The gig economy has been on the rise in recent years, with more and more people opting for freelance or independent contractor positions. This labor market, characterized by short-term, flexible work arrangements, has seen significant growth, especially in the wake of the COVID-19 pandemic. As the number of gig workers continues to increase, so does the demand for services that connect them with clients or customers seeking various tasks or projects to be completed.
According to a report by MBO Partners, 45% of the US workforce worked as independent contractors in 2023, with the number of independent workers growing by 89% between 2020 and 2023. Online platforms have played a crucial role in connecting gig workers with job opportunities, with 40% of gig workers using these platforms to find work in the past year.
The global gig economy market was valued at $14.75 billion in 2021 and is expected to grow at a compound annual growth rate of 20% between 2023 and 2031, reaching $92.9 billion by the end of the forecasted period. Gen Z and millennials are the top earners in the gig economy, with 45% and 44% of each group making at least $2,500 a month from gig work. North American and Western European citizens have the highest average freelance rates, followed by South America and other regions.
Investors have taken notice of the potential in the gig economy market, with gig economy stocks experiencing significant growth. Companies like Uber Technologies and DoorDash have seen a “profitability explosion” in recent years, with the total addressable market for the gig economy industry estimated to be around $4 trillion. Grocery delivery, in particular, is seen as a trillion-dollar market that is underpenetrated, presenting opportunities for companies like Uber and DoorDash to capture a significant share of the market.
Uber Technologies reported strong financial results in FY23, with gross bookings up 19% year-over-year and a net income of $1.887 billion. DoorDash also reported positive earnings in Q1 2024, with revenue up 23% year-over-year. Both companies are seen as key players in the gig economy market and are expected to continue growing in the future.
Other companies contributing to the gig economy include Maplebear Inc. (Instacart), Lyft, eBay, IAC Inc., United Parcel Service, Airbnb, and more. These companies provide gig workers with opportunities in various sectors, from food delivery to temporary staffing services. Institutional investors have shown interest in these companies, with many holding stakes in them.
Overall, the gig economy presents a significant opportunity for investors looking to capitalize on the growing trend of freelance and independent work. With the market expected to continue expanding in the coming years, gig economy stocks are worth considering for those looking to diversify their investment portfolios and tap into this lucrative sector.
