SeatGeek Helps Online Ticket Buyers Beat the Scalpers

Tickets to see the Milwaukee Brewers play a home game on a Wednesday night—ideally for the last game of a series—could be the best deal in Major League Baseball. That's the perfect combination of factors that leads to a bargain, according to two-year-old startup SeatGeek. The number-crunching website aggregates sports and entertainment tickets available on resale sites such as StubHub, then mixes together millions of data points, some brainy algorithms, and an easy-to-use interface to help fans find the best deal possible.

The process of buying tickets on the secondary market can be maddening. Fly-by-night vendors and a lingering air of illegality—sidewalk scalping is still against the law in many states, while scalping online is not—make it hard to know whom to trust, while price gougers make it tough to find a good deal. Resellers change ticket prices seemingly at random in a way that maximizes their revenue and assumes "many consumers are not strategic," says Andrew T. Sweeting, a Duke University economics professor. Primary ticket sellers are getting in on the act, too, with Ticketmaster, sports teams, and event promoters experimenting with variable pricing. "It's kind of overwhelming, the malice people have toward ticketing," says SeatGeek co-founder Jack Groetzinger. "They constantly feel like they are getting ripped off."

Groetzinger and his co-founder, Russell D'Souza, both 26, came up with the idea for SeatGeek in 2008 and launched the site a year later. The former fraternity brothers were living in Boston and wanted to see the Red Sox and the Celtics play. Tickets for both teams are scarce, and the college buddies were "overwhelmed by the bad experience of buying online," Groetzinger recalls. They ended up spending hours bouncing among different reseller sites, waiting to find the best prices. Data, they thought, might bring transparency to the black hole of ticketing.

Sites such as Kayak and Orbitz (OWW) have long aggregated and helped buyers sort through airline deals. A startup called Farecast used historical data to predict changes in air travel ticket prices starting in 2006. (In 2008 it was bought by Microsoft (MSFT), which uses the technology in its Bing search engine.) Groetzinger and D'Souza quickly learned that making sense out of event tickets is trickier than in air travel: While every coach ticket on an airplane is more or less the same, seats for events can vary greatly.

Searches on their site yield a list of most of the available aftermarket tickets displayed on a large dynamic map of the venue. Overlaid on the map is SeatGeek's key feature: a "Deal Score" that rates each ticket. A big green dot over a seat means it's a bargain; a small red dot, not so much. Want to see Taylor Swift in Hartford on June 22? The $90 seat in Row V of the nosebleed section is a great value, as are the $195 tickets in front of the stage. Glancing at the map, users quickly understand that "there are still good deals to be found," says D'Souza.

Behind the scenes, the color-coded dots are powered by SeatGeek algorithms that take into account such factors as how far a seat is from home plate or the angle of a view to the stage, and what Groetzinger calls the "irrational premium" fans put on sitting in the first row of a section. Equally important is how the price compares with historical data for similar concerts and seats at the venue. For sports events, SeatGeek takes into account a team's win-loss record, how far the game is into a season, and even weather forecasts to determine how in-demand a ticket will be.

SeatGeek's main rival, FanSnap, uses a simpler formula to create a short list of top deals for each event instead of evaluating every available ticket. "If it's not worthy, it does not get listed," says FanSnap spokesman Christian Anderson. Tom Davis, who co-founded a similar startup that closed last year after a co-founder passed away, says that at one point about a dozen sites tried to aggregate event tickets. Now, "aside from SeatGeek, a lot of them have just frozen in time," he says.

Like Kayak and similar airline ticket aggregators, SeatGeek doesn't sell tickets directly but instead links to the seller's site, like StubHub or EBay (EBAY). The sites then pay SeatGeek a commission of 9 to 10 percent of each transaction. SeatGeek won't discuss its revenues but says the average customer buys 2.5 tickets totaling $250 to $300. It has raised a total of $2.3 million in funding and now has 12 people on staff—its corner of a shared office in Manhattan is overflowing. "It sounds ridiculous, but I think we have about 18 million tickets on SeatGeek at any given time," says D'Souza.

The founders say their data analytics have been so well-received that at one point they planned on selling the information back to resellers, who wanted to use it to price tickets more strategically. But SeatGeek shelved that idea. As Groetzinger says, "It's a little tricky to play both sides."

The bottom line: SeatGeek uses data including a team's win-loss record and weather forecasts to help fans value tickets before they buy.

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