Here’s why Fiverr stock is down today.

Shares of Freelance Marketplaces Fiverr International (FVRR -9.89%) The decline occurred on Thursday after the company reported fourth-quarter 2023 financial results and provided financial guidance for 2024. As of 11:30 a.m. ET, Fiverr stock was down about 9%.

This is one of the market’s biggest fears.

In the fourth quarter, Fiverr generated revenue of $91.5 million, up 10% year-over-year and entirely within management’s guidance. great. However, active buyers on the platform declined from 4.3 million in 2022 to 4.1 million in 2023.

Fiverr executives have tried to put a positive spin on the decline in active buyers, saying they have focused their marketing dollars on better users. That may be so. However, the company still spent $161 million (54% of gross profit) on sales and marketing in 2023 and lost about 200,000 active buyers. That’s not good.

What does the company expect in 2024?

In 2024, Fiverr is expected to generate up to $387 million in revenue, a 7% increase from 2023. The growth rate doesn’t really matter. And I’m concerned about how the company expects to grow its sales.

As I pointed out, the number of active buyers on Fiverr is decreasing. And the company expects sales on its platform to increase by about 1% to 2% in 2024 compared to the previous year. Therefore, revenue growth comes from freelancers selling their services on the platform.

Fiverr monetizes on a freelance basis through a variety of services. But sales are essentially stagnant, and the buyer base is declining. Therefore, companies risk losing some of their active freelancers if they don’t make enough money to justify the amount they are paying Fiverr.

As a shareholder, I’m encouraged that Fiverr is still growing and approaching profitability. However, we will be watching marketing spend and active buyers very closely in the coming quarters because these metrics can have long-term implications.