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Why the Freelancer Ltd (ASX:FLN) share price dropped 16% today

Freelancer Ltd (ASX: FLN) was one of the worst performers in the local market on Tuesday, down 16% to $0.50, after the release of its half-year results.

The critical point seems to be the lack of revenue growth. Despite a record-high volume of payments processed through the company’s two websites – the online marketplace Freelancer.com and the escrow service Escrow.com – revenue declined 6% from the first half of FY17, which was itself a disappointing 0.4% increase on the first half of FY16. The company reported a negative EBIT of $1 million and an $800,000 loss.

Freelancer.com held promise to develop into a profitable global hub for job seekers, a sort of SEEK Limited (ASX: SEK) for freelancers, with dozens of dedicated country websites across five continents. While SEEK has delivered meaningful earnings growth over time, Freelancer results have disappointed investors and the stock price has dropped 23% in the past year.

The highlight of today’s release is the 11% growth in revenue from the escrow business, which might become more and more important as the need for a reliable third-party regulating online payments increases with the success of e-commerce.

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Motley Fool contributor Tommaso Autorino has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Freelancer Limited and SEEK Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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