What happened

Shares of Fiverr International (FVRR 0.24%) are tumbling 13.3% this week compared with where they closed last Friday, according to data from S&P Global Market Intelligence. The drop followed the freelancing platform's announcement that it was laying off 8% of its workforce.

Fiverr had been a promising tech IPO that transformed into a pandemic-era darling, only to see it catch the vapors in a reopened economy. The stock is down 72% in 2022 and has lost 88% of its value from the all-time high it hit last year.

So what

The economy has not been kind to Fiverr as people returned to offices. During the early part of the pandemic, many people took to the gig economy to make a living, and the company, which matches freelance creatives with customers, surged in popularity.

While it started out with just $5 jobs on the platform (hence its name), it has evolved into a site offering opportunities at every price point. While revenue continues to grow, up 27% in the first quarter, it is no longer at the rates at which it had been expanding and losses continue to widen.

It's likely for that reason the company is slashing its workforce. According to Israeli site Globes, which first reported the cuts, Fiverr said, "During recent months we decided to focus on our core business and improve the expenditure structure of the company in order to strengthen and ensure continued revenue growth and profitability, while adjusting to macroeconomic changes."

Now what

While a struggling economy might force more creatives to Fiverr, customers will also be more careful about their discretionary spending. And advertising is already pulling back, hitting companies like Snap and Alphabet's YouTube.

Fiverr International is scheduled to report second-quarter earnings next week, which could be brutal if the tech stock is already culling its workforce now.