Monday, February 13, 2012

Entrepreneurs Should Question the Way Things Are Done, Says Online Ticket Broker

After leaving an internet company he cofounded here, Eric Baker took the business concept to other countries.

STANFORD GRADUATE SCHOOL OF BUSINESS — Eric Baker, MBA ’01, still remembers the discouraging predictions he received after proposing a company that would let people resell sports and event tickets online without having to stand outside the venue on the day of the event or resort to ticket brokers. Some business skeptics called his idea “legalized scalping” and proclaimed it wouldn’t work.

However, Baker has proven his critics wrong — twice.

Along with GSB colleague Jeff Fluhr, Baker launched ticket reseller LiquidSeats in mid-2000, just in time for the colossal tech stock market crash. But their idea had staying power. The company — renamed StubHub — has become a leader in the ticket reselling market and was sold to eBay in 2007 for $310 million.

Baker is pioneering again, expanding the online ticket reselling firm that he started in Germany in 2006 to more countries.

His current company, viagogo, operates in 27 European nations where Baker said it sells millions of concert and sports tickets annually. The London-based company has secured several major deals, including the French Open tennis tournament and the Manchester United Football Club professional soccer team.

Viagogo recently reached a high-profile partnership with pop star Madonna for the international leg of her 2012 world tour. Fans unable to use their tickets can resell them on the company’s site. Viagogo even has expanded into the United States, following a 2007 exclusive partnership with the National Football League’s Cleveland Browns.

“Fortunately, we didn’t listen to the critics. We did the research and saw there was an opportunity,” Baker told a GSB audience during a recent talk sponsored by the student-led Stanford GSB Entrepreneur Club. “If you’re going to do something entrepreneurial, you have to be willing to question authority and question the way things are done.”

An expensive experience scoring tickets for The Lion King on Broadway back in 1999 helped give Baker, then working at Bain Capital, his business idea. His girlfriend wanted to see the show, and he had to pay “through the nose” for their seats. “It just seemed like, gosh, there must be some better way,” Baker explained. “Why isn’t there some sort of ticket reseller on the internet?”

He examined why and determined a couple of reasons why other firms shied away from the industry. Financial conflict of interest was keeping online seller TicketMaster out of the resale market, he concluded, while eBay’s bidding model wasn’t nimble enough for quick sales of event tickets.

Later, while enrolled at the GSB, Baker investigated selling his tickets for a big Los Angeles Lakers basketball game that he couldn’t attend. Posing as a customer wanting to buy a ticket for the game, he called a ticket broker and was quoted prices between $1,500 and $1,800. Later, Baker called back offering to sell his ticket; the broker offered to pay only $1,000. “Clearly, there was an opportunity,” he said.  

The idea for a website to aggregate sellers was born, with the company making money by charging a fee to both sellers and buyers and guaranteeing the transaction.

The company grew. At the time of its acquisition by eBay in 2007, StubHub was registering $100 million in revenue, according to media reports. But cofounders Baker and Fluhr had a falling out several years earlier, prompting Baker to leave the business in 2004.

Shortly after leaving StubHub and preparing for a trip to Europe, Baker said he realized the event ticket-resale industry could also flourish abroad. “There’s nothing different about going to a Manchester United football match than going to a Dallas Cowboys football game, or going to a Madonna concert in Milan compared to going to a Madonna concert in San Francisco,” he surmised.  

He launched viagogo in 2006 and is the company’s chief executive. In addition to venture capital firms, investors include power tennis couple Andre Agassi and Steffi Graf and French luxury goods tycoon Bernard Arnault, according to the Guardian. Challenges have included navigating different cultures and payment systems, Baker said, but the business also uses knowledge developed with StubHub.

Some European critics have called Baker a “ticket pimp” who caters to wealthy fans with the “biggest wallets” because some tickets are sold for far more than face value, according to a 2009 story in the Guardian. Baker countered that the average ticket sells for no more than 20% above face value, with many seats trading for less. “We are providing a way for people to have transparency and eliminate fraud,” said Baker, according to the Guardian’s report.

Meanwhile, Baker told his GSB audience that the e-commerce business continues to gain steam, with recent launches in Australia, Argentina, and Brazil. Viagogo is already bigger than StubHub was at the same stage, he said: “We’re trying to build something far, far bigger than what StubHub is today, and StubHub last year did $1.6 billion in gross sales. We have bigger ambitions. There’s a lot of opportunity out there.”