Eventbrite’s triple strategy of being a two sided marketplace, increasing prices and offshoring jobs to decrease costs ran into reality in Q2, 2024. Let’s break down each and then dive into our normal comparative analysis.
Not a Marketplace
This chart from their quarterly report says it all – the number of ticket buyers is down 16% over the past year:
We have long questioned their turn to trying to convince investors and customers that they are the marketplace for events. By their own early admission in their SEC S1 filing, they have less than 10% market share (they have 21 Million paid tickets out of a market they say is 1.1 Billion). And to compare themselves with Google, the social media networks, existing customers and good old word of mouth as a marketplace is a big stretch.
We see their diversion of resources to become a marketplace as not serving their event customers well.
Increasing Prices
They have increased prices by about 30% over the past 2 years via introducing fees for marketing tools, increasing processing fees and most recently subscriptions:
There are two problems. One is that they are not offering their event customers any extra value over many ticket products in the market. And they sell advertising that basically takes customers away from non-paying customers. This happens by using emails taken from a non-paying customer and sending those people emails promoting paying events. They also showcase other competitive events on the pages of events.
Surprisingly to Eventbrite, this upsets customers and causes them to leave. There are just too many other ticketing options in the market that have similar or better features and superior support at a lower cost.
Not Valuing Employees
Eventbrite has taken the following moves the past several years:
- Layed off 45% of staff at the beginning of the pandemic in 2020. (At RunSignup, everyone took a 50% reduction in salary and everyone stayed).
- Layed off 38% of staff in 2023 – 8% reduction in staff, and 30% were let go to enable hiring people in India and Spain.
- Lay off 11% of staff now in 2024 – 100 people were let go.
While these are obviously frustrated employees, the impact to a company is even more profound. Software is very, very difficult to transition to a new developer. And new features are difficult to communicate to people who have no idea what event technology needs are. In addition support suffers – customers that had a relationship with an employee who knew there business now try to get a reply from a customer service center in the Philippines. This costs Eventbrite less in salary, but the frustration for a customer that needs something is a real cost because some customers reach their tolerance limit and leave. Finally, the morale of a company has a direct bearing on the quality of the output of the team – product, support and operations suffer.
The Numbers
Moving on to the numbers where we compare ourselves to Eventbrite. The core metric we focus on is tickets sold. As this simple table shows, Eventbrite has declined a remarkable 21%, while RunSignup has grown 60% since the pandemic:
We track how many times larger Eventbrite is than RunSignup on this measure. We have reached a new best at Eventbrite only being 8X our size – they were 16X our size in 2019. As an employee owned company who focuses on technology for our customers, we believe we can be of similar size in the next 10-20 years.
For Eventbrite, they have increased revenue by 20% even while dropping their ticket sales by 21%.
Wall Street has not been impressed, driving their market capitalization down well below $400 Million (they used to be worth $2 Billion)
Several Wall Street analysts have lowered their ratings overnight. For example, Piper Sandler said “we need to see sustained (multi-quarter) momentum in paid ticket”.
So the fundamental problem is paid ticket volume, which implies that their Marketplace is declining and not growing. This decline is also in the face of event attendance and participation trends across the world are actually going up. For example, RunSignup is seeing the average increase per event of 8% across our customer base from 2023 (which was similar to 2019). And Julia has many descriptions of customers increasing their ticket sales. But Eventbrite is stuck at a decline in paid tickets of 21% from 2019 levels.
Financials
While the paid ticket volume is the key indicator, it is worthwhile to see the underlying financials to see why Wall Street has punished Eventbrite so much.
Eventbrite Business Loses Money. Here is snapshot from their current quarter compared with last year. This is in spite of the price increases shown above (“taking” $3.98 from each ticket. up from $3.04) they still lost over $6,000,000.
This is not an isolated problem. Looking at their 10K filings with the SEC, they have never made money from operations:
Wall Street looks at this, and in the past the stories Eventbrite have told have led Wall Street to expect a turn around “this time”. The current story of being a Marketplace propped them up for a while by allowing Eventbrite to collect more revenue from each of their declining customers by charging for Email, Ads and more recently slapping a subscription on customers. Now that the subscription revenue is coming off, Wall Street is not convinced Eventbrite can turn it around.
Balance Sheet. All those losses have to come from someplace. There are four key places where the money was raised:
- $78,000,000 – Pre-IPO investment rounds of at least $78 Million
- $230,000,000 – IPO funding
- $358,000,000 – Debt financing
- $314,000,000 – Customer funds not yet paid to customers – aka “Float”
Here is their balance sheet from their latest quarter:
So sitting at the end of Q2, 2024, they owe event producer customers $314 Million. And they owe debtors (there are a couple, and some of them have equity rights tied into them) $358 Million.
Looking at the asset side of the company, they would have to scrape to pay everyone back today (and with losing money every quarter, will they ever?).
Eventbrite does make money on that cash with interest payments, helping to turn around their operating loss:
The Other Income this quarter of $3.7M was from settlement of a lawsuit against one of their customers (page 16 of their 10Q). Since half of their cash is provided by customers, I guess you could say they have a higher “take rate” than the $3.98 per ticket.
Comparison. Just to compare, RunSignup and TicketSignup charge a lot less, with totally free and unlimited email and websites with no ads for competitors. And we actually make a profit and have profit sharing with our employees. And our current customers are growing their events, and we are winning more and more customers. So Eventbrite could operate their business better – the ticket business is a valid business.
Future
It is really hard to see Eventbrite continuing in their current form to be honest. They do have a good brand having been the early winner in the ticket space. And they have a huge customer base (8X our size!). They need some sort of reset – their investors, employees and customers will not accept this current imbalance. We will be watching and learning from this experience.