In a nutshell, freelance bidding sites allow clients to post jobs and freelancers to bid on them. The freelancer makes a pitch and a bid, and the client picks a freelancer to do the job.

You've probably heard of the major freelance bidding sites. The likes of Elance and oDesk are somewhat ubiquitous within the freelancing community; not always in the way you would hope.

Below you will see a smattering of the good sides of freelance bidding sites, followed by the numerous dangers they pose to you, your time, your reputation and your money.

The Good

There is a common misconception that a "real-world" freelancer is in just as much danger of being ripped off and messed around as the freelancer working online, but it is simply not true. When you work in the real world, you get to meet and talk to the client, you know where they operate and there can be clear repercussions if you are not paid.

Meanwhile, online it is different because you have no idea where your client really is, you have no idea about their character, and there is often nothing you can do if they steal from you. Programmers, hackers and online agitators may disagree, but if you have just spent the week working on a client's project and have discovered you will not be paid, you cannot afford to go on a week-long online revenge campaign (as satisfying as it might be).

At least with a bidding site, you get to see if a member is a new member and if they have reviews and ratings from other people. There are also typically escrow systems in place – your payment is secured before you start working. Importantly, you can report people who are difficult to work with (for whatever reason), and it usually actually means something on these sites.

The Bad

Using a freelance bidding site is near the top of the list for many people trying to build a career online, and they can be a good way to get started. But, just because they are the lesser of several evils does not mean you should be blind to their faults. Here are some of the issues that may affect you sooner rather than later.

Competition

There is always competition from developing countries on freelance bidding sites, and they have learned to enter their home country as the USA, Canada or the UK. They can afford to work for a pittance, and clients honestly believe that the rate they are offering must be the going rate because there are so many people offering to work for a pittance.

Clients Can Be Wary

When it comes down to it, freelancers are typically ripped off and messed around more than the clients are, but it still happens to the client.

For example, they might hire someone from the UK with a low rate to write a single web page, and it turns out he is a Middle Eastern teenager that has copied and pasted Amazon's source code. It affects long-time clients on freelance sites – they can be downright suspicious, and are unlikely to afford you much slack.

Clients Want a Lot for a Little

You will see hundreds of jobs posted where they offer the worst possible pay rate imaginable and then demand a swift deadline and high quality. One may think it is bluster, or that it is them trying to keep the flies off, but they are deadly serious.

You Have to Work for a Positive Review

Are you are freelancer being messed around or ripped off? Tough! Your client is going to make you dance like a monkey at a circus, because if you don't, he or she will give you a bad review.

It is okay for the client because he or she can create a new profile, but you may have spent months building up a great reputation and perfect reviews. Many freelancers are held hostage by their reviews, and the more nefarious clients know it.

Conclusion

Freelance sites are a good starting point for a fresh new freelancer, and they may even provide a little low profit work when times are hard. As a long-term business strategy however, it has more weaknesses than strengths.

As a freelancer, you ideally want to manage your progress in two directions. You want to build a client list and maintain a good relationship with the people that send you work, and you want a website or blog to act as your online ambassador to help build your online reputation. This is especially true if you want to pick up referral work, which as you know is the hottest lead you can possibly get.

If you build a good online reputation and take care of your clients, you will build a self-perpetuating marketing system; bidding on the likes of Elance will be a thing of the past. In my humble opinion, that is ultimately what you should be looking to do.