May 26, 2017

Why our fee is 4.5%

Tim Raybould

Port’s fee is 4.5% compared to 9.5% from our competition because we think ticketing should be more like Shopify and less like Etsy. That deserves some explanation, and after about 15 attempts at a good analogy, this is the one I landed on:

Imagine you make skateboards. (Stay with me).

You’ve opened up your own skateboard shop in a great location and it’s getting good foot traffic. A customer picks out the board they like, brings it up to the counter, and you say to them: "I'm so glad you like my skateboards, but this shop is just a showroom! To buy it, walk next door to Walmart, grab this same board from aisle 5, and buy it there!"

That’s what you’re doing when you put your tickets for sale on a marketplace (such as Eventbrite), resulting in some real downsides. Let’s run with the skateboarding analogy just a little further to illustrate them:

  • Lower conversion. Walmart is right next door, and most of the time, they’ll walk over there, buy the board, and be riding it home in minutes. But not 100% of the time. You’re bound to lose a couple customers because of it.
  • Spam. Let's say Walmart requires an email address to purchase skateboards. A couple weeks later, your customers are getting emails from Walmart trying to sell them other skateboards or accessories that aren’t made by you. They're not just your customers, they're now Walmart's customers too.
  • Restricted to templates. In your store, you put the display together yourself. It shows off the board and all of its benefits. But in Walmart, you only have control over the box. Its place on the shelf looks just like every other product and makes it harder to communicate what your product is all about.
  • Higher price. You sell your boards to Walmart at wholesale prices. If you sold your boards directly from your store, you would sell them at retail prices and not give up any portion of the sale to the marketplace. You've already setup your storefront and are finding your own customers. No need to pay that markup!

Online marketplaces are a bit more efficient than offline ones like Walmart, so the wholesale to retail markup is less severe, however, the difference remains meaningful. Let’s compare Shopify and Etsy using numbers from their 2015 financial statements:

  • Shopify is software to run your own storefront. Their gross merchant volume for 2015 was $7.7 billion. Subscription revenue was $112 million, or, 1.5% of GMV. Add that to the going rate for credit card processing (3.0%) for an average fee of 4.5%.
  • Etsy is a marketplace which brings its merchants new customers. Because of that, their fee is higher. Etsy’s gross merchant volume for 2015 was $2.4 billion and revenue (excluding “other”) was $269 million for an average fee of 11.3%.

That extra 6.8% is well earned by the marketplace if it brings you new customers. However, the reality with events (and you already know this), is that event “marketplaces” do not bring extra customers. People don't find out about events by going to a big list of them and shopping for something to buy. Fact of life.

It's that fact of life that drives our opinion of our industry. We think that when the DIY online ticketing industry was getting started a decade ago, it simply picked the wrong model. Eventbrite charges 9.5% on a $25 ticket because they think of themselves as a marketplace. We believe that the right solution isn’t an Etsy for events (i.e. a “marketplace”) it’s a Shopify for events (i.e. helpful software to sell directly from your website).

Port is the result of that thinking. It’s how we think ticketing should be. It’s how we think ticketing soon will be. And we know from our e-commerce neighbors, that the price for such a tool should be 4.5%, not 9.5%.


P.S., we made an ad!

Tim Raybould

Port is the simplest way to create and sell passes to anything