In this segment from Industry Focus: Consumer Goods, Motley Fool analysts Vincent Shen and Nick Sciple discuss both what they like and what would keep them up at night as investors in Eventbrite.

On one hand, the company boasts consistent growth despite declining marketing expenses, plus solid loyalty from "creators" on the platform. But Eventbrite is still susceptible to competition from both its larger industry peer and partners that drive customers to its service.

A full transcript follows the video.

This video was recorded on Aug. 28, 2018.

Vincent Shen: Looking at our takes now, in terms of the bullish/ bearish points on this company, what we like and don't like, I'll let you start. What is something that you feel more bullish about with Eventbrite?

Nick Sciple: I think their customer acquisition is something that's very bullish for the company. 70% of the creators that come onto the platform for Eventbrite site either prior experience as attendees at Eventbrite events, or word of mouth from other creators, as their mode of getting onto the platform. That signals that Eventbrite isn't having to do a lot of active marketing to acquire these creators. Just the quality of the platform is bringing people on. And then, once these people get onto the platform, they tend to stick around. In 2017, the retention rate for Eventbrite was 97%. That means almost every creator who came onto the platform in 2017 remained with the platform going forward. They have relatively low cost to bring people onto the platform, and once they get on, they tend to stay. And those revenues stick around, as well. From the cohort of creators who came onto the platform in 2013, 78% of their revenue is still going to Eventbrite in 2017. So, you have a low cost to acquire these customers, and those customers stick around and keep paying dividends for the company over time.

Shen: I forgot to mention this when we were looking at some of the line items on the income statement. Because of these low-cost avenues, like these word of mouth referrals, and how they're building up their new creators, the company says that sales marketing support costs will decrease over time as a percentage of revenue. That's thanks to these options, essentially, that they have. It proves out in some of the latest numbers that we've seen. That line item has declined from 36% to 27% of revenue in 2017. I think that will only become a smaller line item or expense as we go forward.

Something else that I liked, we've talked about the fixed fee, the percentage per ticket, the payment processing fees the company's also getting. This is still a small part of the revenue, less than 5% of the top line. But they're also starting to branch out and look at things like day of event and on-site services, branding and web development, and event administration, marketing -- additional services, for example, that creators might need as they scale their businesses. That's just another source of potential revenue as the company grows.

The trends overall, we've talked about the breakdown of free vs. paid tickets. Paid tickets grew, the volume was up 59% in 2017, up another 54% in the first half of 2018 to 47 million, just in terms of broad volume. We're seeing, again, a solid trend in growth for the creators and the events that are actually generating revenue for the company.

You talked about retention rate. The last thing I'll mention with that retention rate, and the trajectory of these creators, is what I call the path to revenue generation. Since 2015, the company sites about 17% of creators who held a free event went on to offer a paid one within 12 months of that first free event. Again, I think that speaks to how Eventbrite hopes to catch these creators when they're first starting out, and then grow and scale with them, hopefully, as they become more and more successful. That means it's a win-win for the creator and Eventbrite, as well, in terms of the platform.

Beyond that, though, there are definitely some red flags, some risks for the company that we want to cover. The big one for me, it comes in terms of competition. Before we get there, though -- are you concerned at all, in terms of some of the talent or the creator retention, some of the signing fees that we mentioned earlier? Does any of that stuff worry you? Or does that all get wrapped into the gorilla in the room we haven't mentioned yet, which is Live Nation, which dominates the high-end of the live events? What do you think?

Sciple: From my perspective, I'm not very concerned about those kind of retention fees they're paying to their creators. It seems to be just par for the course for the business, something you have to do. Once a creator gets to a certain size, they get that leverage and can play off different services against each other.

But, as you alluded to, I think the big concern is, are these creators going to start out from the free perspective at Eventbrite, grow, and then eventually get too big for the platform, grow out of that middle market event space? And that is concerning. The top end of the market is heavily dominated by Live Nation and other operators that really control the large event venues across the country and the world.

Shen: That's a big part of it. As you become more and more successful, if you're a musician, your audience grows to the point where you want these biggest venues. Now, you're basically leaving the realm where even Eventbrite has control, because the venue has its own requirements for how the ticket sales work. That's the challenge here. We talked about all these different numbers, about the 5% or so of creators making up 46% of revenue, and how Eventbrite can scale with the creators as they grow. But is there a natural ceiling where people essentially break out of the platform? And how will the company address that?

Something else to keep in mind here is, the company has a lot of integration with, for example, creators on the website, but also other platforms like Spotify. There's always the potential there for some of these companies that are on the discovery side for whatever these creators are working in -- whether it's music, whether it's fitness events, things along those lines -- for the companies that are nascent to those industries to decide, "Hey, this is a high-growth space." I don't know if we mentioned this earlier, but we're seeing a lot of consumer spending shift to the growth in experienced-base spending. That's growing faster than for material possessions. There's always the potential, especially when you have a big platform like Spotify, to decide that they see an opportunity here, and they can move in and present challenges for the company.

Anything else jump to mind for you?

Sciple: I wanted to further flesh out your point that you had about Spotify, which is one of the key partners for Eventbrite. Currently, Spotify and Eventbrite are integrated together. If you go to an artist's page on Spotify, it will show all the events or concert that the artist participates in that are Eventbrite events. If Spotify were to get into the ticketing market, it would not only add a new competitor against Eventbrite in the ticketing space, but also would take away one of their key partnerships and key drivers for bringing new attendees to Eventbrite concerts. This is significant, too, because based surveys that Eventbrite has done, 42% of people who discover a new artist do so through a streaming platform, of which Spotify is one of the largest. If they were to lose that customer acquisition or attendee acquisition channel, that would be very harmful to Eventbrite as a company.

Shen: They're losing that exposure, essentially.

Sciple: Correct.

Nick Sciple has no position in any of the stocks mentioned. Vincent Shen has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.