Ticketmaster processes more than 90 percent of all concert tickets in the United States, along with the majority of theatre, sporting, and family events. From this ticket base, the company is able to extract significant “convenience charges” per transaction, often exceeding 20 percent of the purchase price. Where does this market power come from? Can it be sustained? Who is best positioned to unseat the monopolist?

Online ticketing connects consumers to live entertainment, a function that features several competition-limiting characteristics. As with any online marketplace, network effects are strong; having access to a greater number of events increases value to consumers, and a larger pool of ticket-buyers attracts more events to the platform. Another characteristic common to marketplaces is the undifferentiated nature of the service itself. There is little inherent value to the platform outside of the quality of the tickets it supports, a fact which limits room for competitors. The nature of the product being sold also serves to limit competition in the ticketing space. Live concerts, shows, and sporting events are unique and scarce commodities. Your favorite band only comes to town once each year, and your local team (regrettably) rarely reaches the playoffs — there are very few substitutes for these unique experiences, and they cannot be replicated in response to increased demand. All of this makes it difficult for event promoters to use multiple exchanges simultaneously to sell tickets, another characteristic of winner-take-all markets.

Given these market properties, it is unsurprising that a dominant player has emerged to capture monopolistic market share. On top of their natural advantage, Ticketmaster has exploited a partnership with Live Nation (their parent company), which owns nearly every major amphitheater in the country, along with House of Blues clubs. Having event promotion and ticketing under the same roof creates significant pricing power. So how can another player enter the space and compete with Ticketmaster? Two companies offer possible answers.

CrowdSurge, a ticketing startup, attempts to create differentiation by offering a white-label ticketing solution directly to music artists performing at major venues. Promoters typically reserve a small percentage of tickets for artists to distribute directly to their fans through presales, and CrowdSurge provides a customized platform the artist can embed within their own websites to run the process. Because the artist sells the tickets directly, CrowdSurge does not need to bring its own audience, circumventing the network effect that typically stifles market entry. The company also avoids the multi-homing cost barrier by taking advantage of a natural divide in the seller of tickets (pursuing artists rather than promoters). With service charges as much as 70 percent below those of Ticketmaster, and an integrated solution that looks and feels consistent with the artist’s website, the company is creating goodwill with both artists and fans, while avoiding promoter gatekeepers.

Eventbrite has taken a different approach, aiming for the long tail of events that were never worth the incumbent’s attention. The platform allows anyone to create and sell tickets to live events, creating a simple outsourced solution for small performances, corporate events, and community gatherings. Thus, by targeting non-consumption (events without a ticketing home) rather than direct competition, Eventbrite has been able to carve out a customer base, selling more than 130 million tickets to date. At this scale, the company can begin to enjoy the same barriers to entry as Ticketmaster, building its own network of events and customers to improve the value of its product.

Both CrowdSurge and Eventbrite have been able to establish themselves in the ticketing space by avoiding direct competition with Ticketmaster. The final question remains: can either leverage their success to jump into the ring with the monopolist and win a sizeable piece of the broader ticketing market? The bargaining power of the performers will play an important role in either success story. For CrowdSurge to gain market share, megastars will have to see the value of selling tickets directly, incorporating higher percentages into contract terms. For Eventbrite, performers who start using the platform when starting out will have to fight to retain that right as they move into bigger venues. Both of these stories would benefit greatly from an improved consumer experience, offering simple and customized browsing of local events and seamless checkout processes. Here the companies’ current strategies appear to diverge; CrowdSurge focuses on creating a customized experience for fans of a particular artist, whereas Eventbrite recommends local events to consumers to build stickiness. A service such as Timbre (a concert-searching mobile app) offers an example of the intersection between these strategies, offering recommendations and a strong user experience. Perhaps a partnership with a similar service would help build and sustain customer loyalty in the ticketing space. Challengers like CrowdSurge and Eventbrite will need all the help they can get if they want to unseat the mighty Ticketmaster.

 


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Recently, I came across a new trend – social commerce – where more and more businesses are providing discounts and other incentives to its customers in exchange for publicizing their purchases online. Social Commerce is the intersection of social media activity and eCommerce where sharing leads to real dollars. I learned of this phenomenon for the first time through an online shopping website Gilt.com. When I logged in on to the website using my iPad, Gilt offered me a discount to download their app and asked me for permission to make my purchases visible to my friends on facebook (Gilt promised some exceptions, however, gifts and intimates purchased would be excluded). At first, I thought: “What a genius marketing idea!” but then I started to doubt whether this idea was feasible and would get any customer buy-in. On the one hand, people I am friends with probably fit within my age and socio-economic group, thus purchases I make might be items my friends would be interested in buying. Ecommerce businesses by making my purchases public would be getting access to exactly the customers they want. Furthermore, the fact that I actually made the purchase as opposed to just liked the item (Pinterest allows users to simply share items they find appealing) might be a more powerful signal to my friends and might have a meaningful influence in driving transactions for any given ecommerce business. However, at the same time users might not be as excited about making their purchases (sometimes irrational, i.e. items of designer clothing that cost way more than they should) public. I, for one, thinking about that downside refused to become a member of this service despite the whooping 20% discount Gilt offered me). I imagine, there are many users like myself out there who would be worried about giving away the right to make their purchases public to online commerce website.

Social media democratized marketing for small businesses: successful promotion and distribution of products is no longer reserved for larger companies who can afford expensive media expenses such as TV ads, commercials during sporting events, etc. Companies like Facebook and Twitter have leveled the playing field – allowing participants to share events, products, and companies they are excited about with their friends by simply clicking the “like” button. Mass adoption of these platforms made it incredibly cheap for companies to reach a large subset of the population that might have a high likelihood of enjoying and purchasing their product.

EVENTBRITE CASE[1]:

Eventbrite is one of the companies that is very excited about social commerce and uses it extensively. The company allows users to share the event before they’ve purchased a ticket by featuring the Facebook “Like” button. On their order confirmation pages (after the ticket has been purchased), they placed a “Publish to Facebook” tool. They track event-sharing behavior carefully and have made few key discoveries from the data they collected between October 2010 and March 2011:

  • 40% of sharing through Facebook occurred on the event page (via the “Like” button) vs. 60% of sharing which occurred on the order confirmation page. This suggests that the motivation to share is higher once the purchase is made and the guest is confirmed to attend the event.
  • The company’s BSR (browsing share rate) is 1% — only 1% of people who are simply exploring the idea of going to the event share with their friends before purchasing a ticket to the actual event. Eventbrite’s TSR (transcation share rate), on the other hand, is 10%, which means 10 times more people share an event from the order confirmation page.
  • They’ve also found that post-purchase share on facebook drives 20% more sales than a pre-purchase share.

The Eventbrite case shows that social commerce is a very powerful tool that could be used to drive sales for a business. However, are all businesses created equal when it comes to social commerce? Or are some businesses meant to succeed in integrating their tool into their marketing strategy while others are doomed to fail?

I believe it is the latter. Although people feel more and more comfortable sharing many aspects of their lives online – e.g. music they listen to (Spotify), events they go to (Eventbrite), places they’ve attended (FourSquare) – products they buy might not be one of them. Firstly, because frequently purchases we make online (although frequently discounted) might be overpriced – an average price for a shirt on Gilt is around $100, which is significantly higher than the price of an average shirt an average American buys (partly due to the fact that items sold on Gilt are designer). Secondly, frequency of their purchases might be something people are ashamed of. If someone shops online every week feels embarrassed by their shopaholism, they might be uncomfortable by these public posts and thus, it could potentially hurt Gilt by discouraging to customers to make frequent purchases. Thirdly, many of us have facebook friends that we do not know much about, so perhaps I am not comfortable with those individuals finding out more about my spending patterns. For the reasons above, I can see how Gilt could fail at implementing a successful social commerce initiative. I believe to succeed, they should beta test it and incorporate a solution similar to that of Eventbrite, i.e. let customers choose which purchases they want to make public and which they prefer to keep private (as opposed to making every purchase public by default). This approach would allow Gilt to analyze their preliminary data and ensure that their customers are happy with this sharing and then consider making it a default feature.


[1] http://blog.eventbrite.com/social-commerce-2/

 


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