Ronald Josey: Hayden, I want to ask a little bit more just around the enterprise sales. I think in the letter, you talked about — you mentioned the land team to be fully productive by 3Q. Is this basically saying you’re able to hit your hiring needs by the end of last year, and so now we’re just in execution mode, it takes about, call it, 2 to 3 quarters to get to overall efficiency? And then we’ve been talking about brand marketing for some time and building up the awareness of Upwork, and we’re seeing new products here. Just talk to us a little bit more about how awareness is coming along in Upwork overall as you do embark in all these initiatives.
Hayden Brown: Yes. Thanks, Ron. The enterprise side, I’d say, it’s helpful to unpack kind of the 2 pieces that really drive that business. There’s land and there’s expand. And you touched on the land team a little bit. What I’d say there is, our land number, which is really reflected in our new customer count that we report, is a function of the newly hired reps that are still ramping, and those reps will be fully ramped by the middle of this year. It’s also a function of the operational fixes that we deployed at the end of Q3 and into Q4, which have been returning the expected improvements. And now those have to flow through our sales cycle. And then we are also seeing in this macro, demand is still there for our product. But what we are seeing is that at the contracting stage of closing deals, we’ve seen elongation there, and that’s what pushed a number — a very large number of deals out from closing in Q4 into Q1.
And so as all of this is happening, we do expect that those things will roll through our sales cycle, and our team is adapting to things like process changes we need to make to close deals faster in this new environment. And that will mean that we can achieve that fully productive outcome for our team by Q3. And I would underscore that’s not dependent on any specific macro conditions. These are just things that we are driving through our business. On the other hand, the expand business does have a little bit more of the kind of 2 drivers coming from it. One is the success of our land team in closing new deals. And so some of that resulted in a little bit softer numbers in Q4 because we hadn’t done as much hiring earlier in the year, and that productivity just wasn’t there for the team to execute against.
And then the macro, we are seeing a little bit of customer pullback in some cases where they have budgetary concerns that they need to manage, and that is impacting certain accounts. So with that, we’re really focused on driving activity in the accounts that have the biggest opportunities, continue to execute against the demand signals that we are seeing, which are very strong in the market. And all of this supports our view that the long-term opportunity is very much still intact, even if near-term revenue growth in the enterprise area is a bit more tempered. To your second question, which I think was about a brand awareness overall, I would say we did see some of those really positive improvements on awareness across different customer cohorts that are really important for us from an acquisition perspective.
And that is, I think, giving us confidence that the creative that we’re developing, the media strategies that we’ve been deploying, the measurability that we put in place over the course of the last year plus, is giving us the insights around how to continue to build on those strengths and optimize our campaigns this year to have even more effect on the audiences we care about most. And so what’s, I think, exciting about that is we are able to bring down our brand marketing investment on the media side by 12%, in line with achieving our profitability goals and other objectives we have in the business, while also continuing to execute around that broader awareness strategy, which is about bringing a bigger umbrella to all of our sales and marketing efforts to make them all more efficient and productive over time.
And we knew this would take some time to play out. This is a year where we’re going to see a lot more of the data coming in as data sets mature and as these campaigns continue to be executed to give us visibility into how those brand awareness numbers are translating into client performance deeper in the funnel.
Operator: Our next question comes from the line of Eric Sheridan of Goldman Sachs.
Eric Sheridan: We really appreciate the framing around the phases and how we should be thinking about that for the business. With that as a backdrop, was there any differential you want to call out in either certain pockets of the economy or certain geographies, where maybe there was little differences in behavior between the Phase 1 type of impact or the Phase 2 type of impact that we should be keeping in mind from a business mix standpoint as we get deeper into 2023? And then maybe I’ve got a quick follow-up after that.
Hayden Brown: Sure, Eric. I’d say the trends that we saw in Q3 largely continued into Q4, where the impact was more noticeable in terms of the softness being more noticeable in Europe and amongst — although it was also in the U.S., but it was again more concentrated in Europe. And then we did see it not just in the SMB part of the business, but as noted earlier, the Enterprise business did see that slowdown on new deals because of that contracting phase of our deal cycle being more prolonged. So those are some of the key elements that we saw that were maybe slightly different or kind of a continuation of with a few nuances what we saw in Q3.
Eric Sheridan: And maybe just 1 follow-up on Ron’s question there on the brand marketing side. How quickly should we think about you going from sort of being more balanced on brand marketing to maybe leaning back into the marketing from going sort of a neutral stance to an offensive stance, if you see more clients moving into Phase 2 and beyond? How should we be thinking about the ability to turn that back on and get some of the return you’re highlighting from some of the elements you feel good about that have been tested and proven out on the brand marketing side?
Hayden Brown: We feel that we are on an offensive stance now with the investments that we’re making and that it is going to give us the ability to reach the audience that we’re seeking to reach with the frequency we want at the investment levels that we are deploying this year. So I think I’m very comfortable that we are seizing the opportunity right now in that area. I think what will be different about where we’ll be at the end of this year is the insights that we will have garnered through the progression of the next few quarters will put us in a much stronger position because we’ll be able to connect some of these metrics together around what’s happening with awareness and how that relates to traffic and registrations and also reactivation of existing customers who might have registered before and now see an ad and become more active.
All of that is going to be much more informed for us due to the experimentation framework and the measurement that we have this year. And so at that point, at the end of this year, we’ll be in a very strong position to connect the dots even more precisely around ROI for the business and make a call then around what is the right level of investment going forward.
Operator: Our next question comes from the line of Brent Thill of Jefferies.
John Byun: This is John Byun for Brent Thill. I had maybe a little bit more regarding the guidance and what’s embedded in it from a macro standpoint. I mean looking at details, you guided to 12% growth or so in Q1 and 13% for the full year. So it seems like you’ll be fairly flat throughout the year. But wondering how you’re assuming in terms of macro progression. And a couple of details around that, any contribution at all from the full-time hiring, and how to think about the dynamics of the client marketplace plan anniversarying in Q2?
Hayden Brown: Sure, John. So what we’re seeing in terms of the — kind of what’s baked into the guidance around macro is, basically, what we can see today from all of the trends that happened in the back half of last year, which you’ll recall, in the middle of last year, we anticipated that we would see that $10 million to $15 million negative impact in the back half of last year, and that is very much what we saw. Similar level of, I think, outlook and being informed by the same types of trends that we were using last year to inform that outlook are the ones we’re looking at now to inform our expectations for the year ahead. And so that includes how customers are behaving coming out of the holiday period, are they spending at the level of where they would have been in a nonmacroeconomic impacted year, et cetera.
So our guidance is not baking in any specific macro condition change. It’s more based on the current trends that we see in the site as well as information we have from so many years of things like seasonality, how things tend to arc through the year as well as our plans in terms of what we will be doing to drive the business going forward. To your question about full-time specifically, I wouldn’t say that we’re expecting this to be a meaningful contributor this year. It’s very early days in this product. We’ve literally just got it out the door. And we need to do a lot to continue to optimize the experience, make sure that we’re really looking to customers here rather than jumping to assumptions about what the revenue will be at the back-end.
So not really baking in anything very specific around that. It’s more one of the pieces of our entire mix as we look at the drivers of the business this year.
Operator: Our next question comes from the line of Rohit Kulkarni of ROTH MKM Partners.
Rohit Kulkarni: Just a question on this reorg from a functional to a business unit org structure. Just maybe just draw out your thinking there, like why now? And over the next year, what sorts of observable results do you hope to achieve from having this reorg done in late last year?
Hayden Brown: Yes. This is an exciting change we made, something we’ve been contemplating for a long time as we look at how to most effectively drive this business. And I realized last year that we could be more effective putting leaders in charge of very discrete parts of the business with accountability to both revenue and, over time, cost components of their business. And these leaders have full stack ownership of different levers to drive those outcomes, whether it’s product, marketing levers, sales levers, et cetera. So this is a big shift for us and is really intended to drive greater alignment internally around the key priorities that we’re delivering against. Certainly, it gave us a chance to be more efficient with kind of how we’re deploying resources across the business in those key priority areas.
And ultimately, I think, gives us a structure for giving different leaders the independence to be risk-taking, forward-thinking and really kind of big picture-owning as they move forward in their respective business areas. And it’s different than what we had in a functional model. So this was the right time to do it. I think especially as we’re heading into a more complex product mix, different customers that we’re serving between enterprise and SMB, we just looked at the total picture and I felt like this is the time to give different types of ownership and responsibility to different leaders in the business.
Rohit Kulkarni: Okay. And just a follow-up on the pricing change you did and the GSV trend that we are seeing and the take rate trend that we are seeing. Is there a point from the price increase that you did? Was your hope that, at some point, GSV would start to stabilize while you start to get pricing leverage? And if so, at what point do you feel that the headwind or the incremental headwind that you’re seeing because of the pricing change starts to diminish in the future?
