The 99designs Business Model: Advantages and Disadvantages
What’s the buzz about the 99designs business model? How can it compare to Delesign?
The internet has made things easier for freelancers. It has also benefited those in need of the skills and services of freelancers.
One innovative platform that has become popular in recent years is 99designs. This article will look into the 99designs business model and the advantages and disadvantages that it has to offer.
What Is 99designs?
There are a lot of platforms that are currently available for freelancers clients to connect. For graphic designers one of the most popular platforms now is 99designs. The site can trace its origins back to Sitepoint which was a web forum founded in 1998.
Sitepoint is meant for web developers and designers. Members of the forum started running contests that were based on fictional briefs from clients. That gave the founders the idea to start charging fees for posting actual project briefs.
Encouraged by results, they eventually founded 99designs as a separate company. The platform quickly grew as its reputation among designers and clients was established. It reached 1 million registered designers by 2016.
The 99designs Business Model
The original business model followed by 99designs is what distinguishes it from other freelancing platforms.
It became famous for holding design competitions. The idea is for the client to provide a brief and for designers to pitch in their design ideas within the contest period. The client will then pick the best design.
Let’s say Company A wants to get a new logo for their company. They will pay for an account on the platform so they can put in a request for the logo. They will provide the details of how they want the logo to look like.
These contests draw a lot of entries. It usually ranges from hundreds to thousands of entries per contest. Only the winning designs will get paid of course and that is normally just a single design. Company A for example would only need a single logo design.
To give you an idea of how many designers are attracted to join in the contests, 99designs claimed back in 2013 that one design is uploaded to the platform every 4 seconds. Within just 5 years of its operations, 99designs has already received over 20 million designs.
The 99design Customers
99designs serve mainly three types of customers; there are the designers, businesses, or individuals that require design solutions, and agencies that wish to outsource work. The process of 99designs can work with all types of companies but it is most ideal for small businesses that do not have their in-house design teams.
The clients of the company can include freelancers and individuals who may want to enhance their value in the marketplace with customized logos and designs.
The 99designs business model makes the designs submitted by its users as entries to the design competitions it hosts as the main source of revenue. The platform takes a 5% commission on the lowest end for the designs that win its competitions. That commission can increase if the client chooses a higher package.
Each of the design categories that they have has a price. Using the example that we had earlier, if Company A wishes to get their logo design through the platform, the cost would start at $299. Here are the minimum costs of the design contest packages on the platform:
- Bronze $299
- Silver $499
- Gold $899
- Platinum $1299
With the Bronze package, Company A would get 30 design concepts, a 100% money-back guarantee, and full copyright ownership of the design. As they choose a more expensive package, they get more features. They would get the most number of designs with the Gold package with a total of 90 designs.
With the Platinum Package, they would get only 60 design concept submissions but all of those are from top-level designers. Company A would also get a dedicated manager for their account and they would be prioritized when it comes to customer support.
Once Company A has chosen a winning design they can continue working with the designer outside of the platform. That means they would no longer have to use the 99designs platform for their design needs, at least until they decide they need a new designer.
Hiring a Designer
99designs also recognized the fact that some of their clients may not want to run a contest and would prefer to get in touch with a designer directly. That’s why they have added a feature where clients can directly hire the designers that they need for the projects.
They recommend that feature for the clients with a clear concept in mind and just want a designer to execute it for them. If Company A is sure about the colors, the typography, and the overall look of their design and they just want someone to create it professionally for them, then this is the option that 99designs would recommend for them.
They call this option the 1-to-1 Project. There is no fixed fee for it, although they have a 5% platform fee. The final cost would be determined by the overall cost of the project. The designers have their own separate fee for using the 1-to-1 Project platform.
Company A can request quotes from multiple top-tier designers and so find the one which will be working within their price range and provide the best design at the same time. The designers on the platform are ranked from Entry, Mid Level, to Top Level. The Top Level designers will be charging the highest fees so if Company A has a limited budget for their logo project, they can stick to searching amongst the Entry Level designers.
Advantages of the 99designs Process
The process and the business model of 99designs is really beneficial to both the company and the clients using the platform.
For 99designs, their model clearly works for them. The main cost of their model is the maintenance and upgrading of their digital structure. All of these have to be top-tier because of the nature of the service they provide.
Most of their cost is associated with the maintenance of their design and software engineering teams that maintain the platform and also the rental of the server. It cannot afford to cut corners on these aspects of their operations as it would impact their reputation. Imagine what would happen if their site has a poor design or if their server is unreliable.
The model has proven to work for the company although it took 9 years before it started making money. During the first years of the company, it was mainly fueled by venture capitalists. It only reached profitability during the 2nd and 3rd Quarters of 2017.
For the clients who choose 99designs as the platform to get their designs, it has also undeniable benefits. For many clients, the cost is the main reason they would choose to use a platform like 99designs and compared with other means of getting services.
It can be very expensive to hire a top-tier designer in the U.S. and if a business is just starting out, it may not have the resources to pay for that. The contest format also gives the client an opportunity to view multiple concepts that they can choose from. They are not stuck to one or several designers who may not capture the concept that they are looking for. More design options translate to a higher chance of getting the most ideal design for the client’s needs.
Problems with the 99designs Business Model
The 99designs business model is not without its critics. Some of the biggest issues of the platform include:
- Driving down wages
- Producing low-quality work
- Exploiting designers
The issue of exploiting the designers who use the platform is probably the most controversial. This stems from the nature of the competition model which has made it into a famous platform. Designers submit work in the hopes of winning the competition and getting the job.
The problem is that only the winning design will be paid for. The other designs will not be getting any compensation from the platform. This kind of setup is ideal only for a few designers that win all the time. While some may argue that this is a system based on merit, there is still that tinge of exploitation when one considers the fact that the other designers also contribute to the prestige of the competition and of the platform in general.
Many top-tier designers may not use 99designs and according to reports, more than 50% of its designers are from Asia. Many of these designers are willing to accept lower fees than their counterparts in North America.
Other critics of the 99designs business model also argue that the whole setup will really drive down the quality of the work being submitted.
The good news is that there are other platforms that clients and designers can go to now. A platform like Delesign can be beneficial to both the clients and the designers, without anyone ending up with the short end of the bargain.
Delesign can give clients the opportunity to work with top-tier talent while graphic designers can get fair compensation for the skills and knowledge.