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Ebay tried the same trick in the past, chasing off the platform thousands of small "unproductive" sellers. The problem is that this sellers were also specialized buyers spending money and many hours chasing rare items in Ebay AND showing their trophies to all their family and friends to see. Ebay lost not only some fine and loyal buyers, but also tons of great free advertising. In the end this lead to losing a lot of momentum as company, that probably helped to the raise of Alibaba.

Freelancers are also numerous and cheap and Upwork definitely can afford to lose some of them, or even a lot of them, as long as keep the clients. But, as in the case of Ebay, the problem is that small contractors are also potential clients. Moreover, small clients add an interesting and very desirable collateral effect to the platform: A big increase in job diversity. If you alienate those people, you risk to lose some money, but also the outliers, very specialized freelancers interested in solving rare problems or offering less common experiences in many fields.

As Ebay before promoting big asian sellers with a lot of transactions, It seems that Upwork is mostly interested in big clients with lots of work that needs to be done, posting again and again the same type of jobs. This could lead to:

1) The same few stablished freelancers being hired again and again. New freelancers eventually will lost interest and leave the platform, or will be swallowed by the sucessful freelancers, now stablished as agencies or farmers, and forced to work for less money.

2) ... Or there is always a different freelancer hired. This would point to a problem with quality of freelancers or clients (can't keep any freelancer for much time and need to repost the same job each month).

3) ... Or nobody is hired. A red flag that could be seen also as a worrying symptom of "ashley-madisonization" of the platform.

I hope the best for the company, but it is unclear currently to me if this will be a smart move or a big mistake.

Regardless of how you analyze it, it was clearly a mistake because the platform is literally driving many freelancers away (many contracts are short-term or <$500 contracts). The least kind thing they could have done is make the announcement about the pricing change at least one year prior the implementation, so that affected freelancers could take appropriate actions. Profit-wise, it could be considered a smart move, but even that is an uncertainty.

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