Internet Companies Get to Work on Freelancers

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If preparing your taxes means collecting a ream of 1099 forms rather than a single W-2, you’re not alone.

More than 53 million people in the country are classified as freelance workers, and as the outsourced economy grows, money has begun to flow to L.A. tech firms capitalizing on the expanding market for skilled freelancers. These companies provide products for both sides of the employment equation, with offerings that simplify the process for individual contractors and the companies looking to hire them.

Among them is Sherman Oaks’ Ebyline Inc., an online marketplace for freelance writers, recently acquired by Orlando, Fla., influencer marketing firm Izea Inc. in a deal with a base value of $1.2 million. That number could rise to more than $20 million by 2017 should Ebyline hit annual revenue targets, according to a filing with the Securities and Exchange Commission.

Two other local startups received seed funding to help them enhance their core products.

Pasadena’s 17Hats received $1.25 million from Santa Monica VC firm Wavemaker Partners to build out its workflow management software for freelancers, and Emadgine, also in Santa Monica, secured $100,000 from St. Louis tech accelerator Capital Innovators to fund its freelancer-rating software for businesses.

These developments come at a time when companies in many different industries are relying heavily on freelance workers. More than one in three U.S. workers are independent contractors, according to a September study from New York market research firm Edelman Berland.

The study was commissioned in part by Mountain View’s Elance-oDesk, an online workplace that connects businesses with freelancers. While most of the nation’s freelancers work in the tech sector, roughly 12 million of those freelancers perform full- or part-time writing work, according to internal company data relayed by an Elance spokeswoman.

Rating talent

Matthew Rotella, Emadgine’s co-founder and chief executive, believes that there’s a growing need for talented writers due to the explosion of branded digital content.

“We’ve seen a surge in demand for freelance writing,” he said. “The reason in general is because content marketing is in demand.”

Though his company launched only a year and a half ago, Rotella said Emadgine has already changed its core business three times.

The company began as what Rotella called a “crowdsourced marketing agency,” which looked to connect small businesses and startups with freelance marketing professionals. When that didn’t work out, the company shifted toward the marketplace model employed by Elance, but it struggled to gain a foothold.

The company pivoted to its current iteration as a software maker late last year.

Rotella said this model allows Emadgine to work side by side with online freelancer exchanges such as Elance while also carving its own niche.

Its platform culls a variety of performance and evaluative data on freelancers from companies such as Elance; that information is then processed by a proprietary rankings algorithm. A beta version is set to launch this week.

Businesses will be able to use the third-party software to make more efficient hiring decisions, Rotella said, in the same way that shoppers use data from Carfax Inc. when they decide which car to buy.

“We use their data to essentially create our own real-time ranking of the talent,” he explained.

Branded journalism

In addition to the explosion of marketing content online, many brands are turning to something called native advertising as a way to engage consumers.

One form of this practice involves companies paying freelance journalists to write stories about topics related to their industry.

“An investment in content produces a return,” said Gabriel Kahn, a professor at USC’s Annenberg School of Communication and Journalism. “You see lots of new opportunities for brands to do this directly and in a way that’s engaging.”

An example of this trend is Intel Corp.’s Intel Free Press, a Website that posts a variety of tech-related articles.

The Santa Clara company looks to Ebyline for experienced reporters capable of filing high-quality stories. And now that Ebyline has been acquired by Izea, that content can be promoted throughout the social media landscape by the Orlando firm’s stable of influencers across the globe who are paid by brands to sponsor various products and services on platforms such as Twitter, Facebook, Instagram, Tumblr and LinkedIn. Included among the thousands of registered influencers are celebrities such as Kim Kardashian and Neil Patrick Harris.

“Intel has the chance to amplify their message,” said Ebyline co-founder and Chief Executive Bill Momary. Concurrently, “the journalist’s byline is now going to be consumed by 10, 20 or even 30 times the audience.”

Momary said he and co-founder Allen Narcisse came up with the idea for Ebyline while they were both working as advertising executives at the Los Angeles Times and witnessed many staff reporters get laid off as print ad revenue dried up.

“Watching the pain internally is what led to the idea,” Momary said.

The company raised $6.5 million in financing, the majority of which came from Cincinnati’s E.W. Scripps Co., as a way to help reporters find work and streamline the hiring process for news outlets looking for contributors.

In addition to its brand clients, Ebyline counts the Associated Press and Times’ parent Tribune Media Co. among its customers.

Momary said that when he launched the company six years ago, newsrooms were acquiring on average about 10 percent of their content from freelancers. Now, that number sits at around 20 percent, and he expects it to rise even more.

“It will grow toward 50 percent over time,” he predicted.

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