eBay bought StubHub for $310 million. Ryan McIntyre discusses the deal:
StubHub’s strategy of partnering with teams coupled with heavy advertising on sports radio (which can be a very cost-efficient media buy) enabled StubHub to build inventory, traffic and transaction volume quickly. Eventually the site grew large enough that it no longer needed to partner with the sports teams to build inventory and transaction volume, and it started growing quite well organically as buyers and sellers of tickets recognized the superior experience that StubHub provided. The company grew quickly and is said to have sold over $400m worth of tickets in 2006, netting the company about $100m in revenue last year.
StubHub’s success can be attributed to the power of vertical specialization. While eBay may have a lock on generic merchandise auctions and Google may own generic web search, these markets are so vast that there are often extremely rich verticals that can be better served by specialization, be it shopping search, travel search, ticket auctions, or other as-yet-unidentified verticals. When vertical specialization offers a sufficiently more compelling experience than the generic approach, real value can be built. The trick is figuring out which verticals are ripe for this type of mining. Clearly StubHub found a rich vein to mine.