asana-business-model

The Asana Business Model And Its Work Graph

Asana is a software company whose aim is to enable teams to work together and reach their goals at scale. Its Work Graph combines tasks, projects, portfolios, goals, and the relations among those. Asana follows a subscription-revenue model with a free basic plan that fills its marketing funnel of leads processed by direct sales, which turn them into enterprise accounts.

Asana origin story

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Asana growth over the years as it reached its milestones (Source: Asana S-1)

It all started back in 2004 when Moskovitz and Rosenstein were roommates of Mark Zuckerberg, at Harvard. They also were in the dorm room which was used to launch Facebook on that February 4, 2004. Within a few days, the site gained so much traction that it would soon become the stickiest website at Harvard.

In a few years, Facebook became a multi-billion company built on top of its social graph and by August 2020 a company worth over $800 billions.

Yet in 2008, Moskovitz, age 27 (he was at the time among the world’s youngest billionaire), together with Rosenstein decided to take Asana on a full-time basis.

As he pointed out in a Business Insider interview, back in 2011, “We left Facebook because we had an idea. We looked for every reason to stay [at Facebook].  I didn’t want to be an entrepreneur.  But the idea was so strong and we became so passionate about it.”

As they would point out in the letter to investors, “We were inspired to start Asana after seeing the broad adoption and impact of an internal work management tool we built while at Facebook. We left Facebook and created Asana to address our own pain: We love working on big ideas, but we loathe the annoying busywork required by their execution.”

As they also pointed out “That’s because coordinating work across teams is generally chaotic. The problem has only gotten worse as organizations take on greater challenges with more people, complexity, and technology. Most people working in teams today spend more time coordinating work in emails, chats, spreadsheets, and meetings than they spend doing actual productive work. Every day, they get inundated with requests and don’t know where to focus their attention.”

What made Asana’s co-founders think it was different from Facebook? Rosenstein explained, “Facebook is social software that puts people at the center of the graph. Asana puts work at the center of the graph.”

Over the years, before going public, Asana got over $400 million in funds from several venture capital firms. For instance, in a 2016 round of $50 million led by Y Combinator, Sam Altman (President of Y Combinator) pointed out:

One of the things I’ve learned about companies is that 1) clear tasks and goals, 2) clearly communicated, and 3) with clear and frequent measurement are very important to success.  Most companies fail at all 3 of these, and they become more important as companies get bigger.  Asana is the best way to excel in these 3 areas.

Mission and vision and values

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Source: Asana S-1

Asana’s mission is to help humanity thrive by enabling the world’s teams to work together effortlessly.

Asana does that by offering a work management platform, helping teams work together on a daily basis, going from tasks that require simpler coordination, to entire projects, where those same teams need to be aligned at a goal level.

As Asana points out “Our platform adds structure to unstructured work, creating clarity, transparency, and accountability to everyone within an organization—individuals, team leads, and executives—so they understand exactly who is doing what, by when.”

Value proposition

The idea that would become the obsession for Moskovitz and Rosenstein and that would turn them into entrepreneurs, was that “Teams Spent Too Much Time on Work About Work.”

Asana tries to address and solve this problem by offering a platform where teams can in real-time plan and roadmap for current and future initiatives. The foundational part of the platform is called a “work graph.”

The work graph captures a set of elements and it connects them up to create associations, relevant to the project completion. As Asana points out, some of those elements comprise:

  • Units of work (in hierarchical order from bottom to top tasks, projects, milestones, portfolios, and goals).
  • People responsible for executing those units of work.
  • Processes in which work gets done (rules and templates).
  • Information about that work (files, comments, status, and metadata).
  • Relationships across and within this data.

Asana solves this issue for a few specific types of customers.

Key customers

Asana follows a freemium model, or more precisely what I have defined a freeterprise model where free accounts channeled via the free service through direct salespeople, to convert them in company-wide enterprise accounts.

That’s why the Asana customer base ranges from individuals to global organizations. As of January 31, 2020, Asana counted 75,000 paying customers globally (compared to the 3.2 million free accounts). As the company specified among those paying customers, of which 207 spent $50,000 or more on an annualized basis.

The three main types of customers comprise:

  • Individuals which value proposition stands from maximizing their effectiveness and reduce distractions on the projects they are managing.
  • Team leads who can manage work across several projects and teams. The main value proposition there is the ability of team leads through asana to track progress, prevent or unlock bottlenecks, and set milestones.
  • Executives who can communicate company-wide goals and gain real-time insights into which initiatives are on track or at risk.

Revenue model

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Asana pricing structure based on its subscription plans (Source: Asana S-1)

Asana follows a subscription-based revenue model, with three premium subscription tiers (the basic plan is free).

Pricing is primarily based on the number of users and features/functionality as the number of users increase. Some key facts about Asana revenue model:

  • Enterprise subscriptions and Business subscriptions were introduced in December 2016 and November 2018, respectively.
  • Business and Enterprise subscriptions now make up 42% of Asana revenues (as of the first months of 2020).
  • In general larger accounts (with over $5k spent per year) made up more than 54% of Asana revenues as of January 2020.
  • The majority of Business and Enterprise customers pay on an annual basis (Asana also have the monthly option).
  • All Asana customers were either channeled through a free trial (from the premium plans) or from the Basic, free service.

By January 2020, Asana made over $142 million in revenues, and it still recorded a $119 million loss from operations ($48 million expenses were though attributable to stock-based compensations due to the tender offer for the company going public).

Stock-based compensation expense for fiscal 2019 and fiscal 2020 includes $3.8 million and $38.7 million, respectively, of compensation expense related to tender offers due to the company going public. However, the company is in any case still not profitable, as of January 2020.

Cost structure and distribution

Asana’s primary expenses comprise those that are indispensable to sell the product in the first place (described under the cost of revenues) and those related to distributing the product (sales and marketing) and improving it over time (research and development).

Cost of Revenues

Asana’s cost of revenues consists primarily of the cost to run the platform to free users and paying customers, thus making its costs primarily related to third-party hosting fees, and personnel-related expenses.

Research and Development

R&D expenses comprise the expanding of product offerings to enhancing features and functionality (Asana’s primary technical improvements comprise integrations with other apps and platform, automation, workflows, security, and more).

Since January 31, 2019, Asana has grown its engineering department by over 80%.

Research and development expenses consist primarily of personnel-related expenses, broken down in:

  • Product design costs.
  • Third-party services and consulting expenses.
  • Software subscriptions and expensed computer equipment used in research and development activities.

Sales and Marketing models

Asana follows a hybrid go-to-market strategy, as it combines a self-service model through its basic free service, and a direct sales approach to convert those free accounts in company-wide accounts.

Self-Service Model

Most of Asana’s paying customers at the beginning go through the self-service plan and free trials. The self-service model enables Asana to break through the acquisition of important leads for the salespeople, who can then act once the customer has been qualified.

Direct Sales

Once the potential customer has been qualified via the Asana’s self-serving funnel, it then gets channeled through the paid funnel, to activate higher tier packages. This approach has led Asana to double up its sales team in 2019, to enable those free accounts to turn into paying enterprise customers for the business.

Marketing and Customer Success

Marketing and customer success act both as an acquisition, retention, and referral strategy. Indeed, Asana primarily markets its platform through its website, social media, through media coverage, paid acquisitions, and word of mouth.

On a customer success level, Asana provides on-demand education and customer support. At the same time, it also partners up with other service providers, certified with them, able to onboard teams and run onside training sessions.

The global community of customers and experts is called Asana Together, which gives access to its community Forum to ask questions and connect with peers. Asana also leverages on certified support agents (called Asana Ambassadors) who assist with and promote adoption within their networks, and Certified Pros, which are independent third-party providers that help with integrating Asana within their customers’ workflow.

Technological model: inside Asana work graph and beyond

The key technologies which represent the assets and what might give the company a competitive advantage include:

  • Asana “work graph.” Asana co-founders helped shape Facebook’s social graph, and as they worked at Facebook the idea of using the same approach but for work, would later become the Asana work graph. That is a flexible data model (made of people, tasks, goals, projects, portfolios, conversations, files, and the relationships among them) that is at the foundation of everything that Asana does.
  • The proprietary “Luna2” application framework, enabling the rapid development of high-performance applications with complex user interfaces.
  • Asana “mindful technology” approach which is about design that respects user attention and enables focus.”

Going forward, Asana will expand its technological capability to enhance it through AI. As any software company of these days, we’ll see Asana converting into an AI company. To enable more automation and prioritization of work for individuals, teams, and organizations.

Inside the Asana work graph

Going back to the work graph, as pointed out in a 2013 Wired article, “a work graph consists of the units of work (tasks, ideas, clients, goals, agenda items); information about that work (relevant conversations, files, status, metadata); how it all fits together; and then the people involved with the work (who’s responsible for what? which people need to be kept in the loop?).”

Asana co-founder Justin Rosenstein pointed out that a work graph differs from a social graph as the work graph “the goal is creation (working together to realize our collective potential), and that requires a work graph, with the work at the center.

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The work graph sketched on a napkin by Asana’s co-founder Justin Rosenstein, to explain the key difference between a social graph and a work graph (Image Source: Asana Blog)

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At a technical level, the work graph is the record of past, current, and future work, and a multi-dimensional data model as it captures and associates units of work (tasks, projects, milestones, and portfolios), the people responsible for executing those units of work, the processes in which work gets done (rules and templates), information about that work (files, comments, status, and metadata), and the relationships across and within this data (Image Source: Asana S-1).

Tasks

Tasks are the smallest elements within the Asana work graph. As the company points out those represent “atomic units of work.”

On those tasks can be set owners, due dates, attach documents, and additional information about them in custom fields. Each custom fiedl is a metadata that will be stored to further explain the tasks emenents.

Projects

A project is a set of tasks to accomplish a specific goal. If a project is completed on a regular basis, that can be turned into a workflow or a template, that teams can follow each time and capitalize on the previous projects’ learnings.

Portfolios

A portfolio comprises a set of projects within a central location. Portfolios are useful to team leads and executives to track and see how projects are being managed.

Goals

Goals represent a centralized place to track the work to achieve them. Asana supports OKR (Objectives and Key Results) and other goal management methodologies. Goals can be associated with Projects and Portfolios and can be made visible to the entire organization.

Integrations

The Asana platform integrates with over 100 third-party applications including:

  • Microsoft apps such as Teams, Outlook, OneDrive, SharePoint, and Power Automate
  • G-suite apps such as Gmail, Calendar, Chrome, Sheets, and Drive
  • Functional tools such as Salesforce and Adobe Creative Cloud
  • Communication apps such as Slack
  • File sharing apps such as Box and Dropbox
  • Development apps such as GitHub and Jira
  • Reporting apps such as Tableau

Integrations with third-party applications are achieved through Asana Connect.

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Example of the integration within Asana and Slack (Image Source: Asana S-1)

Overall business model and go-to-market approach

Asana follows a hybrid go-to-market and growth approach, where the self-service funnel combined with direct sales to expand quickly across teams in various organizations and at various levels.

To recap Asana follows a freeterprise business model, where its marketing funnel is built on top of its product/technology. As free accounts are activated those are mostly driven by a self-service funnel. As more companies adopt free basic accounts, they also get qualified through direct sales, who convert those free accounts, in potentially company-wide enterprise accounts.

This business model is powered up by Asana technology (its work graph) distributed across its primary properties (website, and social media), amplified with a free service or trial (on the premium accounts) that keep the marketing funnel with a continuous stream of leads, processed by direct sales to transform them in company-wide accounts.

Key takeaways

  • Asana follows a freeterpise business model (free accounts are channeled through the marketing funnels and processed by its direct sales to convert them in company-wide accounts), powered up its Work Graph.
  • Where the social graph connected people, the work graph records, represents and connects tasks, projects, portfolios, and goals. Thanks to the work graph projects can be managed at scale through the Asana platform.
  • While Asana built a valuable technology over the years, it started to monetize it at enterprise level only starting 2016, 2018. Thus, while revenues expanded as a result of its increased sales team, its net losses also grew. By January 2020, Asana recorded over $140 million in revenues and over $119 as loss from operations (this also included stock-based compensations as a result of the IPO).
  • Asana is now following a go-to-market/expansion hybrid approach, combining self-serving accounts with direct sales efforts, to gain larger market shares.
  • Connected business models:
  • Slack Business Model
  • Zoom Business Model
  • Facebook Business Model
  • Freemium Business Model
  • Freeterprise Business Model

Connected resources:

Published by

Gennaro Cuofano

Gennaro is the creator of FourWeekMBA which target is to reach over two million business students, executives, and aspiring entrepreneurs in 2020 alone | He is also Head of Business Development for a high-tech startup, which he helped grow at double-digit rate | Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy | Visit The FourWeekMBA BizSchool | Or Get in touch with Gennaro here