The Covid-19 crisis had upended the traditional 9-5 world and created a side hustle culture that saw millions of people pursue gig work for additional income.

Almost a year post the pandemic however, that trend has somewhat faded, leaving shares of gig economy stocks struggling to find momentum.

ASX-listed Airtasker (ASX:ART), which made its bourse debut in March 2021, has seen its share price decline from the $0.65 IPO price to $0.26 today.

The company was somewhat of a market darling when it listed, with the share price closing 60% above the IPO price on day one.

But despite growth, the share price has continued to struggle in 2023, falling almost 30%.

Stockhead reached out to Airtasker CEO Tim Fung to get his take on what’s happening in the gig economy space, and why investors should have Airtasker in their portfolio.

 

What’s actually happening in the gig economy space?

“What most people refer to as the gig economy can roughly be carved up into two kinds of platforms,” Fung told Stockhead.

“One is the on-demand economy platform, which is mainly the ride sharing and food delivery platforms.

“The other is marketplaces like Airtasker, which is differentiated by the fact that it is user generated. Customers can decide on the price and types of jobs, rather than the platform deciding on the price and scope of job.

“The first kind of platform had a huge spike during the pandemic as people needed specific kinds of services.

“And now that restrictions are lifted, you’re probably going to see a whole bunch of consolidation happen in that space.”

 

What can we expect from this sector in 2023?

“I think the bar from customers is only going to increase,” Fung said.

“So only the platforms which are really valuable to both customers and taskers will be able to come through the other side of this.

“And that’s all about having really strong unit economics. If you’ve got good unit economics and are really valuable to customers, then I think you’re going to be just fine and actually come out of this really strong.

“But there were a lot of companies that sprouted up and boomed during the lockdown. For those companies, I think you’ll probably see them either get consolidated or exit the market.

“We’ve already started to see that, and that trend will likely continue into 2023.

“For example, we’ve seen the exits of Deliveroo in the food delivery, and Voly in the grocery delivery space. These platforms were really struggling because the market there is probably just big enough for one, maybe two players.”

 

How is Airtasker different from the rest?

“At Airtasker, we have a different set of macroeconomic factors which are impacting our business,” Fung explained.

“Over the past two years and during the pandemic and then in the subsequent labor shortage which occurred in 2022, we saw a really high demand, but very low supply of labour on our platform.

“There just weren’t enough people who were able to work because there wasn’t enough immigration. Unemployment was so low, that it was really hard to get workers to do jobs on Airtasker.

“But most recently, over the past four or five months starting from September of 2022, we’ve seen that reversing out.

“We’ve seen consumer demand start to taper off and soften because interest rates have gone up. People have less money, and that’s obviously tempering consumer demand overall.

“But what we’re seeing to counterbalance that is a huge uplift in the the number of people who want to work on these platforms. We saw the number of taskers increase by more than 50% in the last two months.

“And that’s actually more than offsetting the amount of softening demand, because now we’re seeing higher completion rates and higher customer satisfaction on our platform.

“So it balances up and down quite organically, and that’s been a good thing for our marketplace.”

 

How do you scale up a marketplace?

“One of the big things about marketplaces is that they are built on network effects,” said Fung.

“In other words, the more buyers and sellers that you can bring together, the better the marketplace is.

“You’re more likely to get matched to the right person, you’re more likely to find that person faster. You’re also more likely to get your job done by the right person.

“And so network effects are a big part of what makes the product.

“In Australia, we’ve built some really strong network effects. We have over 2 million jobs a year going through our platform so we have a really dense network effect here.

“But in the UK, we’re much smaller and we’re still building those network effects, which we call the 1 to 100 caliber. We’ve definitely got traction there and are getting great offers, but we’re not quite at the level of liquidity and network effects in Australia.

“In the US, we’re even at an earlier phase than that and we’re not even really matching customers yet. What we’re doing in the US currently is just building up a steady stream of job opportunities for our taskers.

“Every day, when they check the feed and see more job offers, they’ll think that’s awesome and want to hang out on this platform more. So slowly but surely, they turn that early stream of job opportunities into a bustling marketplace. But it takes time to do that.”

 

What are the main takeaways from your recent half-year report?

“We saw our GMV (gross marketplace volume) increase by about 58% half on half,” Fung told Stockhead.

“There were a couple of reasons for that. First, we’ve got underlying organic growth. But we also had no pandemic disruptions, which we had in the previous half.

“During the half, we acquired a company called Oneflare, which was a contributor to our group and without them, our GMV growth was 23%.

“You can do the math on how much Oneflare contributed there, but we’re really excited about that acquisition for two reasons.

“One is that Oneflare gives us access to the high value tasks segment, enabling us to have a model that helps businesses, which are a little bit larger than the individual tasks on Airtasker.

“Secondly, Oneflare is actually a strong counter cyclical platform.

“The reason for that is that Oneflare monetises and provides value to the supply side of our market through subscriptions, as opposed to the demand side of our market.

“So even if demand softens, that actually helps the Oneflare business a lot because more people would want to up their subscriptions as they want to compete for work and become competitive.”

 

Is Airtasker downscaling or growing?

“During the macroeconomic downturn cycles, it’s just really important that we’re laser focused as a company, and only working on absolute top priorities,” Fung explained.

“We need to be very selective about the initiatives that we tackle, and we’re going to continue to be really disciplined in how we invest.

“That said, we are a mission driven company, and we’re focused on the long term.

“So we’re not going to be pulling any punches and making knee jerk reactions in cutting costs or reducing investments that we believe are really important.

“And the things that we believe are really important are improving customer purchase frequency in Australia, making sure that we’ve got a reliable marketplace here, and then establishing new marketplaces in the US and the UK.

“So we’re absolutely still committed to all of those initiatives.”

 

Should people think about investing in Airtasker now?

“First of all, it’s worthwhile calling out that our share price on day one of listing was much higher than our IPO price,” Fung said.

(Airtasker’s share price rose around 60% on debut).

“We had incredible demand for the stock on day one, and the market was probably over exuberant then. In any case, we have seen the share price drop since, but we also saw that drop across the board in other tech stocks.

“I believe this is really a great opportunity for investors to go a level deeper and look at the actual economics of the different platforms.

“Certainly some companies which had negative or non-profitable economics were over invested, and were probably in a space that only works during a pandemic.

“And then there are other ones that have really strong unit economics which are adaptive and resilient during all parts of the economic cycle.

“I would say that Airtasker is firmly in that second camp, but I encourage investors to do their own research and go a level deeper in order to get good value in their shares and investments.”

 

Now read: The gig economy has been battered, but are we about to see a rebound in these ASX stocks?

 

The views, information, or opinions expressed in the interview in this article are solely those of the interviewee and do not represent the views of Stockhead.

Stockhead has not provided, endorsed or otherwise assumed responsibility for any financial product advice contained in this article.

 

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