Stubhub.com is, at first glance, just a glorified and more flexible ebay that focuses on only ticket sales. They facilitate the sale of tickets for any event – sports, concerts, events, etc… but – dig a little deeper and you find what's seemingly a monster money maker – in a very large niche, with consumers willing to spend money – and actively seeking you out!
The business is completely information based. No hard product, but they do receive the tickets from the seller and forward them to the buyer.
They charge both the seller and the buyer a small fee based upon the sales price of the tickets – and end up making 25% on every dollar that goes through the site. When the average ticket price seems to be around $100 – and an alexa ranking of 3,309 – they're making some serious cash!
Where's the beef? Plenty of beef here – this is a double-quarter pounder with cheese…
- 10% charge to buyers of tickets, in addition to the ticket price and shipping
- 15% fee to sellers of tickets, only charged if the tickets sell
After browsing the site for a while, I don't think it's conservative to say that there is higher than $100 average sales price for each ticket. With an Alexa ranking of 3,309 (very roughly estimated 30,000 daily visitors) and an online average 2.5% conversion… here's the (fuzzy) math:
$$ Breakdown
30,000 daily visitors
x 2.5% average e-commerce conversion rate
= 750 daily ticket purchasers
750
x 2 nobody ever goes to a concert or game alone…
x $100 average ticket price
= $150,000 daily revenue
$150,000
x 25% stubhub take
= $37,500 total daily gross
= $13,350,000 yearly gross
Reasons for success - proven niche with affluent consumers
- listing your tickets for sale is free – pay nothing unless you get your price
- very flexible sales terms
- set price – seller determines the price they want, and that's it
- declining price – seller sets the amount they'd like to get for the tickets, and then the minimum they'll accept. Stubhub slowly reduces the price of the tickets from the high end to the low end.
- auction – seller sets a minimum bid amount and a reserve price, and let's the auction determine how much they go for
- good marketing!
What kind of marketing do they do? - PPC - they're #1 on a google, yahoo or msn search for "sports tickets"
- Radio – I hear their ads on AM radio sports stations very often
- SEO - the google query "site:www.stubhub.com" returns a whopping 340,000 results! They've published a quality textual based page for every major sporting team in every major league. They've published a page for every arena, every concert hall, and every band. Every state, major city, and Canadian province. They've even got pages for overseas locations.
How to steal this idea
I think the keys to this type of business are threefold:
1. big niche – everybody knows about it/goes to it
2. absolute expiration date
3. something you can't easily get
- vacation rentals – lots of vacationers, a set vacation time frame, nobody knows about places to stay away from their home
- cigars – proven consumer, expiration date, cigar shops sell only major brands
- ???
The data and analysis in this blog are complete guesses, not remotely researched, and should not be taken seriously. This is meant only to show the basic business model of the site, and why I think it rocks. If I've royally screwed the pooch, feel free to let me know, and I'll acknowledge my stupidity in a future post.