Scalper

Say the word “scalper” and most people are likely to think of a shady individual, standing across the street from an event venue trying to sell extra event tickets and likely oversized t-shirts as well. When Jack Murphy and Patrick O’Brien hear the term, they think of a vendor in a legitimate marketplace that lacks the liquidity and technological tools of other segments of the secondary ticket market.

Murphy and O’Brien recently launched the Ticket Scalpr, an iOS app that creates a mobile P2P (person-to-person) marketplace for last minute ticket sales.

While Ticket Scalpr allows sellers to list tickets up to seven days in advance of an event and supports both e-tickets and physical paper tickets, its real value exists in the last 12 hours prior to an event and with difficult to unload physical tickets. During this timeframe, it’s often too late to complete an online sale. Typically, this leaves the buyer and the seller at the mercy of an unknown market existing at the periphery of the event venue. With the new mobile app, the market can be assessed and sales can be arranged remotely and with a broad view of the marketplace.

Scalping traditionally works as follows. The scalper must first buy the ticket, most often from an individual, rather than a broker, and typically on premise, rather than in advance. The scalper then turns around and re-sells the tickets to last minute attendees at a markup. In order to make the whole charade profitable, the scalper must buy their inventory at a discount to market value, where that value is set by supply and demand and may differ from the “face value” of the ticket.

The problem with this scenario, for both the consumer and the scalper, is that there’s no effective way of determining the last minute supply and demand levels, or the resulting market price. Sure, sites like StubHub and Craigslist will list tickets to most events, but they do little good in the last hours before an event. Ticket Scalpr aims to fix this. Clearly no one could have done this well before mobile.

Ticket Scalpr built its model around the two parties meeting in person to exchange tickets, either at the event venue or at a mutually agreed upon location prior to the event. This makes sense in many scenarios, but the way it’s implemented leaves something to be desired. Currently, the app shows the buyer the seller’s general location only after the transaction is completed. You could imagine how that might go wrong.

This means that the buyer of a pair of SF Giants ticket could realize after committing to the purchase that the seller is located in Berkley and that they’ll need to travel to the East Bay to pick up their tickets. This is not a great experience. The founders are aware of this issue and in an upcoming update, will begin showing the buyer where the seller wants to meet prior to the transaction – listing either at the venue or at a city-level location.

In addition to the last minute convenience, buyers and sellers are incentivized to use Ticket Scalpr because it charges both parties less than competing marketplaces – except Craigslist, which is free, but as a result offers little technological support. StubHub charges Sellers a 25 percent commission, 15 percent from the seller and 10 percent from the buyer (in the US), plus shipping and handling fees and other additional fees. On Ticket Scalpr, the total fee is 15 percent, charged to the seller. Whether this friendly rate will last as the market expands and matures is unknown, but at present, it’s another reason to consider the upstart marketplace.

A Ticket Scalpr transaction unfolds as follows. The seller takes a photo of the front and back of a ticket to verify authenticity before listing. The buyer then selects the desired tickets and completes the purchase through the app, with all funds held in escrow until the exchange is completed. Once the buyer has picked up the tickets and is satisfied, they must upload their own photos of the ticket front and back to complete the transaction and release the funds.

Ticket Scalpr has been in a public beta in San Francisco since March 7, and will officially launch with the Giants’ home opener on April 5. As a pre-launch promotion, the startup is giving away a pair of tickets to the game for just $0.01. The company partnered with RecordSetter, a New York startup, to register this as an official World Record for the “Most Tickets Sold to a Pro Sports Game for One Cent.”

To seed the market early on, Ticket Scalpr has partnered with Ticket Evolution, a New Jersey-based secondary market ticket aggregator owned by more than 120 brokers. The partnership will mean that when users search for tickets to desired events, they’ll be less likely to find no inventory available.

Murphy and O’Brien recently graduated from the inagural class of Adam Draper’s Boost.VC accelerator, and have since raised an undisclosed – and seemingly limited in size – seed round from Draper Associates and “a Chicago-based angel investor.”

Ticket scalping exists in a regulatory grey zone where it’s often unclear both what is legal, and what will be enforced. The answers to these questions can vary on a venue-by-venue and event-by-event basis. Generally, it’s understood that it is legal to sell tickets at or below their face value, off premise of the event venue. Many venues have even embraced the practice by creating legal ticket scalping zones with their own regulations. The final layer of ambiguity arises in completing a transaction via a virtual marketplace whose jurisdiction is unclear.

When I spoke to Murphy and O’Brien about these issues, they didn’t have a clear answer beyond the fact that scalping happens every day and they’re following the best practices of existing sites and vendors. If Ticket Scalpr is to achieve its objective of growing to a massive scale and becoming the de-facto last minute ticketing marketplace, the founders will need to get clearer on the regulatory environment in a hurry.

Online ticketing and secondary market ticket platforms are two of the most competitive and oldest ecommerce categories. Between Ticketmaster, Ticketfly, StubHub, ScoreBig, SeatGate, Craigslist, and other sites, consumers can already buy, sell, trade, and search for tickets to nearly any event imaginable. As a result, Ticket Scalpr will have to rely on solving the last minute problem as its differentiating factor. The fact that its fees are slightly lower and that it was designed from a mobile-first perspective won’t hurt, but it’s convenience and immediacy that will ultimately make the difference.

Ticket Scalpr is barely a fly on the ass of the overall ticketing industry. Its founders hope to prove the model in San Francisco and then expand to other sports-crazed cities beginning with Chicago. There remains a number of kinks to iron out and a massive amount of awareness to build. But, the demand is there and model looks sound. That is, until those shady guys come knocking after realizing they’ve been replaced by an app.

Scalpr Giants