The Airtasker Ltd (ASX: ART) share price didn’t move much upon news of its acquisition of Zaarly. Can the Airtasker share price boom like Afterpay Ltd (ASX: APT) over the long term?
You must be thinking the only common thing between these two ASX shares is that both start with ‘a’. Hear me out, I’ll explain further below.
ART share price
APT share price
Afterpay’s rise to fame
Michael Mauboussin and Dan Callahan of Morgan Stanley published an insightful paper into valuing a business through the lens of the customer.
The research piece outlined the following five key variables to determine the rate of customer adoption.
- Relative advantage – how much better is the new product compared to the incumbent or status quo?
- Visibility – how visible are the results of a product to others?
- Trialability – how easy is it to try the product?
- Simplicity – how easy is the product to understand and use?
- Compatibility – how well does the product become embedded into people’s existing values, lifestyles and needs?
A great example of a product that has experienced a rapid rate of customer adoption recently is the smartphone.
Afterpay also ticks all these boxes extremely well.
It provided a more flexible and easy to use credit product that was free to download and could be smoothly embedded into people’s smartphones. This combined with its first-mover advantage explains why Afterpay experienced such an astronomical customer adoption rate.
How about Airtasker?
In terms of relative advantage, it seems like Airtasker provides a better service relative to its peers based on online reviews of the business and the app.
Airtasker spent heavily on marketing in its early years to raise its profile. So the recent Zaarly acquisition makes sense because it wants to continue to expose its brand across the US.
I wouldn’t rate the visibility of Airtasker’s product as high as Afterpay though. Afterpay is plastered across physical stores with a lot of foot traffic.
How about trialability?
I think it’s quite low because it’s not free to use and there are no promotional offers to entice the customer to try it out.
Based on the high user rating reviews, it appears quite easy to understand and use.
I think the key issue for Airtasker is being able to encourage repeat purchases as outlined in this article by my colleague, Patrick Melville.
Is it the next Afterpay?
Whilst these two businesses operate in completely different industries, the customer adoption for Airtasker is not as smooth and fluid as Afterpay.
Investors should bear in mind that Airtasker doesn’t have the benefit of a first-mover advantage with historical competitors like Freelancer Ltd (ASX: FLN) and Hipages Group Holdings Ltd (ASX: HPG).
I think the above framework provides a great screening tool to determine whether a business is capable of scaling.
If a business is able to scale quickly in a structurally growing industry, it may well become the next Afterpay.
