Stubhub Paper

        Kevin Patel 006050031

StubHub

4. Pick a Silicon Valley industry and leading firm in the industry. Does the firm enjoy sustainable competitive advantage on a worldwide basis? Document how the firm became a worldwide leader and what must be done to sustain a global leadership in the 21st century.

The online secondary ticket industry is one that typically goes overlooked by event-goers, but is turning into a huge business. As events get officially sold out directly from the venues and box offices, fans of all events need a place to go to securely buy tickets that is quick and efficient. In comes StubHub, a firm that was created in the Silicon Valley by Jeff Fluhr and Eric Baker who were first-year students at Stanford business school in 2000, They identified three characteristics that made ticket resale a prime opportunity. They saw a vast market, with billions of dollars in tickets to sporting events and concerts changing hands. They knew it was fragmented, with eBay only beginning to percolate as a ticket marketplace. And they understood that it was stigmatized, which appropriately described what many fans then viewed as a obscure exchange.  Fluhr and Baker were able to leverage this market opportunity to grow StubHub to be the go-to source for tickets, and after growing largely in popularity they were acquired by eBay for $310 million in 2007. StubHub currently processes over one sports or entertainment ticket every second, and in 2015 had over 16 million unique visitors and nearly 10 million live events per month.

Prior to StubHub, event goers had to rely on street scalpers and websites such as Craigslist, to buy secondary market tickets. Not only was this time consuming because you had to go meet the sellers in person, but also opened room for a lot of fraudulent activity as sellers can transfer the right to their tickets online, and then sell a deactivated hard ticket to a fan. In addition, with PDF tickets becoming more and more popular, sellers can post a listing on Craigslist and sell the same PDF tickets to as many customers as they want, but only the first to get to the stadium would get in. Not until the fan gets to the stadium would he find out that they had been sold a fraudulent ticket. Sellers are allowed to set their own prices, without any limits. Buyers select the tickets they want if they agree to the set price, and StubHub receives a commission from both the buyer and seller, with rates typically ranging from 10-15% in the United States.

StubHub acknowledged this a knew their had to be not only a safer way to exchange tickets, but also one that is more convenient. Their first step when they created this site was to implement a FanProtect Guarantee that would protect both the customers and sellers. Fluhr realized from the beginning that the guarantee would be critical to his company’s success. Even as eBay and others began to capture market share, he remained confident in the opportunity. StubHub’s FanProtect Guarantee, guarantees that the ticket is authentic and that StubHub will make sure, at all cost, that you get that ticket or better. This is exponentially more appealing to customers versus one that other ticket reselling platforms such as eBay uses; even though eBay owns StubHub, you can still sell tickets on eBay’s platform. eBay is a completely different marketplace, with the warning “Buyer Beware,” leaving it to consumers to tell one another which sellers to trust. Some sites offered buyers their money back if there were problems, but a ticket to a game or a concert is not like an ill-fitting sweater or an iPad with a scratched screen. If you purchase a ticket on StubHub and were unable to get into a venue, StubHub has personal at each event they sell for, and will give you a comparable or better ticket, pulled from that games marketplace at the expense of StubHub. This guarantee helped build a large and loyal customer base. Tickets not only are perishable, but they are tied to experiences, which can be emotional. Getting your money back won’t rewind the game you missed, or salve the disappointment of a family looking forward to a night out.

Moreover, StubHub has engaged in partnerships with leagues, venues and sports entertainment providers to promote the use of the site when events are sold out, while also further bolstering their FanProtect guarantee on ticket authenticity. In a sense they killed two birds with one stone with their first major partnership, MLB. StubHub engaged in a partnership with MLB as the official secondary ticket market for MLB. In this partnership, all MLB teams promote StubHub to fans when games sell out, and in addition StubHub and MLB instantly reissue the ticket with a new barcode to the buyer, while deactivating the sellers ticket barcode.

A branding breakpoint came in 2007, when StubHub and ESPN announced a major partnership. Initially, StubHub’s conversations with ESPN were focused on advertising. StubHub bought space on ESPN.com, as well as on other popular sports sites. But as they talked further, it became clear that there was a larger opportunity. Fans often went to ESPN.com schedule pages when they considered buying tickets. StubHub began to put ticket links on ESPN.com, leading to fans moving forward and buying tickets, without leaving ESPN.com and searching elsewhere. By incorporating links on ESPN, StubHub not only drove buyers to its site but also gained an important connection to the mainstream.

Another significant partnership that StubHub struck was with two NFL teams: the Chicago Bears and Detroit Lions. Before long, there were six more, with now essentially every team. Rather than offering a revenue-share deal in which it would serve in the role of vendor, as it did with teams in its first few years, StubHub wrote a check, typically for $200,000 to $500,000 a year, that would establish it as the team’s official resale marketplace. StubHub got to keep all the money from the resale transactions, got increased exposure for its burgeoning brand, and got access. The teams got a new sponsor that would not only write a check but also help them deal with a leading complaint from season-ticket holders, who hated eating the cost of unused tickets. The decision to go from back-end vendor to official status sponsor changed the way that StubHub was perceived in front offices across sports. Rather than dealing with midlevel executives from ticketing departments about revenue-share arrangements, the company was talking to senior management about mid-tier sponsorships. Many of the same teams that initially rebuffed resale as “scalping” changed their minds when it came attached to a sponsorship. As teams have come to better understand how much money is in the resale market, those sponsorship agreements have evolved to include more revenue sharing, along with other components. Some teams see the consumer and pricing data they get from StubHub as more valuable than the sponsorship revenue. StubHub has become such a well-known brand that 60 percent of its traffic comes from people who go directly to the URL. It has come to value the ability to cancel and reissue tickets more than the referrals it gets from the team sites.
        Technology innovations also played a huge role in the success of StubHub. In July 2011, StubHub launched a new ticketing application, available on Microsoft Windows Phone, which makes it easier to buy tickets. StubHub applications for iPhone, iPad, BlackBerry 10, and Android also allow users to decide where they want to sit using interactive venue maps and the number of seats, and to plan the event by finding local restaurants, bars, and parking facilities. In 2012, StubHub was the first in the industry to integrate with Apple Passport. Most tickets that customer’s purchase are PDF’s that are emailed to the buyer. StubHub then integrated their app so customers that buy tickets at the venue right before it starts are sent e-tickets onto their phone, which can be scanned at the venue. In addition, sellers are able to post hard-tickets, with selling rights up to two days before an event, which are mailed to the buyers via next day UPS, paid by StubHub.