New York Times Article about StubHub
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An Article About StubHub
That Invisible Hand Guides the Game of Ticket Hunting
By WILLIAM GRIMES - New York Times, June 18th 2004
What price Madonna? Well, for me, $139.95. That was for two tickets for Wednesday's show at Madison Square Garden, Section 336, Row H. The tickets, with a face value of $94.50, cost me $59 each. Shipping via FedEx added $9.95. And finally, I paid $11.80, or 10 percent of the price for my two tickets, to an outfit called StubHub.
To anyone surfing the Web, StubHub.com looks like a ticket brokerage. It's not. The company, founded four years ago by a couple of Stanford Business School students, is a kind of stock market where the only shares traded are tickets to live events: baseball games, Broadway musicals, pop concerts, tapings of television shows, movie premieres, you name it. You can even find lecture tickets. One of the hot tickets on StubHub last month, priced at $350 for two, was to see Oprah Winfrey speak at the Liberty Science Center in Jersey City. Somebody snapped them up.
StubHub, which sells tickets to events all over the United States, does not buy tickets. Instead, it creates a regulated arena in which people who have bought tickets can sell them, and people looking for tickets can buy them, knowing that the tickets are genuine and that StubHub backs them with a guarantee. Some sellers are professional brokers who use StubHub as their place of business. Most are ordinary citizens, usually season ticketholders who want to get cash back for the events they can't attend, or who want to make a nice profit on tickets to high-demand events. Like the auction houses, StubHub makes its money by taking a cut from buyers and sellers, collecting 15 percent of the purchase price of the ticket from the seller and 10 percent from the buyer.
In principle this business model is as straightforward as Adam Smith. Buyers and sellers mingle in the marketplace and, through free negotiation, arrive at a price that reflects the true value of a commodity. StubHub simply acts as a referee, making sure no one hits below the belt, and collects a commission for its trouble.
To test the system I started with the New York Yankees. A series with the Seattle Mariners was coming up, just before the Yankees left town for a long road trip. Good tickets would be scarce. Sure enough, when I searched the Yankees' Web site, I found slim pickings for the Saturday afternoon game on May 15. There were a few $18 seats in the last couple of rows, a mile up in the nosebleed sections. No good. This was a half-step removed from watching the game on television in the stadium parking lot.
I went to StubHub. Lots of tickets there, many priced stratospherically. A seat at field level on the right-field line, just past first base, was $310. Farther out, about halfway to the warning track, a seat just one section back was $185, a tidy profit on a ticket that sells at the box office for $50 in advance or $55 on game day. Those seats, though, had long since been snapped up.
I settled on two Main Box seats in Section 313, Row G. They were in the right-field corner, just one section above field level. The price was $35 each, or face price for a season ticketholder. This was tremendous value for a sold-out game. I registered with StubHub, creating a user name and password, ordered the tickets, then sealed the deal by providing my credit card number. An e-mail message arrived soon after, confirming the order and informing me that StubHub was contacting the seller to arrange for shipment. My card would not be charged until the seller had confirmed to StubHub the time and method of delivery. A second e-mail message arrived a day later giving the delivery details. The tickets arrived on the Thursday before the game, and the seller was paid by StubHub on confirmation of delivery. On Saturday, under a clear, sunny sky, the Yankees were sending a steady stream of screaming line drives into the right-field corner.
Eric Baker created the company with Jeff Fluhr as a class project. Both men had worked as investment bankers, and they saw opportunity lurking in the chaotic, highly irrational world of ticket scalping.
The market, in business-speak, lacked liquidity. It was highly fragmented. Buyers and sellers had a hard time finding each other. Information was scarce, fraud was rampant and pricing was distorted. Two buyers sitting side by side at a basketball playoff might have paid wildly different prices for what was, essentially, the same product.
StubHub was created, Mr. Baker said, "to bring together buyers and sellers, and allow people to compare prices and seat locations." In other words, to make the market liquid, hence the company's original name, Liquid Seats. Its prime target was the underexploited assets of season ticketholders.
"If you have season tickets to the Yankees, that's 81 games," Mr. Baker said. "Unless you're unemployed or especially passionate, there's no way you're going to attend every game." StubHub gives ticketholders a way to recoup some of their season's investment. This makes sports franchises happy for several reasons. It encourages season ticketholders to buy season tickets again, and it puts warm bodies in empty seats, where they can buy hot dogs, souvenir caps and programs. The teams also receive a percentage of the resale profits, usually 10 percent. So far, StubHub has signed agreements with nine professional teams in North America, and each team's Web site encourages season ticketholders to sell their extras through StubHub. Ticketmaster, eyeing StubHub's sports profits, recently jumped into the secondary market, signing similar deals with 20 professional teams.
StubHub also separated itself from the herd by offering a guarantee. Buyers will receive either the tickets they order or comparable tickets purchased by the company, which insists that it has ways to get its hands on tickets even for sold-out events. In theory, StubHub knows only what its sellers tell it that is, that a package has been sent out on this date, with this tracking number. Mr. Baker uses toilet paper to outline the worst-case picture. "If you open the package and it contains two squares of toilet paper instead of the tickets," he said, "then we debit the seller's credit card for the amount of the purchase." By contrast, eBay bows out once buyer and seller have struck a deal. It does not monitor the shipment of purchased items. The eBay system is largely self-policing, with buyers and sellers rating each other's trustworthiness.
When it comes to antiscalping laws, eBay does more enforcing than StubHub. It automatically refuses a bid that exceeds the legal markup for a resold ticket in the buyer's state, while StubHub relies on the seller to stay within the law.
From sports, StubHub expanded into other live entertainment events. It also spiced up the formula by approaching individual artists, like Britney Spears, Jewel and Christina Aguilera, and persuading them to put V.I.P. concert tickets on StubHub. Proceeds from the ticket sales go to the artist's favorite charity, and fans with deep pockets buy packages that can include backstage passes, admission to after-concert parties or, in rare cases, a meeting with the artist.
When I began browsing the StubHub site, I gasped at the V.I.P. prices for the Madonna tour. Who on earth would shell out $1,000 or more for the privilege of seeing Madonna surrounded by a scrum of bodyguards? Well, lots of people. Those tickets quickly disappeared. So did all the $49.50 general-admission tickets being sold through the box office. That left Madonna fans looking for the best tickets at the lowest prices they could find, but now, like airline travelers logging onto Travelocity, Orbitz and Expedia, they could comparison shop. My $59 Madonna tickets, for example, had a face value of $94.50 each.
I did a lot of browsing, comparing prices on StubHub with eBay and assorted ticket brokers. For Madonna on Wednesday, StubHub offered tickets in Section 305 for $54. Tickets in the same section, high up and in the middle of right field, so to speak, were being offered on eBay, by a broker, at a starting bid of $150 each. Buyers could skip the bidding process and buy them outright for $399 apiece.
But eBay also had bargains. A ticket in Section 329, high up and just behind stage left, opened at $20, attracted 17 bids and sold at $45, or just under the general-admission price. Prices on StubHub vary, too. Two tickets in Section 336, Row H, were offered at $59. Two tickets in Row L of the same section were $101. Several online brokers were offering tickets in Section 336 for about $150, a price that had dropped, by press time, to face value. As the concert approached, Ticketmaster also began selling the $49.50 tickets again. Like commodities traders, buyers can bet that an event will sell fewer tickets than predicted, and wait for falling prices to deliver a bargain.
Once I had the hang of StubHub I succumbed to day-trader syndrome. I began searching the site neurotically, comparison shopping for events that I had no intention of attending. Ms. Winfrey fascinated me; tickets to her speaking engagement, with a face value of $45, sold for about $180 on eBay and $315 on StubHub. A mere trifle. Hot playoff tickets can command prices in the thousands. And when StubHub auctioned tickets to the live finale of the reality show "Survivor: All-Stars" on CBS, two tickets sold for $3,300. Like too many other people, I wanted to see Smarty Jones race for the Triple Crown at Belmont Park. A really good ticket, right at the finish line, sold on eBay for $1,025. Anything remotely near the finish line would have set me back at least $500 on StubHub.
In the New York metropolitan area, the main event categories on StubHub are sports, theater, music and comedy. At the moment, television boils down to one show, "The Daily Show," with ticket proceeds benefiting the Museum of Television and Radio. A category called Family Tickets is also represented by just one event this week, "Dragon Tales," at the Nassau Coliseum in Uniondale, N.Y.
Classical music lovers will look in vain for tickets; StubHub has nothing for them, although that may change in the next year or so. StubHub establishes categories when enough ticketholders express a desire to sell. That has not yet happened for classical music in New York, or anywhere else, as far as I can tell. The Metropolitan Opera alone should be able to support a booming market. Let's get some liquidity going.
Sometimes, not even StubHub can help. At press time, it had no tickets for Saturday matinee performances of "Avenue Q" through Sept. 4. But I found a secret source with a few tickets to spare. Don't tell anyone. It's called the box office.
Return to SBS Ticket Mall Main Page
StubHub Affiliate Manager Interview: Jennifer O'Neal, StubHub.com
By Eric Lander - July 22, 2004
1) Jennifer, can you please tell our readers a bit more about yourself and your role in the organization of StubHub.com?
The dotcom boom hit during my last year at Berkeley and, thinking it would be interesting to tap into this new Internet culture (rumored to be laden with foosball tables & catered lunches), I applied for a job at a brand-new startup called StubHub.com.
If you've ever worked at a startup, then you know job descriptions should be taken with a hunk of salt. Mine was no exception: 'Marketing - Get customers to StubHub'. Along with our affiliate program, I've managed our radio campaigns, handled email marketing, run Charity Auctions, written site copy, created our brand's style guidelines, negotiated with media companies, designed online & offline advertisements, written PR articles, taken customer service calls, and built cubicles.
In other words, I've been busy the past 4 years.
2) Can you describe StubHub.com's identity and reputation?
Started by 2 season ticket holders, StubHub.com is a marketplace where fans can buy & sell tickets for sporting events, concerts, & theater performances nationwide.
For example: if you're a Boston Red Sox season ticket holder, you just paid a lot of money for your packagebut can you make all 81 home games? On StubHub, you can resell your extras to recoup your initial costs while giving other fans access to your seats. (Think: an eBay for Tickets, except fully guaranteed.)
StubHub is returning the ticket market to the fans, who have traditionally been at the mercy of Ticketmaster's availability or scalper negotiations. As StubHub grows, the increased ticket supply is resulting in a reflection of market value pricesso ticket prices are dropping and more fans can see their favorite artists or take their kids to a game.
Our partners include teams in the NFL, NBA, NHL, MLB, & NCAA, performing artists such as The Eagles & Britney Spears, and media companies including AOL & USAToday. So yep, we're legit.
3) As a dot-com organization, how much emphasis is placed on search engine marketing (SEM) compared to other avenues of marketing and sales?
As an online company, we are just 1 click away from any potential customerso SEM is a strong component of our marketing plan. The overall success of PPC advertising shows that consumers are becoming more proactive in their product searches: if they want what you're selling, you'd better be there when they ask for it.
While other companies may turn over SEM to their affiliates, it's smart to maintain a PPC division in-house. This allows you to stay aware of conversion rates, run keyword & ad-copy tests, understand this dynamic industry, and basically cover yourself if those SEM affiliates ever disappear.
4) How many active affiliates help to grow your business?
Though our program is just over a year old, we have several thousand affiliates. Of these, about 18% are active and driving considerable volume. (In case you're worried about the non-performers in your program, know that the 80/20 rule is pretty standard in affiliate marketing.)
5) Of the three forms of SEM (Pay per click advertising, Search Engine Optimization & Paid Inclusion), which methods prove to be the most effective for your top earning affiliates?
Our top affiliates use a combination of PPC & SEO to generate sales.
The key to success with these methods, however, is frequent communication. Because we know this stuff best, we will share SEO tips, PPC formulas, & top performing keywords with our qualified affiliates. This information acts to incentivize, reward, & help themwhich ultimately translates into sales & growth for StubHub.
There is considerable debate about whether this is a good idea - sharing such valuable data with affiliates who could increase your internal PPC bids or who could switch to your competitor's program. For now, we would rather see our top keyword search results flooded with affiliates than flooded with links to our competitors. So choose your qualified affiliates carefully & work hard to develop a level of trust that will bring you both success.
6) Late in 2003, Google had made significant changes in what is now referred to as the "Florida Update". Can you describe for us the impact the Florida update had on your web site as well as the performance of your affiliate network?
Because we only recently jumped into the SEO game, the Florida update did little to hurt us. In fact, our program experienced over 20% growth during November '03so our affiliates seemed to weather the storm just fine (so to speak).
7) What types benefits should affiliates look for when reviewing an affiliate program?
When reviewing a program, affiliates should look at both the commission structure and the sales potential. (I mean, it's great if you could earn $100 for every gold-plated toilet sold through your linksbut how many are you going to sell?) Look for a fair commission rate coupled with high potential for consistent sales.
The action referral period (ARP) is another metric to consider, as you'll want to receive commission for sales that occur after your links were first clicked. The standard ARP seems to be 30 days, so anything more than that should be pretty good. (The StubHub program actually offers 60 days, which is attractive to affiliates who go after repeat purchases during sports seasons.)
As an affiliate, you're pretty much on your ownso having the support of a conscientious Affiliate Manager & having access to tools (eg. an XML feed) are huge benefits to any program. A good AM will tell you how to drive sales and the tools will enable you to do it.
And more than anything, an affiliate should believe in the product being sold. Trust your instinct and promote companies that you likebecause if you don't believe in what you're selling, how likely are other people to buy it? It's easier and more fun to promote products you would actually use.
8) Would you be willing to share with us some of the best growth-models for affiliates working in your program?
While there is no silver bullet or singular solution to creating a successful program, the following elements are key for growth:
- Run Tests - Whether you are running PPC campaigns or building content pages, you should be testing creative, content, keyterms (and everything else) by running A/B splits and tracking your results on a daily basis. Find what worksand keep testing until you find something that works even better. And then keep testing.
- Know the Industry - Pay attention your merchant's industry so that you can effectively market to their target demographic. Seasonality is also important: for example, "Lakers Tickets" may be a profitable keyterm, but only during basketball season. Ask your AM for advice about what to promote & when to promote it.
- Stay in Touch - Your Affiliate Manager is the #1 expert on how to drive sales for that brand. Use your AM as a resource and establish a relationship based on consistent communication. I make myself available via phone, email, & instant messaging: the affiliates who take advantage of this are rewarded with additional help, exclusive bonuses, and more. In short, I'm here to make money for my affiliatesbut they must first introduce themselves or respond to my emails.
9) What major challenges have you helped StubHub.com to overcome as the affiliate program manager?
The main challenge was starting our programs from scratch: with no prior affiliate experience, the learning curve was pretty steep. One of my college friends (Brook Schaaf, AM for Shoes.com) kindly answered my many questions & introduced me to the world of Affiliate Marketing, which helped get us started.
A more consistent challenge is maintaining our EPC on the Commission Junction network. We've held the #1 spot in our category this entire year: our 3month EPC is $22 and our 7day EPC is currently $36. (While EPC is only relevant within CJ, it allows us to attract new affiliates.)
10) For those who are interested in working with you and your affiliate program - what options exist and where can they learn more about your program?
To learn more about our program, you may apply directly via Commission Junction (cj.com) or read more about us.
If you have any questions about our program or anything mentioned in this interview, you are also welcome to contact me directly at 415-644-0810 x 212 or via email at email@example.com.
For the interview, click here at searchengineguide.com