SeatGeek is a search engine for tickets to sports, concerts and other live events. SeatGeek has disrupted the event ticketing space, similar to what Kayak.com did for airline tickets. The company was established to help consumers navigate the secondary market for tickets by aggregating the current inventory so users can browse and compare tickets across 100+ resellers (StubHub, Razorgator, TicketsNow etc.) and 150K+ venues. SeatGeek’s business model is predicated on the creative use of data to improve what used to be a very inefficient (and fairly illiquid) market. Simply aggregating the market saves users time and headache, buts SeatGeek’s analytic capabilities provide price transparency to help consumers make more informed purchase decisions.
Value Creation – “Deal Score” Algorithm
SeatGeek’s differentiation goes beyond serving as an aggregator/search engine; the company’s key value proposition is its ability to calculate a Deal Score for every posted ticket. Deal Score is a metric that gives consumers a more digestible view of the ticket marketplace by indicating the relative value (scale of 0-100) of a ticket listing and ranking of the current listings for a given event.
Deal Score is calculated using a complex, proprietary algorithm that harnesses a vast array of historical data to estimate the fair market value of that ticket. According to the SeatGeek, one challenge is that event tickets can have significantly more variability than airline tickets (e.g., coach tickets on flights are priced the same at purchase regardless of the seat location itself). As a result, SeatGeek factors in a broad set of inputs when calculating Deal Score.
The main input is Seat Quality, which incorporates the row number and section location. Seat quality does not vary across events, so Deal Score assumes a constant relationship between seat price and seat quality across all events at a given venue based on long-term historical purchase data. Deal Score’s algorithm also incorporates Event-Specific inputs like historical ticket prices for the event/performer, event popularity (for sports this may factor in the teams’ win/loss record, significance of the matchup, etc.) and the quality (and pricing) of currently available tickets. For those who are curious, there is more detail on the specific algorithm used (called a Kalman Filter) on SeatGeek’s blog (http://chairnerd.seatgeek.com/the-math-behind-ticket-bargains/)
Leveraging these inputs, Deal Score’s algorithm predicts an expected fair market value for a given ticket. By comparing the fair value as predicted by its algorithm to the current listed ticket price, SeatGeek determines a Deal Score to help users discover the best deals. In addition to saving time and money, consumers benefit from purchasing with more confidence and transparency – not having that feeling that they were just ripped off. Interestingly, this value proposition functions as a virtuous cycle; the Deal Score algorithm is routinely adjusted as SeatGeek continuously learns from customers purchases (i.e., sale prices provide inputs that feed back into the system to improve its predictive power).
See below for examples of SeatGeek’s interactive mapping platform, which highlights (via colored dots) the best and worst deals for a given event.
Value Capture & Future Outlook
SeatGeek has grown immensely since its founding in 2009, and has attracted more than $100mm in VC funding. SeatGeek captures value by receiving an ~8-12% commission on ticket sales made by its partners (SeatGeek directs you the reseller’s site when you clicks on a given ticket). In 2014, the company reportedly directed $155mm in ticket sales and realized ~$25mm in revenue.
Looking ahead, the company is moving beyond search/ info aggregation to offering users a “fully-integrated mobile ticket experience” including event recommendations, digital ticket delivery and its own “SeatGeek Marketplace.” This Marketplace is the biggest step: SeatGeek announced this past week that users can now sell tickets directly on its site. Leveraging the same algorithm behind Deal Score, SeatGeek will recommend a list price so sellers can optimize their sales value. SeatGeek will capture value by charging a 15% fee to sellers. I’m curious to see how its partners will respond to this latest announcement; SeatGeek has gone from brokering a 2-sided market (specifically helping the “buyers”) to now threatening to disintermediating the resellers by directly catering to ticket resellers. The ticket secondary market itself has become increasingly competitive, as Ticketmaster (known as a primary seller) has recently entered the resale market. Only time will tell if StubHub and other resellers can withstand SeatGeek’s growing importance in the ticket industry. Given its proprietary data analytics and significantly enhanced user experience, SeatGeek will certainly continue to shape the market.