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Fiverr's entire business is collapsing. The market of small, cheaply priced freelance jobs has eroded thanks to AI. So Fiverr tried to embrace AI. Yeah, that didn't help either. Active buyers fell from 4.08 million in 2023 to 2.7 million in 2026. Revenue is falling, buyers are leaving, and Fiverr cut its financial forecast in 2026. Then they cut it again just a few months later. Now they're betting everything on a new direction. But this bet they say will take at least six quarters or over a year to even tell it if it's working. Investors are
worried. Fiber situation has gotten a whole lot worse. Is this the beginning of the end? To understand how Fiverr got here, we need to go back to 2020. While everyone was locked down at home in 2020, people started looking for ways to make money online. Exactly what Fiverr was known for. As more businesses needed freelancers, Fiverr's active buyers reached 3.4 million, up 45% year-over-year. This helped drive fullear revenue up by 77%, generating $189.5 million. But Fiverr seemed to think this growth was only the beginning. And for a while, it looked like they were right. In 2021, revenue increased again by 57%. Everyone
believed that remote work was now the new normal, and Fiverr's active buyers seemed to prove it, increasing again to 4.2 million. Fiverr even made it onto one of the world's biggest stages, airing its first Super Bowl commercial on February 7th, 2021. But to sustain this growth, Fiverr introduced new features. Fiverr also changed how sellers were promoted, putting more weight on repeat business, order completion, and response time. In other words, sellers now had to work harder just to stay visible. All this growth encouraged investors to pile in, pushing Fiverr
stock from around $20 to $323. In less than a year, Fiverr's valuation went from hundreds of millions of dollars to over 11 billion. But beneath all these wins, a problem was starting to emerge. Fiverr's net loss jumped from 14.8 million to 65 million. Why? Well, business was growing, but profits don't always follow linearly. Operating expenses grew faster than gross profit, jumping 123.1 million. Fiverr was trying to adjust its structure to this new normal. But once CO restrictions ended, people went back to offices. Businesses returned to normal operations, and
some of that unusual demand disappeared. People no longer had long hours dedicated to staying visible on the platform and soon this effect would show up in the size of the marketplace and the growth slowed with it. Revenue growth was 57% in 2021 but then it fell to just 13% in 2022 while its net loss deepened to 71.5 million. Then in 2023 revenue growth slowed even further to just 7.1%. By this time everyone had realized the pandemic was an anomaly. Offices opened up, online growth slowed down, and Fiverr stock, well, look at that crash. The core marketplace was
getting smaller, active buyers were declining, and marketplace revenue was falling. AI was here. Fiber needed a change. But people were surprised by the direction Fiverr took next. Fiverr was built around people paying freelancers to get gigs done. But in November 2022, Catchy PD launched and suddenly some of those smaller tasks could be done in minutes. An image or article could be generated within seconds and entire websites could be coded within hours. AI has quickly replaced some categories in Fiverr's gig economy and the stock price wasn't spared either. By the end of 2022, it had fallen to just
$29.14 a share. So instead of waiting for AI to become a bigger threat, Fiverr decided to capitalize on it. In 2023, Fiverr released AI categories. This decision was made to meet the demand from artists and programmers who have embraced new AI tools including Midjourney, Chat GBT, and Adali. Searches for AI related services have increased over 1,400% in the last 6 months of the platform. Then they started to push AI with some interesting marketing. But Fiverr's pivot couldn't stop the inevitable. Active buyers fell from 4.08 million in 2023
to 3.1 million in 2025. That's roughly a 24% drop. That's a lot of people leaving Fiverr. But here's something unexpected. Marketplace revenue barely moved from 307 million in 2023 to just 297.5 million in 2025. How a huge number of buyers left, but revenue didn't drop? Well, annual spending per buyer rose from $278 to $342. That's roughly a 23% increase. So, their active buyers dropped by 23%, but the spend per buyer rose 23%. This shows us what is really happening. The lower value buyers were leaving, but the higher value ones were staying. Plus,
Fiverr had another source of growth. Its services business, which included products like Fiverr Ads and Seller Plus, grew from 88.4 million in 2024 to 133.4 million in 2025. In early 2025, they also introduced Fiverr Go, where freelancers can create and train their own AI models on their own work and have them interact with clients on their behalf. Fiverr Go is an open platform for personalized AI tools. This means that from now on, freelancers on Fiverr will be able to create and train their own personal AI models. Fiverr was doing everything they could to defend
their business, mostly with AI. In September 2025, they also eliminated around 250 jobs, around 30% of their workforce to transform into an AI first company. It seemed to be working for a while until 2026. In the second quarter alone, marketplace revenue fell 15.5% year-over-year to 63.1 million. Active buyers dropped by 21.9% to 2.7 million. Another huge drop. But still, the remaining buyers were spending more with annual spend per buyer reaching $368 up 15.6%. But this time, higher spending wasn't enough. total revenue fell from 108.6 million to 97.8 million.
The erosion of their business was in full effect and a boy Fiverr was really starting to feel it. Fiverr starting cutting its expectations for the year. At the beginning of 2026, the company expected between 380 million and 420 million in revenue. After the first quarter, that became 375 million to 390 million. After Q2, Fiverr lowered it again to 356 million to 372 million. Then in the Q2 2026 shareholder letter, Fiverr pointed out the problem. Ongoing compression in high volume, low-v valueue transactional work driven by the accelerating adoption of AI. Yeah,
didn't see that one coming. This was in categories such as writing and translation where transactions were down by more than 24% year-over-year. Fiber's recalibration improved profitability, but it did not stop marketplace contraction. I just don't think the crossover between AI products and Fiverr's marketplace is enough to keep things afloat. Fiverr had an important decision to make. The cheap, lowcost work the platform was built on was collapsing. The new services, ads, subscriptions, and such were growing fast and worked for a while, but it wasn't enough
to keep the ship afloat anymore. If AI was taking all the small jobs like logo design, voiceovers, writing, and so on, Fiverr needed to find more valuable work that still required people. But they already had a signal for where to look. The spending per buyer was going up. So Fiverr decided to make a big bet on its future, but it would be risky. If you've watched this far, consider subscribing. It helps the channel and means you won't miss future videos. Instead of competing for millions of small transactions, Fiverr in a sense needed to
abandon this area. Over the last few weeks, we've seen clear deceleration in overall marketplace traffic and demand. We believe that recent model updates across various LLMs are a contributing factor behind the softness and are confronting these headwinds headon. We are not competing for that work. Instead, we are aggressively executing our push up market toward the higher value work where demand is growing. They decided to become the place businesses went for larger and more complex projects and that meant going up market. But this came with lots
of problems. For one, Fiverr had spent years building its marketplace around volume. So, how could it pivot into something completely different? Well, Fiverr first had to clean up the platform. If it wanted businesses to trust the platform with larger projects, it needed to raise the quality of the freelancers buyers were seeing. So Fiverr overhauled its search algorithm and what it called a quality recalibration aimed at promoting new sellers and removing fake accounts. But it also affected some of Fiverr's most established freelancers. Sellers
with thousands of orders and years of experience suddenly saw their rankings and seller levels drop with some effectively being treated like new sellers. Then came new metrics like success score and communication quality which many sellers found difficult to understand or improve. So while Fiverr was trying to make the platform more appealing to businesses, some of the freelancers who had built their businesses there were suddenly struggling to understand where they stood. But there was evidence the pivot was starting to work. In the first quarter of 2026, Fiverr reported that
the number of clients completing projects worth at least $1,000 had grown 18% year-over-year. These projects now accounted for 15% of the total value of projects completed on the platform. And Fiverr was making more money from these higher value services too. In the first quarter of 2026, the company brought in $38.4 million from its services business, which covers the more involved, higher touch work Fiverr provides to businesses. That was up 30% from the same period a year earlier. But at the same time, Fiverr's regular marketplace revenue, the money it makes from its
traditional freelancer transactions, fell 13.6%. The old part of the business was shrinking while the newer higher value side was growing. But then the second quarter came around. Services revenue was 34.6 million, meaning it was still higher than the year before, but growth had slowed to just 2%. Meanwhile, marketplace revenue fell another 15.5%. So, Fiverr was getting more highv value work, but the growth wasn't yet fast enough to clearly replace what it was losing from the old marketplace. Think about a VP of marketing with a $50,000 budget for a critical brand
overhaul. They're probably not thinking about the platform where people go to get a quick background removal. A project like that requires meetings, detailed planning, revisions, feedback, contracts, and sometimes months of collaboration. Changing Fiverr's branding, aka what people associate with Fiverr, will take a lot of time. And this is where investors are getting a bit worried. In its second quarter shareholder letter, the company said the financial impact of the transformation would take at least six quarters to fully materialize. That's a lot of time and analysts agreed. For years,
you guys have said that really the move to AI was not such a threat because you are basically just a marketplace for freelancers and freelancers are the most adaptable people in the entire economy. But then in February, it seems like the release of cloud code was kind of a watershed moment. I get the transformation. I get the need that companies will have for people to help them do these transitions, but how can you be confident that in six quarters there are not going to be more watershed moments where this gets worse? These bigger projects had to make up for these
smaller jobs and customers it was losing. And that's what made the whole strategy such a gamble. It meant convincing businesses to trust Fiverr with projects important enough that they might otherwise hire an agency, consultant, or freelancer directly. For years, Private's brand was built around making professional services cheap, simple, and quick. Now, it wants businesses to trust it with projects worth thousands or even tens of thousands of dollars. And in doing that, it risks moving away from the very market that built the company in the first place. The small
jobs may not be as valuable as they once were, but they are still what made Fiverr what it is. So, if moving up market doesn't work, what happens then? Fiverr sure had some weird AI ads. But they're not the only ones. Did you know that Dollar Shave Club, renowned for its incredible creative advertising, is now pushing AI ads? The entire brand has collapsed, but not for the reason you might think. Weird AI ads are just a small consequence of a much bigger problem. Click here to learn the rest of that story. But until then, I'm Hari and I'll see you guys on the next one.
