||56.5%||57.0%||58.0%||59.1%||59.4%||64.2%||63.1%||63.2%||62.8%|
|Managed Service business||260||649||1,019||1,432||280||621||996||1,419||318||668||952||1,269|
|% of total||14.6%||17.1%||17.2%||17.6%||13.6%||14.5%||14.9%||15.3%||12.7%||13.2%||12.5%||12.3%|
|Tech Agent business||410||899||1,465||2,082||587||1,133||1,682||2,267||575||1,197||1,857||2,564|
|% of total||23.1%||23.7%||24.8%||25.7%||28.5%||26.4%||25.1%||24.4%||23.0%||23.7%||24.3%||24.8%|
|% of total||0.0%||0.1%||0.1%||0.1%||0.9%||1.0%||0.9%||1.0%||0.0%||0.0%||0.0%||0.0%|
|% of total||32.0%||28.1%||27.0%||25.4%||25.4%||25.7%||26.2%||26.4%||31.8%||30.9%||30.9%||30.7%|
|Managed Service business||240||601||937||1,312||254||564||905||1,287||289||607||865||1,153|
|% of total||36.0%||38.8%||38.3%||37.8%||29.3%||31.4%||32.5%||33.3%||29.7%||30.3%||28.8%||28.3%|
|Tech Agent business||203||476||794||1,172||372||723||1,082||1,460||375||782||1,219||1,682|
|% of total||30.5%||30.8%||32.5%||33.7%||42.9%||40.2%||38.8%||37.7%||38.6%||39.0%||40.5%||41.3%|
|% of total||1.5%||2.0%||1.9%||2.9%||2.2%||2.5%||2.3%||2.4%||-0.1%||-0.2%||-0.3%||-0.3%|
|Gross profit margin||100.0%||100.0%||100.0%||100.0%||100.0%||100.0%||100.0%||99.9%||96.1%||95.5%||96.3%||96.4%|
|Managed Service business||89||231||371||526||106||235||364||514||102||226||322||438|
|Gross profit margin||37.1%||38.4%||39.6%||40.1%||41.7%||41.7%||40.2%||39.9%||35.3%||37.2%||37.2%||38.0%|
|Tech Agent business||63||139||224||313||89||167||249||335||83||175||272||372|
|Gross profit margin||31.0%||29.2%||28.2%||26.7%||23.9%||23.1%||23.0%||22.9%||22.1%||22.4%||22.3%||22.1%|
|Gross profit margin||100.0%||77.4%||78.7%||65.3%||63.2%||57.8%||54.0%||54.3%||-||-||-||-|
|Managed Service business||34.2%||35.6%||36.4%||36.7%||37.9%||37.8%||36.5%||36.2%||32.1%||33.8%||33.8%||34.5%|
|Tech Agent business||15.4%||15.5%||15.3%||15.0%||15.2%||14.7%||14.8%||14.8%||14.4%||14.6%||14.6%||14.5%|
|Operating profit margin||-87.3%||-18.2%||3.5%||-1.2%||47.3%||46.5%||49.0%||50.2%||31.7%||24.5%||18.8%||13.5%|
|Managed Service business||23||83||134||147||-10||3||6||25||0||30||36||64|
|Operating profit margin||9.6%||13.8%||14.3%||11.2%||-3.9%||0.5%||0.7%||1.9%||-0.1%||4.9%||4.2%||5.6%|
|Tech Agent business||-4||3||19||37||21||34||47||71||16||37||56||68|
|Operating profit margin||-2.0%||0.6%||2.4%||3.2%||5.6%||4.7%||4.3%||4.9%||4.3%||4.7%||4.6%||4.0%|
|Operating profit margin||-||-||-||-||-||-||-||-||-||-||-||-|
|% of total||62.2%||56.1%||55.7%||53.2%||57.0%||58.9%||61.0%||60.1%||64.2%||62.0%||63.3%||61.9%|
|Managed Service business||260||389||370||413||280||341||375||421||318||349||284||316|
|% of total||14.6%||19.3%||17.5%||18.8%||13.6%||15.3%||15.5%||16.2%||12.7%||13.6%||11.0%||11.7%|
|Tech Agent business||410||489||566||617||587||546||549||582||575||621||659||707|
|% of total||23.1%||24.3%||26.7%||28.0%||28.5%||24.6%||22.7%||22.4%||23.0%||24.3%||25.6%||26.3%|
|% of total||0.0%||0.1%||0.1%||0.0%||0.9%||1.1%||0.7%||1.2%||0.0%||0.0%||0.0%||0.0%|
|% of total||32.0%||25.3%||25.0%||21.6%||25.4%||26.0%||27.2%||26.7%||31.8%||30.1%||31.0%||30.0%|
|Managed Service business||240||361||336||375||254||310||341||382||289||317||258||287|
|% of total||36.0%||41.2%||37.5%||36.4%||29.3%||33.3%||34.5%||35.3%||29.7%||30.7%||25.8%||26.9%|
|Tech Agent business||203||273||318||378||372||351||359||378||375||407||436||462|
|% of total||30.5%||31.1%||35.5%||36.7%||42.9%||37.7%||36.3%||34.9%||38.6%||39.4%||43.6%||43.3%|
|% of total||1.5%||2.4%||1.8%||5.2%||2.2%||2.8%||1.8%||2.9%||-0.1%||-0.3%||-0.4%||-0.4%|
|Gross profit margin||100.0%||100.0%||100.0%||100.0%||100.0%||100.0%||100.0%||99.7%||96.1%||94.5%||98.1%||96.6%|
|Managed Service business||89||142||140||155||106||129||129||150||102||123||96||115|
|Gross profit margin||37.1%||39.3%||41.7%||41.3%||41.7%||41.6%||37.8%||39.3%||35.3%||38.8%||37.2%||40.1%|
|Tech Agent business||63||76||85||89||89||78||82||86||83||92||96||99|
|Gross profit margin||31.0%||27.8%||26.7%||23.5%||23.9%||22.2%||22.8%||22.8%||22.1%||22.6%||22.0%||21.4%|
|Gross profit margin||100.0%||66.7%||81.3%||53.7%||63.2%||53.8%||44.4%||54.8%||-||-||-||-|
|Managed Service business||34.2%||36.5%||37.8%||37.5%||37.9%||37.8%||34.4%||35.6%||32.1%||35.2%||33.8%||36.4%|
|Tech Agent business||15.4%||15.5%||15.0%||14.4%||15.2%||14.3%||14.9%||14.8%||14.4%||14.8%||14.6%||14.0%|
|Operating profit margin||-87.3%||48.2%||45.5%||-15.2%||47.3%||45.9%||53.2%||53.3%||31.7%||17.4%||7.1%||-1.9%|
|Managed Service business||23||60||51||13||-10||13||3||19||0||30||6||27|
|Operating profit margin||9.6%||16.6%||15.2%||3.5%||-3.9%||4.2%||0.9%||5.0%||-0.1%||9.5%||2.3%||9.4%|
|Tech Agent business||-4||7||16||18||21||13||13||24||16||20||19||11|
|Operating profit margin||-2.0%||2.6%||5.0%||4.8%||5.6%||3.7%||3.6%||6.3%||4.3%||4.9%||4.4%||2.4%|
|Operating profit margin||-||-||-||-||-||-||-||-||-||-||-||-|
Revenue was up 5.3% YoY. The GSV across the entire platform was JPY10.3bn, an 11.0% YoY increase. The take rate (defined by the company as gross profit/GSV) was 19.4%, down 1.3pp YoY. The decline in the companywide take rate was substantially affected by an increase in the share of work matched of the mainstay Marketplace business, which has a lower take rate (18.6%) than the company-wide average—in other words, changes in the service mix were largely behind the decline in the overall take rate.
The company posted an operating loss of JPY367mn, down from an operating profit of JPY37mn in FY03/21. It had positioned FY03/22 as a time to make investments that would contribute to long-term business growth, and the operating loss was in line with plan. On the other hand, the company posted a net loss of JPY672mn, which was greater than the forecast of JPY452mn. The company had originally planned to withdraw from part of its Managed Service business, one of its three businesses. It ultimately decided to withdraw from the entire business after considering its growth potential and profitability, resulting in the posting of a JPY220mn impairment loss on goodwill and software assets related to the business.
The GSV was JPY6.5bn, an increase of 17.5% YoY. Across the platform, including other businesses, the number of client company users in FY03/22 was 37,900 and annual spend per client was JPY264,000. Compared to FY03/21 results, these figures were up by 4.4% and 5.2%, respectively. Recently, around 90% of work matched is to small businesses, and around 90% is also related to the digital transformation efforts of clients. The mainstay Marketplace business is seizing on this demand, steadily growing both work matched and revenue. The take rate in the business was up 0.1pp YoY to 18.6%, while operating profit dropped by 67.0% YoY. The company positioned FY03/22 as a period for making investments in the Marketplace business (positioned as a growth area) in areas related to product development, marketing, and development of new services toward future growth.
Although performance in the mainstay Marketplace business steadily improved YoY, progress rates toward the full-year forecast for FY03/22 stood at 90.8% for GSV, 94.2% for revenue, and 90.8% for gross profit. The company explains that these results were mainly a result of it taking some time to start developing new measures, and in particular, experiencing continued challenges in attracting new clients. GSV for FY03/22 was JPY866mn for new clients (+9.0% YoY) and JPY5.6bn for existing clients (+19.0% YoY). However, the company believes that its various measures centered on package-based services are having a positive effect, such as promoting the continued use of its services by clients. Going forward, it intends to continue to invest in marketing and product-related activities to attract new clients and add value to improve its take rate, thereby boosting its growth trajectory.
The GSV in the segment was JPY1.3bn, a 10.6% YoY decrease. In this business, the value of work requested by clients is roughly equivalent to revenue, so the rate of increase for both is comparable. The take rate was down 1.7pp to 34.5% YoY while gross profit fell 14.8% YoY.
The company's Lancers Assistant and Lancers Creative services are package-based with fixed fee structures, whereas the Lancers Outsourcing service requires customization according to client requests and thus involves more labor and has lower operating margins. Considering this, the company had decided to withdraw from the Lancers Outsourcing service during FY03/22. However, it ultimately changed plans to withdraw from the entire business, including Lancers Assistant and Lancers Creative, after reevaluating its growth potential and profitability. Going forward, the company intends to focus on developing the Marketplace business and the Agent business (the company will change the name of its current Tech Agent business to the Agent business in FY03/23).
The GSV rose 13.1% YoY to JPY2.6bn, and revenue was up 15.2%. The take rate was down 0.3pp YoY to 14.5%. Although effects of the pandemic linger, demand for securing IT professionals saw a turnaround as clients gradually resumed business activities. Robust demand from clients pursuing digital transformation initiatives, mainly small businesses, promises to underpin this business, which places freelancers adept in IT-related areas.
Lancers has decided to acquire shares of Work Style Lab, Inc. (making it a subsidiary) to strengthen its ability to respond to the digital transformation domain, where client needs are strong. It announced the acquisition at its FY03/22 results briefing. Work Style Lab's Professionals on Demand platform has approximately 4,000 registered high-level professionals, mainly from strategy/IT/DX consulting firms. The company will enter the consulting field by acquiring Work Style Lab and the clients and expertise it has accumulated over 10 years of operation. Lancers aims to develop into a platform that can provide comprehensive digital transformation support for clients, including both SMEs, which have been the company's traditional customers, and large companies.
|(JPYmn)||1H Act.||2H Act.||FY Act.||1H Est.||2H Est.||FY Est.|
|Cost of revenue||1,017||1,053||2,070||-|
|Gross profit margin||49%||49%||49%||46%|
|Operating profit margin||-||-||-||-|
|Recurring profit margin||-||-||-||-|
In FY03/23, the company forecasts GSV of JPY12.6bn (+22.5% YoY), revenue of JPY5.4bn (+32.6% YoY), gross profit of JPY2.5bn (+24.3% YoY), an operating loss of JPY289mn (versus a loss of JPY367mn in FY03/22), a recurring loss of JPY284mn (loss of JPY358mn in FY03/22), and a net loss of JPY286mn (net loss of JPY672mn in FY03/22). The company plans to bring quarterly results into the black in Q4.
The consolidated forecast makes the following major assumptions in terms of GSV, gross profit, and operating profit for each business.
In terms of its basic direction for each business, based on the numerical forecasts above, the company will continue to position the mainstay Marketplace business as a growth area. It intends to continue to invest in marketing and product-related initiatives in order to attract new clients, while adding value to improve the take rate and boost the growth trajectory.
The company aims to grow the Agent business by adding value through organizational expansion and entry into new areas. It will expand its organization by reallocating personnel from the Managed Service business, from which it has decided to withdraw completely. The company will also enter the consulting field by making Work Style Lab a subsidiary and acquiring the clients and expertise it has accumulated over 10 years of operation. Lancers aims to develop into a platform that can provide comprehensive digital transformation support for clients, including both SMEs, which have been the company's traditional customers, and large companies.
Lancers did not announce a medium-term business plan along with its full-year forecast, but did announce targets for GSV and gross profit for FY03/24—its key indicators—as well as its plans going forward for achieving these targets.
The targets for GSV and gross profit for FY03/24 are as follows.
Lancers plans to focus on the Marketplace business, which it positions as its mainstay business and as a growth business. It will anticipate the effects of growth investments in the business as it aims to increase GSV and gross profit. The company expects to return to the black in full-year FY03/24, and thereafter move into a phase of profit growth. The company will pursue the following strategies for each business with an eye to achieving its numerical targets for FY03/24.
Develop subdivisions of skill categories of registered freelancers based on client needs
Launch and expand new categories where client needs are strongest
This thrust seems to entail primarily measures such as the packaging and commercialization of the business skills of freelancers.
Diversifying matching mechanisms by product
Encouraging ongoing platform use by bolstering customer success
In addition to expanding existing products and services, customer success, and support services, other measures to encourage ongoing platform use by existing clients include the recently launched Lancers Teams service, monthly compensation-based matching services, and referrals of company-designated Direction Partner companies to clients.
Stabilizing profit through structural reform, including withdrawal from the Lancers Outsourcing service, which is seen to carry relatively low margins.
Expanding commission revenue by restarting growth.
Growing the business by constructing an ecosystem for individuals
Offering new earning opportunities not limited to existing work areas
Building the value of services provided to freelancers and other individuals, such as through education
The idea is that, by packaging and commercializing the business skills of freelancers, for example, it is easier for clients to request work and for individuals to offer their skills. With the growth in subcategories of skills provided, and with greater diversity in plans that include pricing structures, comes the likelihood that individuals will have more opportunities to earn money.
Moreover, some services the company is rolling out, such as the online mentoring service MENTA and Lancers Digital Academy, offer benefits both to individuals who want to earn money by teaching and to individuals who want to hone their skills to earn money. On top of being opportunities for the company the generate commission revenue directly, as these services earn the loyalty of people who take advantage of them, the company expects to be able to secure a pool of highly competitive freelancers, and thus bolster the competitive strength of its platform. By locking in such individuals, the company expects to organically build up a structure to generate profit for each business and service.
Lancers was founded in 2008 with the “empowerment of individuals” as its mission. In November 2021, the company formulated dual visions: “Moving all businesses forward with the power of Lancers” and “Building a society where everyone can harness their talents and become ‘a professional for someone else’”. Guided by these concepts, the company operates an online platform that matches individual freelancers (which the company calls “lancers”) who want to use their skills to earn money and client companies who want to request work.
The etymology of the word lancer dates back to medieval Europe. Countries at the time did not have standing armies. Rather, when war broke out, leaders would contract with mercenaries to form a military corps. Lance bearers, or lancers, who were not in a subordinate relationship to any given corps were called freelancers. Over time, the term lancers or freelancers came to be applied to people who work independently of any organization or to the way such people work.
The chief value the company provides to clients through its matching platform, the Lancers platform is: (1) variable labor costs, (2) access to knowledge and skills the client company does not possess internally, and (3) quick matching with freelancers. The chief value the platform provides to freelancers is: (1) maximizing the use of individual skills, (2) access to numerous personal development and earning opportunities, and (3) the ability to work at any time and in any place.
The Lancers online platform matches freelancers seeking work, with client companies requesting work. The Platform business is the company’s single operating segment, encompassing other businesses.
Number of clients and freelancers: Cumulatively, the company has 1.29mn registered freelancers and 460,000 registered clients. The company does not currently disclose the number of active clients and freelancers, but 38,400 clients used the service in the last year.
Attributes of client companies: Almost all clients are companies, around 90% of which are small businesses. In terms of GSV , the information and telecommunications industry accounts for 60%–70% of the total. Roughly 60% of clients have their head offices in the Tokyo metropolitan area with the rest elsewhere.
Attributes of freelancers: Nearly all freelancers are individuals, the majority of which are in their 20s, 30s, and 40s. About 30% reside in the Tokyo metropolitan area, with the rest elsewhere. Approximately 70% of registered freelancers possess medium- to high-level skills capable of handling work other than simple or light tasks. In particular, of the 1.29mn cumulative freelancers, about 270,000 are IT engineers, designers, or marketers. Registered freelancers in IT-related business areas account for a relatively large proportion of the total.
Type of work matched: More than 350 types of work are matched on the platform. Recently, around 90% of the GSV is related to the digital transformation efforts of clients, such as getting online commerce sites up and running.
Unit prices of work matched: The average spend per client for the most recent year was JPY254,000. The company does not separately disclose the average compensation amount per freelancer, Shared Research estimates the figure at JPY127,000.
As noted, around 90% of client companies are small firms and about 90% of work matched is related to digital transformation efforts. Given these characteristics of its platform, the company describes itself as a provider of skill sharing services specializing in business, and says that, because of its large pool of freelancers in digital fields, it can help solve the worker shortage of clients, especially small businesses, seeking to implement digital transformation.
The Platform business is Lancers’ single operating segment, but the company divides its business model into two areas based on different ways clients request work: online staffing and crowdsourcing. In short, online staffing involves the client company choosing a specific freelancer and requesting work, while a crowdsourcing request does not specify the freelancer.
Specifically, in online staffing, the client selects a specific freelancer based on the skills, track record, evaluations, and other data registered on the platform and makes a work request. In crowdsourcing, the client requests a final deliverable (or something close to it) without specifying a freelancer, and then chooses from among candidate submissions.
Of the two areas, online staffing clients typically require more advanced freelancing skills, and the contracted unit price for work is also higher. This is the company’s main focus, recently accounting for around 90% of work matched on the platform. Unit prices for work matched through online staffing is about 4x that of work matched through crowdsourcing.
The Platform business is the single operating segment, and the business model is divided between online staffing and crowdsourcing. In terms of the company’s actual business activities based on the online Lancers platform, the company engages in Marketplace, Managed Service, and Tech Agent businesses.
|Business||Service provided||Business area||Summary||Main clients||Key business categories||Proportion of business|
|GSV||Revenue||Gross profit||Operating profit|
|% of total||% of total||% of total|
|Marketplace business||Lancers (project-based)||Online staffing||Client requests work from freelancers directly online||Small businesses||System development, operation||5,516||59.4%||1,022||26.4%||1,021||53.0%||513|
|Lancers (package-based)||Creative production|
|Lancers (competition, task-based)||Crowdsourcing||Back office|
|Managed Service business||Lancers Assistant||Online staffing||Company mediates client work request, contracts and manages project||Small businesses||Creative production||1,419||15.3%||1,290||33.4%||515||26.8%||26|
|Lancers Outsourcing||Large business||Back office|
|Tech Agent business||Lancers Agent||Online staffing||Company mediates client work request, places IT professional||Small businesses||System development, operation||2,267||24.4%||1,460||37.7%||335||17.4%||73|
|PROsheet||Large business||Creative production|
|Group total including others||9,294||100%||3,868||100%||1,925||100%||36|
The following table shows the breakdown by area and commission revenue structure of the three businesses the company engages in.
|GSV||Total of three businesses. GSV = number of client users × average spend per client, or number of freelancers receiving work × average compensation amount per freelancer.|
|FY03/21 GSV = JPY9.3bn, roughly 36,300 client users × average spend per client of JPY251,000.|
|The company does not disclose the specific number of freelancers receiving work and average compensation.|
|Revenue||Commission revenue in the Marketplace business derives from system usage fees from freelancers.|
|Commission revenue in Managed Service and Tech Agent businesses derive from service fees from clients.|
|Cost of revenue||The Marketplace business carries virtually no cost of revenue.|
|Main cost of revenue in the Managed Service and Tech Agent businesses is outsourcing costs associated with the company's subcontracting of work to freelancers.|
|Ratio of revenue and gross profit to GSV||Against JPY9.3bn in GSV in FY03/21, ratio of revenue was 41.6% and ratio of gross profit was 20.7%.|
|Overview||The company's main business. Client companies request work directly from freelancers registered on the Lancers online platform.|
|Lancers (project-based)||Clients post work requests and select from among applying freelancers, based on estimates and track record.|
|Lancers (package-based)||Clients select freelancers based on clearly posted specifics and prices of skills provided.|
|Lancers (competition, task-based)||Clients request a final deliverable (or something close to it) without specifying a freelancer, and choose from among applicants.|
|Commission revenue to company||System usage fees from freelancer upon completion of work. Fee rates are as follows.|
|Based on contracted amount (compensation to the freelancer): 20% for contracts of JPY100,000 or less, 10% for contracts between JPY100,000 and JPY200,000, and 5% for contracts above JPY200,000.|
|No fees from clients. No registration fee or annual membership fees for either freelancers or clients.|
|Ratio of revenue and gross profit to GSV||Against JPY5.5bn in GSV in FY03/21, both ratio of revenue and gross profit ratio were 18.5%.|
|The ratio of revenue to GSV is roughly equivalent to average fee paid by freelancers to the company. There is virtually no cost of revenue.|
|Of GSV, the ratio of project-based to competition or task-based is roughly 9:1.|
|Managed Service business|
|Overview||The company undertakes business outsourcing from clients and uses registered freelancers to meet needs.|
|Lancers Assistant||Fixed monthly fee plans in which content of work provided and rates are decided in advance.|
|Lancers Outsourcing||Tailored to client requests, manpower provided using freelancers.|
|Commission revenue to company||Service fees from clients.|
|Fixed fees for Lancers Assistant, separate company estimates for Lancers Outsourcing.|
|Ratio of revenue and gross profit to GSV||Against JPY1.4bn in GSV in FY03/21, ratio of revenue was 90.9% and gross profit ratio was 36.3%.|
|Revenue structure in which the GSV is basically equivalent to revenue. GSV includes consumption tax, revenue does not.|
|The company incurs outsourcing costs as cost of revenue due to subcontracting work requested by clients to freelancers.|
|In terms of work matched, the ratio of Lancers Assistant to Lancers Outsourcing is estimated at 4:6.|
|Tech Agent business|
|Overview||Wholly owned subsidiary Lancers Agency places IT professionals with client companies from among the pool of registered freelancers.|
|Lancers Agent||Company acts as contracting party between client and freelancer.|
|PROsheet||Company does not act as contracting party. Typically used by clients accustomed to dealing directly with freelancers.|
|Commission revenue to company||Service fees from clients who contract with personnel from the Lancers group, as follows.|
|3-month plan: Monthly fees from JPY80,000–JPY120,000 for 1–5 days worked/week. 6-month plan: JPY60,000–JPY100,000.|
|No separate placement or brokerage fees.|
|Ratio of revenue and gross profit to GSV||Against JPY2.3bn in GSV in FY03/21, ratio of revenue was 64.4% and gross profit ratio was 14.8%.|
|For Lancers Agent, GSV is roughly equivalent to revenue. The group company receives service fees, freelancer compensation in a lump sum.|
|For PROsheet, the company receives only service fees from clients, counted as revenue.|
|For PROsheet, placement fees are charged if the client contracts directly with a freelancer.|
|For Lancers Agent, the company subcontracts work requested by a client to freelancers, incurring outsourcing costs as cost of revenue.|
|In terms of work matched, the ratio of Lancers Agent to PROsheet is estimated at 7:3.|
The Marketplace, Managed Service, and Tech Agent businesses differ by each business area and commission revenue structure, but all involve using the Lancers platform to match client companies and freelancers. An overview of the platform’s characteristics follows.
Compared to other HR service companies, Lancers says that it is set apart by the fact that it: (1) provides highly specialized human resources, (2) offers a workflow that can be completed online, and (3) offers overwhelming speed through to a successful match.
About 70% of freelancers work in business areas that require medium- to high-level skills, such as system development and operation, digital marketing, and creative design. Online staffing, used by clients demanding more sophisticated freelancing skills, accounts for around 90% of the GSV at the company. Around 90% of work matched has recently been related to the digital transformation efforts of clients. The company says the average compensation amount per freelancer in FY03/21 was about 2.5x that of its competitors, suggesting that its platform is matching more work with higher unit prices.
|System development, operation|
|Web system development, programming||JPY3,500–7,000/hour|
|iPhone, iPad app development||JPY300,000–2,000,000|
|Online commerce site construction, operation||JPY500,000/in-house site renewal|
|Business card creation||JPY10,000–50,000|
|Photos, videos, narration|
|Video creation, production, video materials||JPY50,000–500,000/video production|
|Image processing, photo editing, visual materials||JPY100–5,000|
|Management, strategy consulting||JPY150,000–300,000|
|Web, IT consulting||JPY100,000–200,000|
|Office work, professional work|
|PowerPoint creation||JPY30,000–100,000 (10 slides)|
|Listing advertisement management||Cost of advertising cost + around 20% fee|
|Articles, blogs, testimonials||JPY0.5–5/character|
|Data collection, input, listing||JPY1,000–10,000/100 items|
|Monitoring, surveys, questions||JPY10–3,000/survey item|
Key factors when evaluating the operations of a work matching platform include: (1) whether both client companies and freelancers can use the platform with a sense of security; (2) whether both clients and freelancers find it easy to locate desired partners, and (3) from the outset through to the final stage of delivery of work and compensation, how likely trouble is to occur and whether both clients and freelancers can complete transactions with a high degree of satisfaction.
Also, when considering the growth potential of a platform, realistically, the quality of the freelancer a client encounters the first time it uses the platform can be a deciding factor. Conversely, freelancers want to know how efficiently and frequently they can receive work after registering.
From this perspective, the Lancers platform appears to have the elements considered vital for a work matching platform. It also has rules and mechanisms to ensure elements that the company itself considers important, described below. These rules and mechanisms are distinctive features of the company’s platform and business model.
The security of work transactions is considered to be the most important factor for a platform. Here, the company has introduced rules to avoid common compensation-related troubles. The rule is that, when a client requests work from a freelancer on the Lancers platform, the company holds the compensation in advance and gives it to the freelancer when the work is completed. So, even if the requested work is interrupted or the client cannot contact the requested freelancer, this rule helps ensure that the client will not have trouble recovering its payment, which could occur in the case of direct advance payment to a freelancer. Likewise, the freelancer can avoid issues such as non-paying clients even though work is completed.
The company’s platform offers robust security. It uses AI tools to instantly detect malicious posts on the platform. It also assigns about 20 monitoring staff to eight locations in Japan and three locations overseas to patrol posts on the platform round the clock. If a client company or freelancer posts a malicious post, the company takes action such as hiding the post, issuing a warning, or suspending the account.
The monitoring staff also serve as the company’s customer support team, operating a round the clock support desk for clients and freelancers. Apart from that team, the company has set up a Customer Success team of about 15 people, mainly to support newly registered clients. This team is available on weekdays from 10:00 a.m. to 6:00 p.m.
Through such measures to avoid compensation issues and inappropriate behavior on the platform, and by establishing a system to address platform issues, the company is working to ensure that clients and freelancers can use the platform with a sense of security.
Achieving a high volume of work matching on a platform involves going beyond simply ensuring safety, but also ensuring reliability when users conduct transactions on the platform. In short, a mechanism is required to ensure that both the client company and the freelancer can trust one another. The company has established rules and mechanisms for the platform that offer this sense of reassurance.
The company seeks to gain the trust of its clients by first proving that a registered freelancer is a real person. It encourages freelancers to post their real names and faces on their profile screens. The company also indicates on the profile screens that the freelancer has completed a documented identity verification process and consented to confidentiality.
In addition to a general profile indicating the registered freelancer's skills, the company also offers an onscreen overview of work the person has done on the platform to date, along with past client evaluations. The company requires both clients and freelancers to provide feedback when a transaction is completed, including scoring one another using a 5-point scale (although it plans to change the evaluation method in early February 2022). In addition to the number of jobs completed, each profile screen also shows score averages. Users can refer to this as a key criterion in selecting a work partner.
|①||Self-introduction||Includes Lancer’s biographical information, achievements, and areas of expertise. Characteristics are highly specific to the individual.|
|②||Track record summary (all period)||Includes volume of all past work received, volume of work created, client evaluations, and rate of good evaluations. Useful for gauging the character of the freelancer and their working abilities.|
|③||Skill set||Describes the kind of work the Lancer can produce or deliver. Allows confirmation of proficient areas, business sectors, and genres.|
The company also ranks freelancers based on past work performance and evaluations on the platform, and displays the ranking on the profile screen.
The company introduced the ranking system in August 2018. Ranking criteria are clear and fair, including work performance and client evaluations on the platform, and are openly available. Rankings are divided in descending order into Certified Lancer, Silver, Bronze, and Regular, and reviewed monthly. The company recommends that clients request work from the highest-ranked Certified Lancers, especially for clients who are new to the platform or concerned about requesting work online.
|Ranking criteria||← Corresponds to "reliable freelancers" defined by the company →|
|Track record, evaluation on the Lancers online platform||Work order volume||-||1 or more orders||1 or more orders||1 or more orders|
|Work completion rate||-||-||Over 90%||Over 90%|
|Past year average evaluation||-||-||Client evaluation||Client evaluation|
|(5-point scale)||over 4.8||over 4.8|
|24-hour or less response rate||-||-||Over 80%, from time of client contact||Over 80%, from time of client contact|
|Compensation earned||-||-||-||Top 20% of registered freelancers in each category|
|Task approval rate (for task-based track record)||-||-||-||Over 90% of tasks approved by clients|
|Login to the Lancers online platform||Within the past month|
|Information verified, registered||Verified identity, confidentiality, telephone; profile image; name displayed; self-introduction over 300 characters; one of: skill, skill set, portfolio, delivered service; one of: business experience or qualification|
Client companies can thus confirm that the freelancer is a real person and also get a sense for past work performance. Also, when searching for freelancers, the company’s proprietary algorithm ensures that clients see candidates in order starting from the highest-ranked freelancers and most extensive profile content. The fact that the company makes recommendations starting with freelancers objectively thought to be reliable builds client trust.
The company emphasizes the reliability of transactions on both the freelancer and client sides. Just as client companies have access to a freelancer’s profile, track record, evaluation, and other information before requesting work, freelancers can also check past work request performance, cancellation rates, and other information on the client’s profile screen.
In December 2019, the company introduced client authentication and a certification system to make it easier for freelancers to find more reliable clients.
To be authenticated, client companies must provide sufficient profile information to prove that they are a real entity. In addition to authentication, certification takes into consideration the client’s work request record and freelancer evaluations. Criteria are clear and openly available. Authentication and certification status is displayed on client profile screens. This information is especially useful for freelancers deciding whether to accept work who want to make sure that potential clients are reliable.
|■Track record (past 6 months)|
|Total value of work completed||JPY300,000 or more|
|Work request rate (rate of noncancellation)||70% or more noncancellation|
|Assessment of work pricing||5% or less of transactions contain freelancer feedback on inappropriate pricing|
|Evaluations by freelancer||Average 4.8 points or more (out of 5)|
|Message reply rate||80% or more reply to contact from freelancer|
|Certified||Required: Completion of verification of identity, telephone, confidentiality, etc.|
|For companies: disclosure of 3 or more of: industry, capitalization, number of employees, name of representative, business content, address.|
|Compensation payment||No past delays in payment|
For freelancers deciding whether to accept work, it is important that the terms, especially compensation, are set at appropriate levels.
When a client requests work, the platform uses an AI tool to determine whether the price is appropriate, based on a past record of similar projects and comparisons with market data it researches independently. If a price is determined to be inappropriate, the request is not displayed. For freelancers, it is reassuring to be able to use the platform knowing that only projects deemed to be appropriately priced are in circulation.
In this way, the company requires both client companies and freelancers to provide extensive profile information, and displays the transaction history and evaluations from both sides on the respective profile screens. With authentication and certification system for clients, and the ranking system for freelancers, the company discriminates between users to some extent. Furthermore, if the AI tool determines that a client’s price is not appropriate, the work request itself is invalidated.
Such rules and mechanisms could potentially lead to lower volume of registered client companies and freelancers and a corresponding decrease in matching opportunities. Still, the company’s stance is to prioritize the security and reliability of the platform, believing at the end of the day that continued growth of the platform largely depends on these factors.
Aside from giving both client companies and freelancers a sense of security and reassurance, for platform operators like the company to achieve efficient work matching, the number of freelancers on hand capable of meeting the client demands is critical.
The company stresses having a corps of what it defines as “reliable freelancers” among its registered freelancers as the source of the platform’s competitive strength. As mentioned above, the company has adopted a ranking system for freelancers based on track records and evaluations, with rankings of Certified Lancer, Silver, Bronze, and Regular, in order of excellence. The company defines Certified Lancers and Silver and Bronze Lancers as “reliable freelancers” (it does not disclose the exact breakdown by ranking among registered freelancers).
Recently, about 80% of GSV at the company has been directed to “reliable freelancers.” In FY03/21, average compensation per “reliable freelancer” was about 15x higher than Regular freelancers.
Positioning “reliable freelancers” as the source of its competitive strength, the company is making efforts to expand and lock in this resource, including the online mentoring service MENTA and the Lancer of the Year award event.
An online mentoring service, MENTA connects “people who want to teach” with “people who want to learn.” It is run by IRITEC Co., Ltd. (now renamed MENTA Co., Ltd.: unlisted), which Lancers made a subsidiary in October 2020. For those who want to teach work skills, using MENTA can offer more earning opportunities and further hone their skills. Those who want to learn can expect to gain work skills and thus more freelance work. The company records the GSV and commission revenue for MENTA in the Marketplace business segment (MENTA is estimated to account for about 5% of GSV). The fee schedule is similar to ordinary matched work, and fees are paid by the mentor who will be compensated for teaching.
Lancer of the Year is an annual awards event the company launched in 2015. The company puts out a call for candidates, and chooses half a dozen people from among the freelancers who apply. Selection is based in part on the candidate’s compensation on the platform over the past year, client evaluations, and the person’s “story” related to freelancing. There is no monetary reward or other fixed prize, but sponsoring client companies may offer prizes of their own. Winners are announced on the company’s website among other venues, and award results are displayed on winners’ profile screens. Applications are high—many freelancers are drawn not so much to the prize but to the status involved and the boost to their ability to acquire work requests.
Peripheral services the company is developing for freelancers include the New Working Style LAB, a framework for providing freelancers with opportunities to network and learn. In addition to online offerings, the company has established or is planning to establish 16 “co-working spaces” in Japan as well as a similar location in Bangkok, with the help of sponsors there. The company or freelancers (community managers) hold events and seminars in these spaces from time to time. Development of the New Working Style LAB does entail any commission revenue or costs for the company.
In addition to these initiatives, the company is developing benefit programs where freelancers can receive special treatment or discounts at facilities nationwide, tax advice services, and financial services through tie-ups with outside companies.
The pool of “reliable freelancers” is growing steadily, thanks in part to these efforts by the company to attract and lock in talent. The subscriber base for the online mentoring service MENTA is also expanding.
|No. of "reliable freelancers"||9.7||11.0||11.8||13.1||14.3||14.9||16.7||18.6||19.9||21.1|
|No. of registered MENTA||6.1||8.4||10.6||13.5||16.7||20.3||24.7||30.2||34.6||40.0|
In November 2021, the company announced that it would launch Lancers Digital Academy in early 2022, with a view to supplying professionals in the digital field as well as serve as an active source feeding into its corps of “reliable freelancers.” This program targets freelancers who want to acquire the latest digital skills and apply them to their work. The company describes it as a “job-linked training service that aims to equip freelancers with practical knowledge and skills as a professional.”
The course lasts about two months and tuition is about JPY200,000. The curriculum starts with students acquiring practical knowledge through video-based teaching materials produced by top experts in digital fields. After completing assignments, reports, and group work, students undergo a final practical assignment. For program graduates, the company will provide dedicated concierge support for a certain period of time, and offer work information according to individual career goals, even beyond the Lancers platform. The profile screens of program graduates will show a digital skills certificate.
The goal of Lancers Digital Academy is to turn out digital professionals, the shortage of which is a major topic in Japan. Naturally, the company also wants course graduates to play an active role as “reliable freelancers” on its platform. Course registration appears to have surpassed 100 students already; the company is shooting for 10,000 students over the longer term.
Given the nature of its business, the attrition of highly competitive freelancers poses a clear risk for the company. One concern is that freelancers might deal directly with client companies without going through the platform, or that they might migrate to the platform of a competitor.
However, there are significant benefits to freelancers from remaining and continuing to work on a particular platform. By handling more work in good faith on a given platform, the freelancer builds up a solid track record in terms of work volume and client evaluations. With the Lancers system, the person’s ranking will go up based on this track record. Clients pay attention to profiles, so a more robust profile promises greater opportunities to get work on the platform, at better terms.
Given this mechanism, there might be cases where freelancers decide to deal off-platform only with a specific client, but most want to continue to get work from a variety of clients, including those with whom they do not yet have a relationship. This group is unlikely to be motivated to deal directly with clients or migrate platforms.
According to a survey* of freelancing from February–March 2020 by Japan’s Cabinet Secretariat, 21.5% of freelancers reported that they use intermediaries to acquire work. Of that number, about half (46.8%) said that they use a single intermediary. For freelancers who have built up a solid track record on a single platform, there is reason to think they have little motive to jump around between platforms or migrate to another platform.
*Lancers publishes its own periodic surveys of the freelancing market since 2015 but, for the sake of objectivity, this report, here and in the following discussions, cites the results of third-party surveys.
Platform characteristics also differ between companies. Moving to another platform means dealing with a different environment, no small adjustment. A comparison of platforms between the company and other leading competitors is included in the Market and value chain section below.
As noted, the company has established rules and mechanisms to bring a sense of security and reassurance to both freelancers and client companies, while emphasizing its corps of “reliable freelancers” as a competitive advantage. The company’s platform has grown steadily. The GSV continues to increase in tandem with growing client company users and spend per client.
One key business indicator for the company is the GSV, which simply indicates the degree of growth of the platform. The company has sustained a stable take rate, which is the ratio of gross profit to GSV, but wants to raise the take rate by enhancing its service lineup. Group performance indicators also include gross profit, an indicator of value added for platform users (both client companies and freelancers).
|No. of Reliable freelancers||-||-||-||-||-||13,100||18,600||21,100|
|No. of Lancers' clients||A||20,500||25,600||29,300||31,900||33,200||33,700||36,300||(reference) 38,400 clients, JPY254,000 in the past year|
|Annual spend per client (JPYmn)||B||112,000||141,000||165,000||167,000||194,000||240,000||251,000|
|% of total||-||-||-||-||63.5||56.5||59.4||63.1|
|of which new client||-||-||-||-||584||682||794||443|
|of which existing client||-||-||-||-||3,516||3,906||4,722||2,743|
|Managed Service business||-||-||-||-||1,133||1,432||1,419||668|
|% of total||-||-||-||-||17.6||17.6||15.3||13.2|
|Tech Agent business||-||-||-||-||1,217||2,082||2,267||1,197|
|% of total||-||-||-||-||18.9||25.7||24.4||23.7|
|Gross profit (JPYmn)||400||800||1,100||1,252||1,486||1,795||1,926||988|
|% of total||55.7||49.1||53.0||59.9|
|Managed Service business||-||-||-||-||343||526||515||226|
|% of total||23.1||29.3||26.7||22.9|
|Tech Agent business||-||-||-||-||224||313||335||175|
|% of total||15.1||17.4||17.4||17.7|
|Take rate (%)||17.4||22.2||22.9||23.6||23.0||22.1||20.7||19.6|
|YoY change (pp)||-||4.8||0.7||0.7||-0.6||-0.9||-1.4||-1.3|
|YoY change (pp)||-||-||-||-||-||-1.0||-0.7||-0.0|
|Managed Service business||-||-||-||-||30.3||36.7||36.3||33.8|
|YoY change (pp)||-||-||-||-||-||6.5||-0.4||-4.0|
|Tech Agent business||-||-||-||-||18.4||15.0||14.8||14.6|
|YoY change (pp)||-||-||-||-||-||-3.4||-0.3||-0.1|
Annual spend per client, a key indicator for the company, continues to trend upward. The company says the reason for this is that growth in requests for work with high unit prices feeds into equally strong growth in spend per client.
Of the company’s three businesses, GSV in its mainstay Marketplace business is steadily increasing. In 1H FY03/22, GSV for both new clients and existing clients were up by more than 20% YoY.
On the other hand, the ratio of gross profit to GSV—the take rate—is on a downtrend. The main reason is two-fold: The mainstay Marketplace business, which carries a take rate that is below the company-wide average, is both accounting for a greater share of work matched and experiencing its own declining take rates. The rates of system usage fees the company receives from freelancers in this business go down as the contracted amount goes up. The steady increase in the average unit price of work contracts in recent years has pushed down the take rate of the Marketplace business, thus also impacting the company-wide take rate. From the outset, the company has sought to build a platform to match work from clients demanding high-level freelancing skills, and thus high unit prices. The dilemma for the company is that, as it realizes this goal, profitability inevitably declines.
Going forward, the company has plans to improve the take rate, but what will likely be more important will be to boost the GSV enough to compensate for lower take rates. In November 2021, the company launched several new measures aiming to expand the GSV. One key measure is the full-scale rollout of a system for packaging and commercializing the business skills of freelancers, which conveys the specifics and prices of skills provided by its freelancers in an easy-to-understand format to present to the clients. Another measure is Lancers Teams, a service that allows clients to book in advance IT-related freelancers who can work on an hourly basis and use them only when needed.
The primary goal of the system for packaging and commercializing freelancers’ business skills is to expand the client base. On the Lancers platform, clients have typically first indicated the terms for work and put out a call for freelancers, and then selected personnel from among applicants or from submitted work, or selected personnel after checking candidate profiles suggested by the platform.
With the new skills packaging system, the matching process occurs after ascertaining in advance on the freelancer side what kind of work is possible at what compensation level. Small businesses, which form the bulk of the company's client base, often find it difficult to select freelancers and negotiate compensation and other terms due to their lack of personnel and experience. Such clients will find it easier to place work requests if there is a clear indication of what work can be done and for how much.
The system subdivides freelancers’ business skills into more than 350 categories. The company believes that the more categories it can offer, the easier it is for clients to request work. The freelancers’ requested compensation must be above JPY10,000, and the company encourages the skills offered to be the business skills of a professional as opposed to a mere side interest. The company is prepared to offer three separate fee plans for each package to address a variety of needs: basic, standard, and premium.
Lancers Teams is another new service that allows client companies, after initial interviews, to book multiple IT-related freelancers who can work on an hourly basis, and make use of their services only when needed. There are no fees to the client for securing or managing freelancers, but only for actual hours worked. The interview aspect enables clients to secure people who are a good fit with their corporate culture, while incurring minimal costs.
At the same time as it unveiled its plans to launch these new services, the company announced two more finely tuned services: a monthly compensation-based matching service (which will reduce the complexity of compensation payments for clients while offering freelancers more regularly timed payments) and a service that allows clients to book freelancers with different expertise in a group through company-designated Direction Partner companies. Having built a platform that offers safety and reliability, the company continues to research and onboard new services in pursuit of greater convenience for clients and freelancers.
Lancers reports that around 90% of the client companies and freelancers on its platform registered without having seen any of the company’s advertisements. This is likely due to the fact that the company’s name comes near the top of internet searches, as one of the major operators of work matching platforms in Japan.
Nonetheless, the company is pursuing proactive measures to attract clients and freelancers. Most of its advertising is web-based. In terms of marketing activities, the company holds seminars to introduce freelance case studies targeting potential client companies, and seminars to learn about digital technology targeting potential freelancers. It does not send representatives out on sales calls or make other on-the-ground efforts to acquire clients or freelancers.
The company is also collaborating with other companies with the expectation of attracting new client companies and freelancers. Tie-ups with regional financial institutions are a typical approach. In 2021, the company formed alliances with Fukuho Bank, Ltd. (unlisted) in Fukui Prefecture in May, Tamashima Shinkin Bank in Okayama Prefecture in July, and Dai-ichi Kangyo Credit Cooperative in Tokyo in November. Because small businesses in regional urban areas often consult with such institutions about ways of getting around the shortage of IT professionals, Lancers hopes to utilize these tie-ups to acquire new clients.
In September 2020, the company announced a three-way alliance with Shopify Japan Inc. (unlisted), the operator in Japan of “Shopify,” the world’s largest multichannel commerce platform, and FRACTA Inc. (unlisted), Shopify’s official partner which supports the rollout of “Shopify” for corporate clients.
“Shopify” is a cloud-based multichannel commerce platform that enables easy entry into online retail, with a presence both in Japan and internationally. The platform makes it easy to create and customize an online shop, share inventory, and conduct sales management and marketing across multiple sales channels, including the web, mobile device apps, social media, marketplaces, and brick-and-mortar stores. The platform also has powerful back office capabilities for shop owners, with Shopify centrally managing most of what is needed for online retail. Headquartered in Ottawa, Canada, Shopify has to date supported more than a million companies in about 175 countries.
While many companies are struggling under the impact of COVID-19 and sales at brick-and-mortar stores are languishing, there is strong demand among companies that want to expand beyond brick-and-mortar stores to online shops and other sales channels. In this context, Lancers is developing a program to teach freelancers how to build and operate a Shopify online commerce site. The company is thus seeking to attract new clients by strengthening its responsiveness in areas of brisk corporate demand. It also sees this initiative as facilitating greater use of its platform by existing clients.
The new measures launched in November 2021—the skills packaging system, Lancers Teams, and Lancers Digital Academy—also have the potential to bring in new client companies and freelancers.
Client companies pay a freelancer’s compensation in advance when the work request is agreed with the freelancer through the platform. Payment methods include credit cards, PayPal, and bank transfer. The company also accepts payment by invoice (deferred payment) after a screening of the client company (this is a common payment method with other businesses in Japan).
When the freelancer completes the work request, the company confirms with both the freelancer and the client and pays compensation to the freelancer. There are two payment schedules: payment at the end of the month following a cut-off on the 15th day of the month, and payment on the 15th day of the month following an end-of-month cut-off. Compensation payment is by transfer to the freelancer’s designated account, in an amount after deducting the system usage fee (the company shoulders any bank transfer fees).
Clients pay a service fee after service is received, based on an invoice sent by the company. In many cases, payment is made about a month after completion of work. The company pays the freelancer as its subcontractor after completion of work. In short, the company bears the cost of compensation until it recovers fees from the client.
Clients who opt to use IT-related freelancers placed by subsidiary Lancers Agency pay a monthly service fee. In the Lancers Agent service, where the company acts as the contracting party between the client and the freelancer, the company will pass on compensation paid by the client to the freelancer.
Lancers Agent has a somewhat complicated fee schedule. Since payment of compensation from the company to the freelancer tends to be cumbersome, the company outsources this operation to an outside partner. Compensation is paid to the freelancer at the end of following month for work completed the previous month. However, freelancers may also receive earlier payment, such as same-month payment, by taking advantage of a paid service provided by the outside partner. With PROsheet, the company does not act as the contracting party between the client and the freelancer, and the client pays the freelancer directly.
As of end-FY03/21, the company employed 153 people (plus an average of 25 temporary staff per year) with an average age of 32, an average length of service of two years, and an average annual salary of JPY4.7mn. For the group, there were 175 employees (plus an average of 37 temporary staff per year).
As of November 2021, the figure for the group appeared to have grown to about 230 employees (including temporary staff). In terms of job descriptions, sales (agents, directors, sales representative, etc.) accounted for about 40% of employees, products (IT engineers, designers, product data managers, marketers, customer management, customer success representatives, etc.) accounted for about 40%, and managerial staff accounted for about 20%. The company wants to augment the number of IT engineers, marketers, inside sales reps, and customer success reps connected with product enhancement and sales promotion. By business, the company is already shifting personnel to the Marketplace business, positioned as a growth area.
Commission revenue: The company’s main source of commission revenue is system usage fees received from freelancers in the Marketplace business, service fees received from clients in the Managed Service and Tech Agent businesses, and system usage fees received from mentors in the online mentoring service MENTA (recorded in the Marketplace business). Client demand for work requests tends to pick up every year toward the end of March, the fiscal year end for many Japanese companies.
Cost of revenue: The bulk of cost of revenue is outsourcing costs incurred in the Managed Service and Tech Agent businesses. In both these businesses, the company subcontracts work client companies contract to freelancers (some services are structured differently). Both businesses thus incur high outsourcing costs.
SG&A expenses are heavily weighted to personnel costs, advertising costs, and outsourcing costs. The company has recently been stepping up recruitment of IT engineers, marketers, inside sales reps, and customer success reps, etc. related to product enhancement and sales promotion, and the weight of personnel costs has been increasing as a result. Outsourcing costs recorded as SG&A expenses are different in nature from those included in cost of revenue, and are mainly related to back office operations. The company also actively makes use of freelancers in its own business. Advertising costs increased temporarily in FY03/20, but the impact of the company’s TV campaign to raise awareness in the lead up to its December 2019 IPO was significant.
|% of revenue||% of revenue||% of revenue||% of revenue|
|Cost of revenue||659||34||1,037||41||1,680||48||1,943||50|
|Salaries and bonuses||503||26||491||19||547||16||721||19|
|Provision for doubtful accounts||-4||-0||-14||-1||6||0||6||0|
|Provision for bonuses||73||4||71||3||77||2||11||0|
|% of revenue||% of revenue||% of revenue||% of revenue|
|Cost of revenue||-||-||-||390||29||739||37||724||36||751||34|
|Salaries and bonuses||-||-||-||378||28||416||21||427||21||601||27|
|Provision for doubtful accounts||-||-||-||-4||-0||-15||-1||6||0||6||0|
|Provision for bonuses||-||-||-||55||4||64||3||57||3||5||0|
The company’s three businesses—the Marketplace, Managed Service, and Tech Agent businesses—share the fact that they match registered freelancers and client companies on the Lancers platform. Supplementary information on each business follows.
In the mainstay Marketplace business, clients request work directly from freelancers through the platform. Services provided are grouped into project-based, skills package-based , or competition, task-based services (see table below). Project-based and skills package-based services are thought to account for around 90% of the GSV.
|Lancers (project-based)||・ Corresponds to online staffing business area.|
|・ Each freelancer submits an estimate (delivery date, price, etc.) for a client work request. The client selects a freelancer based on estimate, work track record, past evaluations, etc.|
|・ Choice between fixed and hour-based compensation. For long-term work, fixed compensation may be paid in installments until completion.|
|Lancers (package-based)||・ Clients select freelancers based on specifics and prices of skills provided posted by freelancers.|
|Lancers (competition, task-based)||・ Corresponds to crowdsourcing business area.|
|・ In competitions, clients select proposals that best fit their intentions from among multiple submissions.|
|・ Main difference from project method is that the freelancer submits a proposal in a form close to the final desired product, and compensation upon acceptance is predetermined.|
|・ In task-based work, multiple freelancers simultaneously perform the same client request. Mainly entails nonspecialized work such as simple text creation, data entry, or answering surveys.|
|・ The client periodically checks deliverables and pays only for approved tasks.|
In the Managed Service business, the company draws on a pool of registered freelancers to meet business outsourcing requests from client companies. It provides two services: Lancers Assistant and Lancers Outsourcing. Lancers Assistant offers fixed monthly fee plans in which the content of work provided and fees are decided in advance. Lancers Outsourcing is tailored to the individual requests of clients, such as clients that do not know how to locate appropriate freelancers. In terms of GSV, the ratio of Lancers Assistant to Lancers Outsourcing is estimated at 4:6.
|Lancers Assistant||A team of freelancers appointed by the company meets the client's bulk business process outsourcing needs or fixed-price business outsourcing needs. The company allocates work.|
|Lancers Outsourcing||A team of freelancers appointed by the company meets requests from clients for which defining work requirements is difficult. The company builds a project framework and manages the quality of delivered work.|
|Fixed-rate assistant service|
|Contract term||3 months or more||6 months or more||12 months or more|
|Time allotted||30 hours/month||30 hours/month||30 hours/month|
|Fixed-rate sales support service|
|[Startup period: 2–4 weeks, interviews and proposals on performance indicators, strategies, etc. (2 video conferences) + 2 task completions]|
|Contract term||Startup period + 1 month||Startup period + 3 months or more||Startup period + 3 months or more|
|*Completion bonuses are paid only for work requested by appointment or sales agency work (JPY1,000 or more)|
|System||Sales director + operator + 1 freelanceer||Sales director + operator + 2 freelanceers||Sales director + operator + 3 freelanceers|
|Fixed-rate search engine optimization service|
|Contract term||6 months||12 months||6 months|
|Business content||Site analysis, market research, keyword extraction, unlimited SEO consultation, advisory, reporting, etc.|
|Fixed-rate Shopify online commerce service|
|(extension option: JPY55,000/month)|
|Contract term||3 months||6 months|
|Business content||Shopify startup support, online commerce site production, operational support|
|*The Standard plan also boosts operational efficiency by including additional apps.|
|Fixed fee reception service|
|Reception support||50 times/month|
|Pay-as-you-go||51–100 calls: JPY100/call|
|101 calls and more: JPY200/call|
|Fixed fee creative service|
|Plan||3 months||6 months||12 months|
|Fixed fee EC entry service|
|Price||JPY50,000/month (extended service option JPY30,000/month)|
|Contract term||3 months|
|Business content||Provide services on selection, implementation, and support of shopping cart systems and logistics settlement, EC site creation on hehalf of customers(product registration, up to 30 products), and operational support|
The company does not disclose the breakdown of each Lancers Assistant fixed monthly fee service plan in terms of work matched, but fixed-fee creative services appear to account for the majority of work.
The company has announced its intention to withdraw from the Lancers Outsourcing service in FY03/22. Because the service involves a response tailored to individual client requests, often including the assigning of a director and sales team, the company deemed the business to be underproductive. The company is exploring alternative ways of addressing the needs of Lancers Outsourcing clients, such as through its new service that allows clients to book freelancers in a group through company-designated Direction Partner companies.
In the Tech Agent business, the Lancers group places candidates from among its pool of registered freelancers with clients seeking IT professionals. In practice, wholly owned subsidiary Lancers Agency (unlisted) is chiefly responsible for placements. Services provided are Lancers Agent and PROsheet; the ratio of work matched between the services appears to be about 7:3.
|Company name||Lancers Agency, Inc.||Profit/Loss||Revenue||1,460,912||(JPY'000)|
|Description||Employment placement service||(FY03/21)||Recurring profit||83,021||(JPY'000)|
|Established||Dec 2014||Net income||83,859||(JPY'000)|
|Shareholder||Lancers, Inc.||Net assets||47,248||(JPY'000)|
|Capital stock||JPY29,950,000||Total assets||391,323||(JPY'000)|
Originally called Paraft Co., Ltd., Lancers Agency supports freelancers in IT-related fields seeking a side career or organizational independence. The company acquired all of Paraft’s shares in November 2017, with the name changing to Lancers Agency in September 2019.
Originally a separate company, Lancers Agency’s corporate culture differs somewhat from its parent. Unlike Lancers, the main business of Lancers Agency is HR placement, and it engages in some on-the-ground sales activities. The subsidiary stands on its own and has not fully integrated with the parent. In some cases, clients bring projects to Lancers which then passes them off to its subsidiary, while in other cases Lancers Agency acquires new projects directly.
Lancers Agency places freelancers registered on the Lancers platform with clients. Currently, more than 35,000 of them handle IT-related work, including many with a diverse occupational background and lengthy work experience.
|Job categories of IT freelancer|
|Experience level in IT freelancer's field of business|
|Over 10 years||30%|
|Over 5 years||30%|
|Over 3 years||25%|
|Less than 3 years||15%|
In the Lancers Agent service, clients interview potential Lancers Agency placements before every placement. Based on results to date, clients extend informal offers to candidates after an interview in about 35% of the cases, while the acceptance rate of candidates who receive an offer is as high as 90%.
Lancers Agent also includes a subservice, PROsheet, in which the company does not act as the contracting party between the client and the freelancer, but rather clients and freelancers contract for work directly. In many cases, companies that are relatively accustomed to direct interactions with freelancers but unable to find qualified IT professionals often choose the PROsheet service, asking the group only to introduce candidates.
Through its online platform, the company engages in matching client companies requesting work with freelancers seeking work. The company acts as a kind of go-between in the process of people sharing their skills. Trends in freelancing and in business process outsourcing (BPO) are thus the most relevant market trends to the company’s business.
Freelancers are the core providers of skills in the company’s business.
Generally speaking, freelancers are people who receive compensation by providing their expertise and skills, working independently without formal ties to a specific company or organization, while freelancing describes working in this way. Freelancing can refer to situations where there is a formal employment relationship with a specific company or not, as well as situations where the freelancing activity is the person’s primary job or not. In its March 2021 White Paper, the Professional & Parallel Career Freelance Association (PPCFA) classifies types of freelancing as shown in the table below.
|Working status||Employment relationship||Form of freelancing||% of total|
|Independent freelancing||No||Self-employed (sole proprietorship tax status)||74.1%|
|Manager (company, micro company)||5.5%|
|Part-time freelancer (retired, housewife, student, etc.)||8.1%|
|Freelancing as a side career||Yes||Employed, and manager (engaging in freelance business while employed by a specific company)||0.4%|
|Employed, and a sole proprietorship||6.0%|
|Employed and part-time freelancer||3.8%|
|Dual employment (employed by a specific company while also undertaking freelancing work under an employment relationship)||-|
In recent years, Japan’s population of freelancers has been trending upward. With more ready acceptance of diverse working styles, it is easier for people to make judgments about becoming a full-time independent freelancer or freelancing as a side career. Meanwhile, more companies are requesting work from freelancers. Already facing labor shortages, companies are under increasing pressure to deal with changes in the business environment amid advances in digitalization and the onset of COVID-19. In this context, there is a trend of turning toward outside resources to allow companies to concentrate management resources on their core businesses.
As social conditions feed into growth in the population of freelancers, various organizations have been working to get a better picture of the state of freelancing in Japan. Freelancers are under no obligation to join any organization, which makes it somewhat difficult to grasp the situation on the ground. Moreover, definitions of freelancing and the scope of coverage may differ between research groups, causing their estimations of the freelancer population to vary. Many groups place the population at between 3mn–4mn people. Lancers’ definition is different from that of many other organizations—it appears to have a broader target range.
|Survey entity||Cabinet Secretariat||Cabinet Office||The Small and Medium Enterprise Agency||Ministry of Health, Labor and Welfare||Lancers|
|Estimated freelance population||4.62mn||3.41mn||4.72mn||3.67mn||15.77mn|
|(Survey period)||(Feb. to March 2020)||(Jan. to March, 2019)||(Jan. 2019)||(Jan. to Feb., 2019)||(Sep. to Oct., 2019)|
A report, “Japanese Freelancers by the Data (March 2020),” by Recruit Works Institute gives a fair snapshot of the average freelancer in Japan: 55.4 years old, with males accounting for 78.6% of the total. Average annual income is around JPY3.0mn. The service sector accounts for the largest share of freelancing by industry, at 21.1%, while sales and retail account for the largest share by occupation, at 6.5%. The survey reports that more than 90% of freelancers do not affiliate or register with a specific group, but that among those who do register, Lancers accounts for the greatest proportion.
|Gender||Male: 78.6%; female: 21.4%|
|(of males, over 50 yrs old with ample work experience account for 54.8%)|
|Family structure||[Spouse] Yes: 56.5%, No: 43.5% [Children] Yes: 53.3%, No: 46.7%|
|Education level||High school: 39.1%, university, graduate school: 29.8%, vocational school, junior college, technical college: 24.4%|
|Average annual income||Previous job: JPY3.77mn, current: JPY2.99mn|
|Working days, hours||4.7 days/week, 31.9 hours/week|
|Days worked at home||45.5% (rate of zero commuting time)|
|Type of industry (17 categories)||[Top 5 industries] Service: 21.1%, ICT: 9.9%, Construction: 9.0%, Wholesale/Retail: 8.7%, Manufacturing: 5.4%, Other: 25.3%|
|Type of occupation (45 classifications)||[Top 5 occupations] Sales: 6.5%; Construction, Civil Engineering, Surveying Engineer: 6.1%; Manufacturing, Manual Labor: 5.9%; Other professional, Technical: 5.5%; Creative: 4.6%; Other: 23.4%|
|Affiliation, registration with organizations, platforms||Uaffiliated: 91.9%; Lancers: 3.8%; CrowdWorks: 3.6%; Production: 2.0%; PPCFA: 0.1%; Other: 2.5%|
|Insurance coverage||National Health Insurance: 84.5%; national pension: 78.4%; medical (private): 54.8%|
According to a survey of freelancing from February–March 2020 by Japan’s Cabinet Secretariat, more than 80% of freelancers reported that they were either satisfied or very satisfied with their working environment (hours, location, etc.), with the balance between work and private life, and with work relationships.
If this level of satisfaction with working styles persists, it could encourage freelancers to settle down in their current work status. Seeing the high degree of satisfaction of freelancers could also encourage more people to switch to this kind of career. A growing population of skilled freelancers would be a boon to the company’s business.
Freelancers also have concerns and areas of dissatisfaction. According to the same Cabinet survey, 59.0% of freelancers responded that low or unstable income was the biggest barrier to working as a freelancer—the highest percentage of any response. According to the PPCFA White Paper, 64.2% of respondents in that survey cited income instability as the biggest issue concerning continuing with the freelancer working style, also the top response.
Both the Cabinet survey and the White Paper survey reported difficulty of finding work as the third-largest concern of respondents, at 15.3% and 29.8%, respectively.
When asked if they had ever experienced trouble with a client, 37.7% of respondents in the Cabinet survey and 45.6% of respondents in the White Paper survey answered in the affirmative.
|Cabinet survey||Whitepaper survey|
|Did not experience trouble||62.3%||54.4%|
Most of the troubles that freelancers have experienced with clients are compensation-related, ranging from delayed payment, lack of payment, and unilateral reduction of payment. Especially for freelancers concerned about income instability lacking the support of any organization, compensation-related trouble is undoubtedly stressful. Further, in cases where the trouble is with a repeat client, the freelancer may be unable to negotiate freely for fear of losing business. Such freelancers undoubtedly long for rules that can avoid such trouble.
|Compensation and job details not specified at time of request||37.0%|
|Payment delayed, paid past due date||28.8%|
|Lack of payment; payment reduced unilaterally||26.3%|
|Specifications, deadlines, delivery dates, changed unilaterally||24.4%|
|Argument about work content and scope||23.5%|
|Underpricing, etc. unfavorable conditions demanded||22.8%|
|Contract changed unilaterally||38.0%|
|Reduction of predetermined compensation||32.4%|
|Underpriced work demanded||28.2%|
|Client will not provide, deliver documentation||27.7%|
|Forced to accept unreasonable payment, provide unreasonable labor||23.9%|
|Client will not set payment date||17.8%|
|Infringement of intellectual property rights on proposals, projects, work, etc.||10.3%|
It is worth taking a look at the routes by which freelancers find work while worrying about income stability and compensation issues with clients. According to the PPCFA White Paper, personal connections, including introductions of acquaintances, are the most common route for finding work, followed by past or current business partners. At the same time, intermediary services have been the fastest growing route for freelance work in the past few years.
|Change from 2019 to 2021 (pp)|
|Past or current business partners||59.4%||52.3%||62.0%||2.6|
As mentioned above, the chief concerns for the majority of freelancers are income instability and the inability to find work, while some freelancers experience trouble with clients, mostly over compensation. These factors appear to be driving an increase in the use of intermediary services by freelancers to more efficiently find work that provides stable income and avoids client trouble.
The Cabinet survey, which coincides with results of the White Paper, found that, in recent years, about 20% of freelancers use intermediary services to find work, and about half of these use only one service. This would suggest that, for such intermediary services, it is critical to make contact with freelancers ahead of other companies and to offer a sense of security and satisfaction in the early stages of transactions, giving rise to repeated use.
|Usage of freelance agencies|
|Not using agencies as a means of obtaining work||78.5%|
|Using agencies as a means of obtaining work||21.5%||➡||No. of agencies used per freelance|
|No. of agencies||Response|
|3 to 4||11.5%|
|5 or more||3.1%|
For the company, access to freelancers who can offer skills demanded by clients is critical. From this perspective, recent growth in the freelancer population is a positive trend for the company.
Faced with the pressing issues of compensating for a shrinking workforce and promoting working style reforms, the Japanese government seems to have a favorable view of freelancing. On two occasions (the “Future of Work 2035: For Everyone to Shine” report issued in August 2016 and the report of a study group issued in March 2017), the government has pointed out the need to improve the environment for working styles that are not dependent on employment relationships, highlighting the role of freelancers in particular. Such moves by the government to support growth in the freelancer population are drawing attention.
As nearly all of the clients who transact with freelancers through the company’s platform are companies, trends in the business process outsourcing (BPO) market are germane.
The BPO market in Japan has grown in recent years. Already facing worker shortages, Japanese companies are under pressure to deal with advances in digitalization and other developments and must increasingly turn to outside resources in order to concentrate their management resources on sustaining and enhancing competitiveness in their core businesses. The COVID-19 pandemic only added urgency to the need to deal with changes in the business environment, while also necessitating working from home and otherwise constraining employee working styles. Such factors have fueled rising demand to outsource business processes.
According to the 2021 BPO market survey of Yano Research Institute (YRI: unlisted), Japan’s BPO market grew 1.9% YoY to JPY4.4tn in terms of the revenue of BPO service providers in 2020. The IT-related market was up by 1.5% YoY to JPY2.6tn and the non-IT-related market was up by 2.5% to JPY1.8tn. IT-related BPO refers to companies outsourcing their system operation and management, while non-IT-related BPO refers to outsourcing of other services. IT-related BPO accounted for 59% of the market in 2020, with the remainder being non-IT-related outsourcing.
|FY||2018||2019||2020||2021 Est.||2022 Est.||2023 Est.||2024 Est.||2025 Est.|
|Domestic BPO market||4,211.4||4,349.2||4,430.8||4,531.5||4,634.3||4,731.9||4,829.5||4,932.8|
|(YoY change %)||-||(3.3)||(1.9)||(2.3)||(2.3)||(2.1)||(2.1)||(2.1)|
|IT BPO market||2,476.2||2,575.8||2,613.6||2,666.9||2,727.0||2,781.8||2,834.5||2,892.6|
|(YoY change %)||-||(4.0)||(1.5)||(2.0)||(2.3)||(2.0)||(1.9)||(2.0)|
|(% of total)||(58.8)||(59.2)||(59.0)||(58.9)||(58.8)||(58.8)|