The stickiness of the Fiverr, Upwork & Airtasker marketplace model
All three major gig marketplaces, Fiverr $FVRR, Upwork $UPWK, and the ASX-listed Airtasker, have 1 thing in common - they have all experienced rapid growth over the last few years thanks in large part to the recent pandemic.
But there's another thing they all share in common that isn't often spoken about...they have an inherently weak product stickiness.
Having been a customer on all three platforms, I can confidently say that once I have found a service provider that I work well with, I do my best to engage with that service provider outside of the platform.
It's not that I'm against paying for service fees, it's just that there are zero inherent benefits to me the customer, returning to that platform and paying the extra commission fees + service fees that are passed back onto me eventually.
This is the number 1 concern I have had when investigating these platforms as a potential investment, what are they doing to enhance retention rates.
Whilst the growth rates might be good, all 3 are loss-making ventures, and currently are more akin to job posting platforms than real networks.
Some might say, well what's wrong with being a hybrid job posting/marketplace, well I wouldn't say there's anything 'wrong' with it, but it does directly impact the margins of the business and the overall multiple that those different businesses attract.
To be clear I think all three businesses are great examples of gig marketplaces, but I haven't seen any initiative from either of them to indicate that they are about to solve this 'retention' issue.
Airtasker is probably the most exposed of the three, as it started as a marketplace for in-person gigs like housekeeping, gardening etc...And like most people, once you find a good house cleaner, you swap numbers and never revist Airtasker again until it's time to find another one.
Digital services are a little more challenging as you can do a fairly decent job of enforcing users to keep all conversations and payments through the platform but always up to a certain point. Eventually, emails are shared and repeat services are booked outside of the platform.
The other thing that I ponder when looking at these as potential investments is, what happens if one of these platforms comes up with a great initiative that drives 'repeat' % through the roof, how likely is it that this initiative won't be copied by their competitors in a matter of months or even weeks.
I think there's going to be a lot of movement over the coming months and years in the gig space and I wouldn't be surprised if 2 or even all 3 of these platforms are consolidated into a single global gig marketplace.