Dear Shareholders,
Let me start by saying that I hope you and your family are all staying safe and healthy. Given the unprecedented nature of the past few weeks, I would like to provide you with an update on what we have observed thus far with regard to the impact that the COVID-19 pandemic is having on our business.
We’ve been asked in the past, and increasingly so since we went public last year, how our business would perform in a market downturn. Our answer has always been that we believe in the resilience of our business and of our community. That belief is reflected in some early data we have seen amid the COVID-19 pandemic. Our marketplace had a strong start to 2020 and this momentum continued through mid-March. In the third week of March, we felt the impact of the pandemic for the first time with activity across our platform temporarily declining by 10-15% versus the previous week. The following week the decline stabilized and exhibited a meaningful rebound, with the growth continuing robustly into the beginning of April.
In a recently published white paper, Fiverr’s Chief Behavioral Science Officer1 outlined how the trends on our marketplace over the past few weeks correlate to the four stages of coping with stress, i.e. denial, panic, self-preservation and adaptation, and in particular how the adaptation phase could lead to new behaviors, consumption trends and growth drivers. Although the data we have so far are limited and preliminary, we have noticed particular strength in certain categories such as ebooks, video and animation, and online lessons, with slight weakness in categories in the Digital Marketing and Business verticals. These trends reflect changes in how
businesses and consumers adapt and make the most of the current environment. We are also seeing increased activity on desktop versus mobile which reflects the stay-at-home requirements put in place around the world.
While the development of the COVID-19 pandemic is uncertain and far from being over, we were encouraged to see that our marketplace was able to quickly rebound and resume growth. To break down further, we saw our existing cohorts return to their historical pattern of contributing a steady revenue stream to our marketplace. On the acquisition side, organic trends remained
strong and we observed additional performance marketing opportunities as the advertising space became less competitive. On the supply side, skilled professional freelancers from across the world are joining our platform and creating new gigs in record numbers throughout the past few weeks. Our takeaway is simple – people are turning to Fiverr to explore new income sources as they now have more time at home and as global unemployment increases. In these times we feel an increased sense of responsibility to our community and we are committed to our mission now more than ever.
Given the short-term nature of the shock in the second half of March and the strong momentum we saw before that, and while we have not yet completed our reporting process for the three months ended March 31, 2020, we expect both our revenue and adjusted EBITDA for the first quarter of 2020 to come in slightly above our previously communicated guidance range. We continue to implement a disciplined financial strategy and we have a strong balance sheet and liquidity position. Looking forward, I think it is still too early to draw any conclusions, as the macro conditions around COVID-19 and its impact on the broader economy remain highly uncertain.
That said, we do believe the data we have seen so far speaks to the strength and resilience of our business, key aspects of which are summarized below. First, Fiverr’s purpose of connecting businesses and freelancers around the world and enabling remote work to be done digitally through our platform has never been more critical. Freelancers are increasingly turning to us to help them navigate this environment and more businesses are exploring ways to remotely engage with their teams and digitally engage with their customers. As the crisis reinforces and accelerates the trends towards adopting remote work and moving businesses online, we believe our marketplace is well positioned to both address current needs and to be a key resource when the economy re-accelerates.
Second, we are a technology company at our core and our strong technology and product innovation capabilities allow us to stay agile and resilient through unusual times such as these. Since the start of the COVID-19 pandemic, we have prioritized a series of product initiatives, that specifically address the needs of our community to help them navigate through this crisis. You can find these initiatives through this dedicated resource page. We have also launched seven new service categories in response to new trends, with ten more coming in the next few weeks.
Our ability to capture new customer demand is where the horizontal nature of our marketplace shines. Furthermore, we are on track towards delivering our growth initiatives laid out at the beginning of this year. In fact, I’m delighted to announce that we launched Fiverr’s Promoted Gigs in beta earlier this week, ahead of our original schedule. I am incredibly proud of our team and want to thank them for their commitment and focus in the face of this unprecedented environment.
Third, we had over 2.4 million buyers on our marketplace at the end of 2019. Most of our buyers are SMBs across a diverse selection of industry groups. Since our marketplace focuses on digital services, many of our buyers use our platform to support or grow their online presence, whether it’s content creation, digital marketing, or on the tech side of things. Our revenue base is highly diverse with no concentration in any specific industry.
Fourth, we run a highly efficient go-to-market strategy, with most of our buyers coming from organic channels, complemented by performance and brand marketing. The fact that we do not have a sales force or a long sale cycle allows us to find, target and acquire relevant buyers in a disciplined and highly flexible way. Our experience, data and marketing automation technology allows us to track KPIs on our marketplace in real-time, enabling us to make timely decisions when it comes to our marketing spend.
All of the above makes me confident and cautiously optimistic about our business and our prospects. While the coming months are going to be challenging for us as individuals, family members, friends and members of our respective communities, our business is strong and resilient.
Before I end this letter, I would like to reiterate our commitment to you, our shareholders, that we will remain forthright and transparent during these uncertain times. We plan to continue updating you on the trends we observe and the progress of our business during our first quarter 2020 earnings call as well as various investor events.
Micha Kaufman
Founder and CEO