Gigmasters collects a 10% commission each time it brokers a transaction between a buyer and seller of entertainment services. This is referred to as a "booking." Since it instituted its current booking system, Gigmasters successfully booked over 100 gigs at an average commission of $100. This was accomplished with no major advertising, and with the founders working only part-time on the business. The company predicts that in the year 2001, when the company is funded and its founders are working full-time, bookings will grow by 20% per month, and by October of 2001 will be averaging approximately 145 bookings per month with commissions each month totaling $14,000. Gigmasters collects the commission from the seller (the entertainer). Gigmasters does not charge the customer (i.e the buyer) anything to use its service.
Gigmasters has a transaction-based revenue model similar to sites such as eBay.com and HotelReservationNetwork.com. These companies earn money on each transaction they broker, and are among the few profitable sites on the Internet.
In order to determine the best revenue model, the company tested several payment scenarios. Initially the entertainers were charged a flat rate to be listed on the site. Even with a substantial free-trial period, however, there was a reluctance to pay in advance for a service largely unproven. The company then introduced a mixed payment option in which entertainers could choose between a flat-rate fee structure or a commission-based plan.
The majority of entertainers responded positively to the 10% commission plan. Follow-up surveys indicated they favored a system not requiring them to pay any money up front. The company implemented the 10% commission plan exclusively, and this has generated the most revenue.
The first and most important factor is getting people to visit the site. The website is currently averaging 200 visitors a day to the main page of its site (this does not include hits to interior pages of the site). This number is projected to grow by 20% per month over the next year, and then 10% per month in the second year, and 5% per month in year three. Traffic is essential because it leads to gig requests, which lead to bookings, which lead to commissions.
Most of Gigmasters' traffic comes from search engines like Yahoo.com, Excite.com, Hotbot.com, and AskJeeves.com. Search engines direct users to sites based on keywords. The company has been able to achieve favorable positioning for keywords including "booking," "agents," "music," "wedding," "planning," and "party." It has accomplished this by optimizing its code, utilizing search-engine submission tools like Submit-It, and by contacting the larger sites directly when necessary.
Because of its value as a resource to musicians, Gigmasters has been listed on numerous musician websites in their ‘Recommended Links' sections. For example, Harmony Central, a popular destination for musicians, has Gigmasters listed as a recommended site for bands. Other musician sites displaying Gigmasters as a recommended link include: The Music Scene, the Professional Music Forum, and the Indie Journal. Links are a vital form of free advertising, and frequently occur without notice or request. Others need to be actively pursued. Increasing the number of sites which link back to Gigmasters will be a major focus of the company's marketing effort. Often it is a process of browsing from site to site looking for opportunities to register the company's link. It is estimated that approximately 29% of the site's current traffic is originating from links from other websites. In addition to links that target musicians, the company will aggressively pursue links that list Gigmasters as a resource for brides/grooms, corporate event planners, and club owners. These links should have a substantial impact on the site's overall traffic.
Also, many of the musicians and entertainers have put a link to Gigmasters from their main website. This is accomplished by a logo provided to each artist upon signing up. The hyperlinked logo identifies the entertainer as "Officially Registered With Gigmasters." This lends the group increased credibility by being associated with a network of entertainers such as Gigmasters. At the same time, it provides a form of free advertising for the company.
Gigmasters currently relies on banner ads to supply it with 5% of its traffic. So for example, out of the 200 visitors it gets per day to its homepage, 10 will come as a result of seeing a banner on another site (the rest of the traffic comes from search engines, word of mouth, being mentioned in articles, etc).
The company will seek to form strategic partnerships with sites such as WeddingChannel.com, TheKnot.com, iParty.com, and Evite.com, whose customers are planning weddings, parties, and events. Gigmasters will offer these high-traffic sites the opportunity to share in a viable revenue sharing program, and, in return, Gigmasters will benefit from a steady stream of traffic and increased revenue.
In this type of co-branding situation, a link or graphic is placed on the partner's site with words to the effect of "Click Here To Find a Band or D.J." When a user clicks this link, it takes them from the partner's site to Gigmasters. The page will have a look and feel which mimics the partner's design but which lives on Gigmasters' servers. The user would search just as if he/she came to Gigmasters directly. Then end result is a revenue share between the partner site and Gigmasters. The partner site would be providing the traffic, while Gigmasters would be providing the revenue-generating booking system. Gigmasters would handle the billing and would distribute a percentage of the revenue to the partner company.
There will likely be additional costs to the company as a result of a co-brand. The increase in traffic may require the purchase of additional servers to handle the volume. In addition, Gigmasters will need to hire one or more employees to handle the increased customer service and billing responsibilities.
The closest competitors to Gigmasters are (discussion omitted). These sites all connect buyers and sellers of services, however only Gigmasters provides the emphasis on music and entertainment. By doing so, it offers significant advantages to all of it's customers. For example, only Gigmasters provides online press kits allowing customers to both hear and see entertainers before they hire them. Also, only Gigmasters has developed an online bidding system which supplies customers with competitive bids from the entertainers. None of its competitors do.
The second tier of competition comes from wedding sites such as TheKnot.com and ModernBride.com, which focus on providing content on wedding planning, but have also a section providing names and addresses of local merchants. Again, because the information they provide is so limited, it is not any more useful than a phone book.
There are also approximately 13,239 traditional (offline) booking agents in the United States. They earn $2.4 billion annually. Many have websites, but few, if any, offer the ability to book directly online. These sites are more like corporate "brochures" and spotlight only a few of their big-name entertainers with little more than a phone number available for further information. Also, these agents traditionally focus on high-end bookings, generally ignoring the vast market of individuals looking for bands for their weddings, private parties, fraternity dances, corporate Christmas parties, and high school proms. These types of events make up the Gigmasters marketplace.
It is worth clarifying that companies not competitors to Gigmasters are MP3.com, Napster.com, and Emusic.com. These are sites where customers find downloadable music from thousands of bands. Even though Gigmasters does have a large database of groups, this is not part of the company's business model. The user experience at these music sites is geared toward listening to music, rather than being specifically tailored to hiring entertainment. From the moment a person arrives at Gigmasters, she knows that the purpose of the site is to help her find and hire live entertainment for her next event.
Once visitors have reached our site, we must convince them to book entertainment through Gigmaster.com. There are three challenges here:
Helping the customer find the right entertainer
Our internal search engine is combined with audio and streaming video samples so customers can 'audition' local performers from the comfort of their living rooms.
Gaining the customer's trust
Co-branding, as described above, will give the site legitimacy by linking it to other well-known and trusted websites. In addition, we have completed processes to be marked as a secure site for handling sensitive customer data and billing.
Making sure that our listed entertainers respond to gig requests
These gigs must be profitable for performers, or they will stop responding to gig requests. We will limit each customer to choosing 3 entertainers of each type per event (for example, three bands, three photographers, etc.) in their gig request. Each gig request thus represents a 1 in 3 chance for that entertainer to get a gig.
In addition, since each gig request and bid in response are routed through our system, we will be able to keep tabs on how the matches are going.
Overall, there are three main variables in the formula that determine the volume of bookings that Gigmasters will be able to generate:
The day after an event takes place, the company contacts the customer. The purpose is to: a) inquire about the level of satisfaction with the performance, and, b) to discover the rate the entertainer charged to the customer. Once the amount is revealed, an invoice is distributed to the entertainer for an amount equal to 10% of his/her earnings.
The invoice is sent both online and offline. An entertainer has 30 days to remit payment, and may pay online with a credit card or may send a check. If payment is not received within 30 days, his/her online press kit is de-activated. Press kits are re-activated once payment is received. To date, the company has collected on 93% of its bookings.
Because Gigmasters has online billing capabilities, the company will offer the entertainers the option of having commissions automatically billed directly to their credit cards. This will shorten the number of days it takes the company to get paid, and will be more convenient for entertainers.
In order to encourage entertainers to accurately disclose the amount they have been paid for their performances, Gigmasters offers an incentive program. Essentially, the more business an entertainer books through Gigmasters, the higher they are listed in search results. For example, a bride who searches for jazz quartets in Miami, Florida will see those groups listed first who have booked the most total dollars through Gigmasters. By instituting this policy, the company rewards entertainers who book through its service, and gives them priority positioning. Response from entertainers has been positive, and those who have seen results from its service have shown a willingness to disclose the amounts they were paid in order to not jeopardize their likelihood of getting additional bookings in the future.
Because Gigmasters has over 15,000 entertainer press kits, it behooves entertainers to maintain a high position in the categories where they are listed. This is the incentive for them to disclose the dollar amounts they receive through the site's booking process.
Gigmasters also derives revenue from sponsorships of its bi-monthly newsletter. This newsletter currently goes out to approximately 8,000 entertainers who have valid email addresses in the company's database. Because of the large number of musicians receiving the newsletter, it is an effective means of advertising for music & entertainment companies. Past sponsors include: Amazon.com, Emusic.com, RollingStone.com, and Bluelight.com. These companies have paid as much as $1,000 per mailing and receive a paragraph of text placed at the top of the email. Revenue from sponsorships will continue to increase as the company's database grows. Recently, Gigmasters added an additional mailing sent each month to the brides/grooms, event planners, and club owners who have used its service. Potential advertisers for this newsletter include party-planning companies like Evite.com and iParty.com, as well as wedding sites such as TheKnot.com and ModernBride.com.
In addition to its primary revenue sources of booking commissions and corporate sponsorships, the company also derives revenue through additional fee-based services it offers its entertainers. This includes fees for digitizing entertainer's music into RealAudio or MP3 format, scanning press kit photos, and the selling of musician CDs on consignment. As the company grows and has additional resources, these secondary revenue streams will begin to take on an increasingly important role.