By offering a venue location (albeit electronic) where season-ticket holders could safely sell their tickets, StubHub quickly attracted customers.
StubHub then moved into direct consumer marketing by facilitating ticket sales between any two willing parties including guaranteed delivery through FedEx. StubHub quickly became the second largest ticket resale auction site, with 2.1 million unique visitors per month and over $100 million in annual revenue. StubHub’s success naturally attracted competition, and their unique position within the market began to erode. At the same time, industry powerhouse Ticketmaster began lobbying to have states outlaw the reselling of tickets for more than their face value.
With rising competition, a business model that was growing obsolete, and the probability of weakening revenues, StubHub needed a new strategy for growth and profit. Several options present themselves. First, StubHub could offer advertising space on its site for sporting and theatrical events. Internet advertising has been the number one revenue generating system for profitable internet ventures. Google, for example, projects advertising revenues in excess of $26 billion by 2009, and worldwide ad revenue is expected to increase by over 20% per year in the foreseeable future. StubHub has avoided this avenue in the past, but with more companies looking to market to its clientele, it has gradually expanded in this direction.
While StubHub could contract with event sites to sell tickets for them, attempting to undercut Ticketmaster would be difficult. Most venues would not be eager to pay the same percentage commission those individuals selling tickets would, and StubHub has no resource-based advantages over Ticketmaster. This strategy is not a part of StubHub’s current model and would be difficult to implement. Attacking an entrenched provider is usually a recipe for high expense and low returns.
StubHub’s unique buy/sell/guaranteed delivery method makes expansion of the auction a distinct possibility. Apparently eBay thought so too, because they bought StubHub in January 2007 for $310 million to replace its own failing ticket resale site (marketplace). Being acquired by eBay gave StubHub a large cash infusion that boosts many of StubHub’s weaker areas, like access to talent and experience, established platform, and well, cash.
The infusion of capital from the eBay deal presents a fourth option: StubHub could begin buying tickets in bulk and then auctioning them off itself. The new system would function similar to the stock exchange, which might substantially increase site traffic. The necessary information would be readily accessible, and though StubHub does not currently have the expertise to manage the risks and returns, that could be acquired. This market is currently unfilled, making it a plausible avenue for expansion.
If StubHub decided to market concert and sports memorabilia at its Web site, this would be an example of which portfolio strategy?
b. related diversification