Asana offers a tool that allows teams to organize, track, and manage their workflow, so with all its competition, how does Asana make money?
Nov. 28, 2020
In the digital age, there are plenty of distractions for business owners and employees alike during the average day. Management tools like Asana (NYSE: ASAN) help teams to align their attention and focus on what needs to be done next rather than getting lost in the weeds. This article looks at exactly how Asana makes its money.
Introduction to the company
Asana launched in 2008 with the goal of simplifying team-based work management. Facebook co-founder Dustin Moskovitz and former Facebook and Google engineer Justin Rosenstein created Asana, which had its market launch in April 2012. In August 2020, the company filed for a direct listing through an IPO.
The core focus of the business is on its software-as-a-service offering that looks to optimize work management and team collaboration. Teams can manage a given project all through a single tool.
Team members can quickly create a project, assign the work to various people, set deadlines, and communicate directly about each specific task all through Asana. It is particularly useful for teams that are working remotely, something that has become a lot more common as a result of the COVID-19 pandemic. It also allows for the integration of a lot of popular third-party apps, such as Google Calendar and Microsoft Teams.
Business Model
Asana's business model is simple. Like a lot of competitors, it offers an extensive free trial of the platform. This is a pretty comprehensive offering, showcasing most of the key aspects of the Asana work management experience. There are then three paid plans that give the user access to additional perks. There is a Premium plan, Business Plan, and Enterprise Plan, each of which is focused on a particular set of needs.
The business decided to take advantage of the shift towards remote working and launched its IPO on the New York Stock Exchange in September 2020. The reference price per share was $21, with the opening share price reaching $27. The initial valuation was almost $4 billion, compared to the $13.76 billion of its direct competitor Slack Technologies.
There is plenty of competition in the sector. Along with Slack, Asana also has competition in the form of Atlassian Corporation's Trello, Monday.com, and Basecamp. As a result of trying to get a foothold in the market, there have been increasing marketing, sales, and research expenses at Asana. Asana has also not yet posted a net profit since launching in 2008.
In the fiscal year 2020, its net loss more than doubled year-on-year to $118.6 million. Its revenue did rise in the same period by 85.5%, up to $142.6 million. In July 2020, there were 82,000 paying clients in a market that IDC forecasts will grow from $23 billion in 2020 up to $32 billion in 2023.
What's next for the business?
The collaborative work management tool sector is extremely competitive. While Asana seemingly has a decent market position, there is going to be a lot of hard work needed in the coming years to cement its place near the top of these rankings. There is no doubt that increasing the productivity of workers, particularly when working remotely, is a hot trend that looks set to continue for the next number of years.
The company needs to figure out how to get more free users transferred over to being paying customers. As of July 2020, there were 3.5 million free users and just 82,000 paying clients. This means that Asana has to convince the free users that this offering is superior to other competitors and it is worth paying for.
If Asana can do this, then it could start generating profit as it becomes more efficient with its sales and marketing spending as it optimizes conversion rates.
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