Hello. This is Courtland Allen from India hackers dot com. And on this podcast, I talked to the founders of profitable Internet businesses, and I try to get a sense of what things were like in the early days, especially how they came up with the idea and things they did to grow their businesses to where they are today. In today's episode, I am talking to Scott Keys, the founder of a very interesting business called Scotch. Cheapflights has going Scott,

Hey, how's it going? Good to be here.

Thanks for coming on the show. It's great to have you. So Scotch Cheapflights is a mailing list for cheap flights on the way it works. Is that you, Scott and your team of basically flight finders spend the better part of every day tracking down the cheapest deals on flights all over the Internet. And as a subscriber, you get access to all of these deals in your inbox on a daily basis. So we're talking things like $350 round trip airfare to pairs.

Yeah, that that's kind of it. In a nutshell. We are people who are really obsessed with finding cheap flights, you know, some people really like cooking other people really like, I don't know, making instagram videos and whatever reason. Our obsession is literally just spending hours and hours and hours on, you know, Google flights and kayak and in orbits and just tryingto hunt down those cheap deals almost like a like a treasure hunt. And then when we find him email in an amount toe, you know to subscribers who want to know about these cheap flights and get them before they, you know, the best deals before they disappear.

I think one of the coolest things about your story is that it kind of started as a personal obsession. It wasn't really a business from the beginning. In fact, you're just finding flights from yourself. And this was back in 2015. A couple of years ago. Fast forward to today. It's transformed from the small mailing list. That was really just, you know, for your friends and family and to this, you know, 600,000 subscriber behemoth that's generating $300,000 a month, which is almost $4 million in revenue. How did you make this transition and how did you start Scotch cheapflights

That's exactly right. You know, I never intended to start a business. I was never really an aspiring entrepreneur. But I love to travel, and I didn't have, you know, hardly any money in the bank. So I wanted to try to figure out a way to still travel without liquidating my life savings. And so I got really good at sort of figuring out those tips and tricks to get as cheaper flights as possible. Got really good at navigating the frequent flyer miles world. And then it all kind of culminated in the middle of 2013 when, um ended up finding and booking the best deal I've ever gotten in my life, which was non stop from New York City to Milan for 130 bucks round trip. I didn't even know I wanted to go to Milan until I saw this deal. And, of course,

who could say no to 100 $30 round trip flight to Italy, you know, ended up going and, like, hang on out on Lake Coma, where you know George Clooney as a house there, like hang out, going like skiing in the Alps, going and hiking in Chincha Terra like it was incredible. And so then when I got back, that's when sort of things change because, you know, it's just hang out in the break room at the office and people would come up and say, Hey, Scott, you know,

can you like I heard about that crazy flight that you got? Can you let me know next time you see something like that so I can get in on it, too? And so then, you know, I had enough people ask bed of me that starts realized like, Okay, I can't keep everybody's like Try to remember every single person is supposed to tell why. Don't just start a little email last in that way, I can just kind of send it out to everybody at once.

How big was your email list At first?

Yes. At first it was just a few dozen folks. I mean, I started a little free mail chimp list because, um, you know, first I was just going to do it on Gmail. But then I realized I think there's a limit in terms of how many, like carbon copies you can have on Gmail. I can't remember what it is something like 25 or 50 maybe a deceased. At the time, it was not very high. So I started a little male chimp list and just kind of sent it out to my networks like am doing this just for fun, you know? And this is totally, totally free, like just a just a hobby,

something I enjoy doing. So for, you know, like a few dozen friends signed up the first day and then over the next kind of 18 months, it just slowly started to grow out from that network. And so then, by the time of about April 2015 so just a little over two years ago, it had grown from that, you know, maybe initial kind of 25 50 people to about three or 400.

How did you were you actively promoting your list At this point time? There was a growing entirely by word of mouth,

Just word of mouth. I mean, it was just, you know, I would again, would like It's one of those weird guys who really enjoys trying to find cheap flights. So then, you know, once I found it's like I can take all of them. So I might as well just set him out to people who are no and like and would want to be ableto take advantage to them as well.

Did you ever think you know, in that early stage like, hey, this is something that I could probably charge money for it Was it just like a hobby?

No, never, Never. It was just a total hobby.

I imagine it was a lot of work to send out all those emails.

You know, it wasn't was not like at the time. I was very like Nowadays we send out, you know, three or four deals departing the US every single day and then, you know, a number ones departing like it doesn't just cover the U. S. We also cover flights departing Europe. It's running Asia, Australia, Canada, Latin America on down the line. And so, you know, we probably as a company now send up 15 20 like deal alerts each day. But,

you know, at the time I would send out maybe a run across, like, one or two a month, because again, this was not even a side hustle because I wasn't getting any money. for is just a pure hobby. And so it's just like, you know, when I had some time felt like going to search for some flights and, like, I stumbled across something really great that it would send it out. But it wasn't that much of a time suck initially, just because, you know, it wasn't that big of a priority, at least in those sort of initial hobby stages, right?

So when did things change?

Yeah. So where things really sort of like the inflection point was April 2015 s. I've been living done in Mexico and was getting ready to depart for a kind of big two month round the world trip with my now fiance. We basically amassed a bunch of frequent flyer miles, and we're using them to get free flights all over the world. We're going to, you know, 13 different countries, like 20,000 miles. You know, this big, big trip and I posted a little map on Facebook, just showing you know, where is gonna be goings and like for those you know, Doubters and haters of frequent flyer miles like this is this is about to take this awesome trip for the next two months, and it's all for free. And just so happens.

You know, I was working as a journalist at the time and, you know, side friends, another working in other journalists outfits and a friend of mine who worked at business insider saw this. It was like, Oh, that looks like an interesting celery. A Scott can I, uh, you know, pass this along to my friend here, who writes about travel for business, insider and see, you know, she's interested in doing a story.

It's like, yeah, you know, sure, by all means. And so she waas and ended up doing an interview. So the day I let you know, the day we left for this big trip of the business insider article went up and, you know, it's with one of these sort of, uh, slightly click baby. But, you know, made for viral headlines like you man travels around the world 20,000 miles, 21 flights,

like, all for free, you know, figures out how to game the airline industry, one of these that really sort of like gets people you know, a cross between, like, exciting travel, you know, frugal. The free part, all that stuff. And so it ended up going super viral, you know, 254 304 100,000 clicks on it and look literally over. You know,

in that article it had a link to the email list, and so literally overnight, it went from, you know, this just sleepy little hobby of for 304 100 people, you know, 80% of whom I knew personally to 5000 subscribers. Like overnight. That's crazy. Yeah, it Woz and I didn't really quite know what to make of it. A and be. It was kind of one of those crisis to Nitties, you know, because the bad part waas this, you know,

little hobby that enjoy doing and enjoyed doing with a free mail chimp list. All of a sudden, the email list was big enough that I was gonna have to start paying hosting fees. And, you know, I love doing this just the hobby for friends. But I wasn't really thrilled about the idea of just paying money out of pocket for server space to, you know, do a favor for my friends. So, you know, that was the bad part. The good part was, you know, I sort of realized, Hey,

you know, maybe there's more interesting this type of thing than I realized. Like they're, you know, awesome. There 5000 people who are really into this I knew, You know, I'm not a business, and by background or trade, but I knew enough about sort of business and marketing to know that, like getting getting that burst 1000 subscribers, those 1st 1000 customers is by far the most difficult thing to Dio.

And you already crossed that at this point.

Yeah, exactly. In the fact that I crossed that fivefold with doing nothing like not having to do any hustle. Not, you know, I'll take the time or anything. I was like, man, maybe there's an actual opportunity for business here. And so it was, you know, during that trip that in and started to sort of percolated my and hey, you know, how can I turn this into maybe, ah, little business throwing around some different sort of revenue models in my head like ways toe waste actually turning to a business, you know,

Should I do Ah, like a paid advertising thing should do like a referral link type of thing. Should I do, like a paid subscription tossing all those around and then come August 2015 9 it up officially relaunching it as a business. Went with the prey, the paid subscription model and Ah, yeah, that was sort of the birth of Scots. Cheapflights is a business. Just about two years ago.

I mean, you mentioned that you basically didn't have any 100 ownership experience, and you never really started a business. And you ended up just kind of falling into this. I mean, did you plan when you were writing, you know, collaborating for the article on business Insider. Did you plan Toe put a link to him? Analysts in there? Did you expect to get, you know, a ton of traffic?

No, it was all completely serendipitous. You know, I had no idea what election couldn't idea was that it was gonna go is popular's it did. I had no idea like that. You know, I never even considered at that time that there would be a like, a business opportunity. Here is just again something you just kind of dating my everyone. So I own my spare time. Just for fun and and got incredibly, incredibly lucky that it ended up turning into Ah, big break.

So today, Scots cheapflights it's not just you working alone, but you actually have a co founder and a whole bunch of employees. And your co founder, Brian, actually collaborated on your Andy hackers interview. Ah, few weeks ago. How did the two of you guys end up

meeting? Yeah, that was kind of a crazy story. So this is very early on a couple months after in officially launched is a business, and it was starting to grow enough and have enough customers and have enough work going on that I realized, like I need some help. Like, I can't do this by myself. And so just around that time, when I started to think like, man, how am I gonna find somebody? Like as, ah, you know, business partner, Someone toe kind of take on responsibility with this.

Brian reached out to me because he was doing a giveaway. Basically, he was trying to start looking Ah, travel, blood travel community thing. And I figured, OK, maybe I could give away a couple subscriptions to discuss your flights and do an interview with him. And so, you know, we chatted for a while, giving a couple of subscriptions, and I just got a really good vibe from talking with him, like, man, this guy,

you know, he's got a shit together, like he seems like a pretty, you know, hard working entrepreneurial. Like I'm just impressed with the cut of his jib. So kind of on a lark, I just messed him like, Hey, you know, look this good. This might sound kind of weird, but I like we kind of need help over here, you know, like where things are growing, we've got customers,

but like, it's just more work. And we have, like, there's a lot of opportunity to help build this up, but, um, yeah, is that something that you're interested in? And you know, he said, yes. We worked it out, and it ended up being just such again going back to serendipity. I like it's not. It's probably not a wise or advisable business partner.

Search strategy to just take somebody who you randomly met on the Internet. Hey, you want to go into business together, you know, and we've never even actually met face to face until about five months ago or so. But I just again got so lucky because our not only is he incredibly confident, credibly skilled and hardworking, but also our our skills that's really complement one another as well. So you know, I'm good, obviously good at the sort of flight searching stuff, and then good it like writing with the journalism background. And then he is really good at that sort of behind the scenes back and stuff, like a lot of sort of building systems, kind of trying to get partnerships worked out, trying to build up,

like, you know, marketing and development growth, all sorts of stuff like that behind the scenes that, um it's hard to kind of put a singular label on. But, man, I mean, you know, Scott, see, plates wouldn't be 1/10 of what it is today If we hadn't had that serendipitous meeting and decided to go into business together.

And it sounds like you met Brian. It kind of the perfect time, cause you were at the time thinking about how do I put a business model on this? And how do I charge and make money from all this

demand. Yeah, that's absolutely right. I mean, it was It was I like at that time, probably when he came on there. Maybe 10,000 total subscribers, maybe 500 or 1000 were paying, like, you know, definite growth and bigger than I expected. But, you know, a fraction of what it is today. You know, eight likes 18 months later.

So you made a lot of decisions early on about what your business model would look like. And you decided to basically do a freemium business model, which, for people who don't know what that means effectively, you gave away a lot of your product, your service for free. And then you charged for an upgrade so people could sign up for the normal mailing list. And then what did? What did you charge money for?

Yeah, so initially we set the prion premium model, and the thinking was I was very sort of again, coming from the business from its start coming from the journalism world was very cognizant of the difficulties that a lot of newspapers went through going from, you know, their websites where they offered all the articles for free to then trying to charge for it. And I know how difficult it is to have a categorical shift in people's mind from thing trying to start charging them for things that they used to get for free and saw his very sort of tried to stay mindful of that. And so that's why I was like, Okay, I don't want to just have a purely paid listen Tell everyone like, Hey, you know, starting in August 2015 you have to pay for this if you don't then take a hike. So that was part of the thinking. You know, I think another part of the thinking which ended up working out really well, was that if we have this free list A,

it's a lot. It's a massively lower sort of barrier of entry for new subscribers. You know it like asking someone just to Senate for an email list is away. Smaller f massing, Um, someone who'd never heard discussed replays to come in and pay for it, but the even more than that, then, having this sort of built in list of free subscribers, wound up creating a captive audience where any time you know, we like when we send out deals to the free list includes little banners like Hey, just F Y I. You know free subscribers missed out on, like, $350 deals to Rome yesterday or something like that, like sign up,

you know, sign up for premium here to get all the deals, those types of things, you know, we have thes folks who are interested. I already know, you know, house gusty flights works and are much, much, much easier to convert to paying subscribers than you know, just random Joe Schmo, who just found out about Scott's replace yesterday.

I guess that a long term view, basically it was it was not, You know, the end of the world. If someone doesn't pay immediately, it's it's fine. You can convert them later,

right? Right, Especially because the beauty of ah, sort of 21st century mail list business model is that the marginal cost is so low of. And you know it's effectively zero for any given subscriber. Obviously, you know, once we had certain thresholds, we have to upgrade server call server space and stuff like that. But Brian, given subscribers effectively zero. But, you know, we found that over time just about one. Just about 10 to 12% or so of free subscribers wind up being wind up becoming paid subscribers. And so, you know, that is incredibly lucrative. Then if we can just sign up 10 you know, get convinced 10 people to send it for the free list. We know at least one of those people are gonna gonna wind up paying for it.

I think that's huge, especially considering, like, you were mentioning earlier that, like it's so hard to get people to pay for things they're not used to paying for, especially

content. Yeah, we don't even we actually even recommend people that they don't sign up for premium right away. Like I want people to sign up for the free lift. Initially on, we actually on our website. You know, when you come in there, there's only one call to action. It's just put in your email address after you do that. Then there's information about the, like the premium list, you know, if they're really interested right away. But I want folks to start out on the free love because they want them to get a sense of how Scott's cheap flight toe operates, you know, and make sure that it's what they're looking for.

Make sure that they don't have sort of preconceived notion about what it is that it doesn't ultimately end up being. You know, some people think it's like Group on where, you know we have sort of this block of flights that we're selling ourselves. Or some people think it's like kayak, where they can search for the flight themselves. Or some people think it's like fly Stein where they can, you know, just have an expert, go look up the best flights for them, you know, And scusi flights isn't any of those things. That's something something new and different. And so having people come in and see, you know, for the first week or two,

just get the free deals, see what it's all about and then sort of decide. Okay, you know, am I interested in getting more of the perks, my interest in getting all of the deals rather than just some of them? So the difference between the premium on the free list is all the deals go to the premium list. Where is just one out of every three? Go to the free list. All the premium list gets to choose which specific cities you want departure alerts for. So, you know, say, like you live in New York, you say Okay, I only want flights departing,

you know, JFK, LaGuardia and Newark. Or maybe you can add in Philadelphia, Boston in there, too, if you really want, or Hartford. But you get to choose which specific ones, whereas for folks on the free list they choose by region. So OK, I just want deals departing the Northeast. I just want deals departing, You know, the West Coast or something like that.

Is this something that you've played around with it all? They had a G determine exactly where to draw that line between what free users would get and what paid subscribers would get.

It evolved a little bit over time. The one out of over three has been that way the entire time. Premiums. Garber's get a deal. 30. Like when a deal goes to the free list, premium subscribers get it 30 minutes before the free subscribers, which you know for some deals doesn't matter. But for some deals, they like, legitimately only last a couple hours at times and so finding out about it early can sometimes make the difference. There's no ads in the, uh, premium murals that's also been there since the beginning, and the two kind of premium features that have changed since the beginning are that, like I said, that sort of specific airport selection feature that I mentioned and three the we now offer text message alerts as well.

But that's only for premium subscribers as well. Those are things that, you know, we just didn't have, like the functionality built out initially. But it's something we do have now. We ended up taking away one feature initial, like so initially, you know, when they when the criminalist is really was a lot smaller. But the entire list was a lot smaller. We offered free credit card consultations for premium subscribers. So, you know, I got going back. I got really good at frequent flyer miles,

you know, generating them and using them for best value. And a big part of that is which specifically airline or points credit cards toe open. And so you know, it's like Okay, yeah, if you're a premium scrubber like and you're thinking about opening up a new credit card sent me an email, you know, help you choose. And that went along great for the 1st 6 months or a year or so. But then it just ended up getting big enough that, you know, I was just every day having dozens slump. Doesn't Yeah, just swamped in because that, you know, that was sort of the one perk that was not really scalable like that. Each each person emailed had have individual attention. And so we ended up kind of phasing that out and implementing you know, these new features that talked about the city departure selection in the text message alert.

So rewinding a bit You've got to this point now where you went from 300 subscribers to 5000 to 10,000 subscribers. And, you know, up until this point, you're doing it pretty much by yourself. You haven't even brought Brian on. What did it take for you to actually build out the infrastructure of the business? I mean, were you on male Trump the entire time? And did you set up a website?

Yes, it was on male chimp initially, um, had a website that I just actually my brother was, like good at at Web design. So he just kind of built out website initially did mail Chimp that we used form crafts initially, which is just a form plug in thing that connected well between the website and stripe, which we use for payment processing. So that was like sort of the initial stack set up. We ended up over time phasing out form crafts it once we got out of the new website built with our own, uh, with our own kind of form capture and then just connected directly to strike for still for payment processing. We did pay Pal for a while. We offered bed as a payment option ended up taking it out because it just didn't like without getting too wonky about it. It just it doesn't play nearly as nice with other acts and plug ins. It ended up being just take one specific point here when folks would pay with pay how it would automatically use whatever email address they had. Is there papal email as the email that they signed up for the list with like for the Cheapflights email list?

But a lot of times people didn't want that they wanted a different one. And so, you know, it would cause problems like they didn't realize that, and so they wouldn't be getting emails for weeks. And really, like where my emails like, Oh, you know, went to the one that you send up with or you end up just being big headaches, trying toe, trying to figure it out with everybody. So, yeah, we ended up phasing out PayPal is an option. Oh,

gosh. Six months ago or so we keep we go back and forth on whether or not to bring it back. But I think we're all kind of happy toe not have it. Even though it's, um it's like, slightly probably sacrifice just marginal amount of revenue by not offering it. We, I think are like, like amount of hassle and headache that we saved by not doing it is by far

worth it. What happened after after you brought Brian on, like, how did, uh, scotch cheap flights of the business change?

Yeah. So that was really where it kind of started to get professionalized. Um, you know, the first few months were really just sort of almost a test to figure out. OK, I've done. But doing this thing for free Got a bunch of potential people Are people willing to pay for this, you know? Is this something that I could even cover my hosting costs with? You know, at that time, I think we're $50 a month. And so, my, you know, I just initially wanted to set a really low price point.

Okay. Is this something that I can convince 25 people to sign up for two bucks a month? I can. I do that. And, you know, even the first day or two wasn't really clear if I'd be hit it. But then it started to pick up and and, you know, But I think by the end of the first month had 101 120 panic subscribers to two bucks a month. So, you know, I was really happy I was make money like it's profitable. The already turning a profit in the very first month. But you get when it sort of had grown to 10,000. 15,000 You know,

by the time I brought Brian and we really rise, Okay, A. There's a lot of potential here, You know, most people were sending up. We're really happy. There was basically no churn at the time. You know it was expenses were next to nothing. You know is that we don't have an office space. There's no physical product like it cost basically nothing to scale. And user satisfaction was really high. So he's just started to put our heads together like, Okay, what types of what types of, um,

tactics can we take to try Teoh to try to get things as good as possible? And so he came up with a bunch of like, really, I think smart ideas. So I'll give you a few examples. We shifted away from the $2 per month model Teoh. I think initially the price was five bucks for three months, 15 for six months and 29 for I have to double check. Make sure that's what it was initially or something like that. 5 15 29 for three months, six month or 12 month subscription. And it basically was about the same price, in some cases even a little bit lower than two bucks a month. But by not processing payments every single month, and instead of processing them like once a year once over six months, once every three months,

we ended up saving, you know, Thanh on credit card processing fees because, you know, the way it works is like standard processing fees, something like 2.9% plus 30 cents And that 30 cents out of two bucks, you know, is more than 10% that were, you know, So we're getting eaten every transaction 15 you know, somewhere between 15 20%. And so just by shifting to a longer ah payment structure when you know, making and saving a ton of money s Oh, that was a B, you know, came in with ideas about,

like, a black Friday sale and raising prices. So we ended up raising prices, like, right around New Year. I believe

I was going to say like, uh, one of the most common things years that you should always charge more. You know more than you think in $2 a month, it's so insanely cheap, like there's nothing online that I pay for that that's that's cheap,

you know? And that's sort of what I was thinking. Like, I wanted to be a low enough price point that it doesn't deter that the price point doesn't ducked her. Anybody I just wanted to see or they're people who are willing to pay money, whatever amount but pay money for this type of

thing. At what point did you have enough validation to say, Okay, people will pay for this. I should charge more like there's a certain target

after after a few months. Yeah. I mean, that was a right around when Brian came in and we shifted to this longer term structure, whereas Okay, you know, there's a potential toe raise prices here, but, you know, there's always a little bit of a fear when you raise prices, like are people going to revolt? You know, are we undermining ourselves? And so we did two things. Well, the first thing we did is we kept everybody grandfather to have whatever, you know,

rate that they signed up that so, you know, you signed up a two bucks a month. You can stay at that for life, and we still have some subscribers on the list or paying two bucks a month. You know, with people who signed up, say, ah, 15 bucks over six months like they're still at that. So we didn't you know, we're in Bye bye. No way affecting existing customers And so, you know, negate any chance of, like,

revolt, You know, people's canceling because of that. The other thing that it really realize from this was really a real surprise for me is how much of a sales booster raising prices can be. And that's because again, because we had this sort of grandfather clause, the result was that people realized OSHA. If I don't sign up by the deadline tomorrow, prices are going up. So I bet you know, it takes everybody who's all this. These 10,000 people who are on the free list and are sitting on the fence deciding, you know, should I operate or not All of a sudden forces them to make a decision and make a decision that's waited in our favor because there is okay. Either I could do it today at 19 bucks, or I could do it tomorrow at 29 bucks.

And so you know, the sales just skyrocket in the day or two leading up to that sort of deadline, and so that's made me much more much less averse to price increases where they're warranted. Because I know that when that happens, it's going to drive a ton of upgrades in the, you know, in the time leading up to it. The last insight. I think, uh, you know, just tangible example I can think of that. Brian really came up with an executed. Really well, was that, um went back and kind of did some analytical data crunching on existing users.

And he found that basically, e noticed an interesting little quirk that, you know, when someone signs up, there's a you know, there's a decent chance that they're gonna upgrade right away, and there's a decent chance to upgrade in the first month. Even that first to second month. There's somewhat of a chance that they'll become paying subscriber. But almost nobody on the free list who had been on there from more than two months was upgrading like it was very, very small number. And so what we realized from that is OK. These people, you know, have a very low chance of upgrading and, you know,

ostensibly are not like high value because of that low chance of upgrading. And so what if we can offer them something to try to entice them to upgrade. And so what we did was we offered them a free month. We just we would we'd segment the list would say okay. And you know, I only want people on this list to have been on for more than two months and, you know, on the for us to have not upgraded. And we sent them all just a free of free upgrade. Things that Hey, you know, for the next couple days, you can try out the free the premium list for free for one month. You gotta put in your credit card and stuff. It won't get charged for a month if you cancel. Cancel anytime.

No, no questions asked in that month. Uh, you won't get charged even if you forget, you know? Oh, you know, just got charged for guy like it's two days later. Can you Can you cancel refund? Yeah, absolutely. But we found that they like something like we would get thousands and thousands of upgrades just from this again from this group that had almost no chance of upgrading to begin with. And it was leading, you know, tens of thousands if you know 50,000 plus in revenue. That was just,

like free money. Because it wasn't it wasn't gonna happen naturally. And so that was again just a a tangible, really insightful thing that Brian noticed in implemented. One of the reasons why I'm so grateful to have him on the team.

Yeah, it sounds huge. And I think one of the cooler point premier your interviews that you talk about, you know, in terms of time things April of 2016 was when you guys bought scotch cheapflights dot com.

Yeah, I know. Super lucky that it still existed before that. It was just I had written, like, a couple of e books, and it was on, like, fly for free guide dot com. And they had I just had, like, five for free guy dot com slash email list or something was the was the U. R l for the email list for a long time, and it was kind of confusing. People like, you know, I want to refer my friend over,

but like, what's the U R l again? Like, what the hell is that? S o like we're really lucky. That's got your plates dot com still existed, You know that we got it. And yeah, that was part of the sort of professionalization of the company that Brian help brought it bring about.

Do you remember about how many subscribers or how much how much revenue you guys were generating at that time?

Who in this is in April of Ah, 2016?

Yeah, about

a year ago. Okay. In that month, we brought in about $30,000 that month.

About about 1/10 of what you guys are making now. Probably similar subscriber numbers.

Yeah.

How have you guys grown by 10. Accent in the last year.

Who? Man.

That's a huge manager Lynn. Imagine pretty hectic

again. I think a huge part of it again is the free going back to the Freemium model. The fact that we don't have a big ask, you know, just Hey, sign up, it's free. Try it out. And that's the one called action. And so a lot of the Web page right now is optimized for that type of thing. Again, there's one called Action. Just put in your email address. You know, there's a like an opt in you. You're going to leave like, Hey,

just putting your email address real quick So a lot of that is optimized for collecting email addresses. Ah, lot of growth through Reddit. We've been, you know, posts a lot on, like read it entrepreneur on Reddit, doing a maze stuff like that that has led to a ton of subscribers done. Ah, you know, media hits. You can always see a decent spike when there's a good article in The Washington Post. Or, you know, Conde Nast Traveler stuff like that. But honestly,

the biggest source of growth. We did a survey recently of subscribers. 45% of people said they found out about Scott's cheap flights via word of mouth. You know, almost half of people came because somebody, some friend of theirs, had told them like, Hey, you should sign up for this and that's been a That's like, extremely flattering. You know that it's something that people really sort of recommend to their friends and that it's gotten so much growth that way. But be it's It's been an interesting data point as we have gone back and forth about whether or not to do a referral program, you know, should we, like, offer people?

Hey, like, get a month free on your subscription for every person that you bring in or something, you know, something like that. And we were like, we keep going back and back and forth on it because on the one hand, you know, people like referral programs. They work like it helps bring in new customers. On the other hand, if 45% of our people are already coming up, thousands, thousands, thousands of months are coming because they heard about it from

friends. Like, Do you even need a referral?

Yeah. Do we need a referral crime? Do we need to boost? Do we need to like, you know, maybe that could end up just being in expense at that point by giving away money for something that we're already getting. So it's tough. We go back and forth on it, but, you know, it's an interesting problem to grapple

with. I think one of the cool things about being Freemium is that it really helps enable your word of mouth grows, too, because if you charged everybody up front and you know, maybe 90 of 95% of people who would otherwise be in your free lists. Just don't end up using it all because they're not willing to pay. Then they never end up telling their friends.

Oh, yeah, I'm a super skeptical guy. Like, I almost never pay for something like right off the bat. You know, I want to try it out. I want to see if I like it. And there plenty of things that, you know, I've tried out, like the little liked and then decide, Yo, you know, pay for this. So I give you a quick example. Slack,

like we, uh You know, once the team started growing big enough, we couldn't just, like, use like hangouts as our as our message serve messaging service. Because, you know, there was no group aspect to it. Like it is all just one on one conversations. And so we ended up moving over to slack. But then, you know, you get above 10,000 messages, stops are coming And being all these other things we decided like, yeah,

you know, this is actually pretty valuable. We've been using this. We really like it like I will pay, you know, 5100 bucks a month whatever whatever it costs nowadays and are really happy having having done so. And that, I think, is the model. I think nowadays is just you. It just makes so much sense toe let people try something out, see if they like it and then, you know, figure out if it's worth paying for

not, yeah, especially if you know that what? The service with a product that you're offering actually provides value. Like if you have something that's not that good and okay, like, maybe Freemium is not gonna work pretty because people who people who have jacket I hope you like I don't want to pay for this is sex.

Yeah, absolutely. I mean, you've gotta put a lot of soda trust and faith in yourself in your product that, like you can have these people signing up for free and then that you can convince them to be that it's worth paying for over time. And you know that, like obviously we know that 80 somewhere between 85 90% of people, we're not going to be able to convince to pay for. But that's fine, because the march again, the marginal cost for every free subscribers, basically nothing. But you know, by having that, we wouldn't be able to get those 10 to 15%. We wouldn't be again, nearly that. You know, that many folks, if we didn't have the free list for people to try it out first.

And I think another cool thing about your businesses that typically it's it's pretty hard to get consumers to pay for things like if you sell to businesses. Businesses are making a lot of money. There's a lot of opportunities to help them make more money, help them save money. And so it's easier for them to do the calculation in their head of court like Okay, of course, I'll pay for this product because it's gonna help me make money or save money. But with consumers, it's a little harder to get that. You know that point across. And I think that Scotch Cheapflights is in this interesting area where, like consumers spent a lot of money on travel and on, you know, airline tickets. And if you can save people hundreds of dollars on that, that it's a no

brainer when it's also just a very it's the very unique industry, right because you you know, it's not like, I don't know, buying an iPhone where, like, the price is basically always the same. You know, you, you know, exactly to get it like the price is gonna be the same today as it will be next week. Like you know what to expect. It's just one single product. Where's with flights? You know, I mean literally. The price is changing by the hour,

if not more. You know, you who has any idea what it's supposed to cost on any given route between, you know, like, what's the flight supposed to cost between, like D. C. And you, Sapporo or something like I don't know, like like for money. I mean I mean, I do know because I spend my day doing this type of thing, But for most subscribers, I think you could tell them $900. You could tell the $1900 they would like,

Yeah, you know, I guess that's publics, right? And so the fact that you know, when whatever kayak sort of spits back at you as the price like there's not a good always a good reference point for folks to know like Is this a good prices is a bad price. Like, should I be buying it now? Like, you know, I'm traveling in. I want to travel in, like, three months, so that pull a trigger. Now,

should I wait Those? It's a super opaque industry that, um you know that every, like almost every single person on any given flight is paying a different price. Right then, you know, then the neighbor sitting next to them. So almost positioning ourselves is this sort of concierge who are, ah, decoder in the middle to tell folks not only to be your advocate in searching like, hey, you know, here's a really good deal. We're always looking for them, but also that, you know, we can tell you like what's not a good deal when you should book and how long we think it's gonna last, that type

of thing And you guys were so single mindedly focused on this one thing that I mean, you guys don't do anything else. You guys were just purely flight search. And so your home page, Yeah, nothing else. Where's every other site that I've been to? Is everything you know, and I talk to people in the indie actor Storm. About this a lot like there's so much of a temptation when you start a business to spread into all these adjacent seas and do all these kind of related things. But if you just focus on one thing that you can do what you guys have done and like, you know, streamline your home page, you only have one single called Action and you can, you know, increase your conversion percentage and you can, like, deliver a product that's gonna disappeared. Everybody else's because you're not doing anything else. You just focus on 11 and single problem.

Yeah, I think that's exactly right. I mean, especially early on. I think that's one of the We didn't know it for sure at the time. But in retrospect, I think has been one of our keys to success is keeping our focus very narrowly tailored and just keeping on are sort of core competency rather than trying to get into even if there was an opportunity there for other ah other like methods of revenue, keeping it focused on like the things that we know we're good at and that we know we're providing value and other people like.

One thing you mentioned earlier is that you know, at this point time you've got a team and it started off just you alone and you brought on Brian. I think now you've got 15 or 20 people helping out. What is everybody doing? And how did you find these people?

So everybody does different types of things. So we have folks who dio customer support. You know, we get somewhere between 306 100 emails a day in the inbox. So they're helping folks out. We decided very early on to basically do no paid advertising, but instead, take that budget and focus it on customer support. S O. I wanted people when they email in to not have to await the standard sort of 24 to 48 hours to get a response. I wanted to get our response in a couple of hours, if not a couple of minutes, because that I think that type of interaction with especial with a new company that you don't know Are they trustworthy? Is this good? It's It's bad if you get a response back in. You know, like within minutes of emailing.

That's a really positive interaction that you up with a company especially, you know, is your question. Help you out. And so I think, like bringing on really investing in customer support with something that was really, really glad that we did early on, especially given the nature of the business that because it's so email based, any time somebody is a question, they just e mail it back right there. Not always going to take the time to, like, look on our, you know, F a Q on the Web site or anything like that. Just like,

why am I gonna look there? Let me just emailing back. And so putting that emphasis on customer support folks was was important. So we have Some folks were doing flight searching as well. You know, I used to be the only one doing flight searching for U. S. And Canada. Now I've got a few a few folks helping out with that as well. And then we've got folks, you know, doing the flight, searching for Australia and New Zealand Europe. You know, Latin America. We have some folks we've like social media managers,

some folks doing, you know, Web development building, you know, doing sort of the techie side of things. Yeah, it's kind of all over the map now, like a bunch of a bunch of different roles. But one of the cool things that everybody is based where everybody works remotely. We're in 10 different countries around

the world, so you're literally all

over the math. Yeah, only a few of us have ever met face to face. Um, it's a very sort of 21st century type of business.

I think the thing you mentioned about choosing to focus on customer support instead of, for example, you know, putting money into ads to go your business is super interesting decision. Do you think that will always be the case? Will you ever start spending money on ads? Are other girl channels?

I mean, I don't want to say never say never. I'm just highly skeptical of the efficacy of ads like, I don't think I I think it's just something that now it is who likes to be feel like they're getting sold something you know, like that people like to feel like they found out about something on their own, you know, so that whether it's word of mouth, whether it's doing the research, that's everything. I think I tend to think that the budget can be put to much better use in terms of like customer acquisition better than paid advertising. The you know, I think there are slight exceptions to that. Like the fact that, um, Facebook, you know, with their boosts.

Let lets you engage Mawr either with your own, you know, audience or like minded, audience like way started to dabble very minimal, you know, 10 bucks here, 15 bucks there in terms like boosting a couple a couple stories or post that will put up. But I just don't I? I'd have trouble envisioning us, ever having, you know, a four figure, five figure ad budget or anything like that, because I just don't I can not to see. That is not the best way to get, like,

not the most effective way to get new subscribers. Well, I'll give you an example. I think, for instance, that money is better spent. If I had $1000 I would not spend that on $1000 worth of ads. I would do a giveaway and by insect to free flights toe to Europe, you know, for you and your friend. And you know, this is something we've done before and let you know when we do. This will get 30 40 50,000 new subscribers just because we like on not only from doing a giveaway but also doing a giveaway that is effectively tailored to promote share, you know, to promote social sharing. So you get, like one entry for putting in her email address that you get five entries for every person who subscribes with your referral link or are not subscribed. Like enters the give away with your referral link.

That's such a smart idea. And it's cool because I see a lot of companies to giveaways, and the thing that they're giving away is so unrelated to their product. Like if you give away free flights and it's like anyone who enters that competition and cares about a lot about it is also going to enjoy Scotch cheapflights because they like cheap flights.

Yeah, yeah, it's very on brand. So you

know, we're talking about growth and and ways to grow like you guys have also been completely bootstrapped from the beginning. You've never raised any money for investors. And I'm sure at this point you've got investors banging down your doors trying to convince you to take money. Why not go that route? You

would just never had to been lucky enough that we never you know, we've been approached by various investors, VC funds and whatnot. But, I mean, our profit margin is so high at this point, and our expenses air just so low that we never had any need And don only that. But you know, obviously, as I'm sure your listeners are well aware as flattering and it is extremely flattering to be approached by investors and funders. Obviously it doesn't. You're never getting money with no strings attached. Like you're you're giving up equity, you're giving up some control and then you're starting your shifting from being the ones in control. Your own boss, the one making all the decisions don't listen, having to be accountable in answer to someone else's.

Well, and you know, that's that's a big mindset shift like we can we can do with the company what we want right now, we can either try to maximize profit. We can reinvest everything we can try to focus on user acquisition or just improving the user experience like weaken, take things in whatever direction we want and not be have to be like maximally focused on returns in the way that you might have to be if you have Ah, you know, an angel investor who's kind of breathing down your neck. So, yeah, I mean again very, very humbling, very flattering to be approached, but in a super fortunate position to be able to say no to it.

And what would you say your goals are at this point, I kind of like, you know, at a personal level, but also the business level. I mean, a year ago, you guys weren't making nearly as much money as you are now. You don't have nearly as many subscribers. You want to keep growing that fast, Or do you wanna turn into more of like

I will preface this with thing. It is really hard to think long term because, you know, if you told me a year ago that we would be 10 times larger than we were, then I would said, You're slipping crazy and you know I like, and so it Z it's hard to even. I think there's very little chance that we're 10 times bigger a year from today. But, uh, you know who knows? May May. I guess it's possible, he knows. So it's a little bit hard to envision it, but be it's because it's like, hard to almost visualize.

Like where, When I you know, with six million subscribers fired in 600,000 it's a little bit hard to like make long term plans. So we've almost kind of issued doing any type of super long term planning we've mostly stuck to sort of short term in middle and medium term planning. So, you know, within my kind of thinking, 3 to 6 months ahead, like what types of new features, what types of new ah, outreach methods and stuff. Don't we want toe pursue The main thing I think that we'd like to do, you know, obviously without giving weight to too much of our plans. But the main thing that we really want to do is improve the customer experience. You know,

the user experience. So you know, right now way we're still kind of running on an M V. P with some of the new systems in terms of like premium subscribers choosing their departure airports. And so that's up. We really want to kind of build out a system that's much more user friendly. That's much more intuitive and and much more visually pleasing for folks to be getting, you know, when they're sending up their account and getting that type of stuff and then just start to explore mawr types of outreach opportunities, whether that's building a block, whether that you can, we keep going back and forth on this possible referral program, even sort something to, For instance, we sent on email blag the other day, asking for folks telling,

saying like, Hey, you know it. Have you gotten any, like, really good deals, discussion flights and have a cool story with that? You know, we get people emailing us Well, time about, you know, all I got, you know, we took our honeymoon that we didn't think we could afford or like I visited. You know, this relative back in Europe who I I hadn't seen for 10 years,

you know, because prices were too expensive. Do you have any cool stories like that? And so you know, we got hundreds and hundreds of stories and you know, people with sending photographs and stuff. These, like, really touching, heartwarming stories. And so we started to post those a little bit like on Facebook, but trying to figure out, you know, is there mawr sort of ways we can focus to engage people with those types of stories, you know, sharing those types of successes.

And then we also folks who are traveling all the time like every you know, thousands. Tens of thousands of people taking these cheap flights were taking photos, having experiences. Is there a way that we can kind of start to tap into their experiences? You have people like, Oh, snap. When you're in Barcelona, go to this really awesome hole in the wall restaurant or if you're in Venice, like here's the best way Teoh Hello, gondola, or something like that. It starts a harness some of that sort of user generated content into into something that we can kind of share with everybody and build build a little bit more of a community, a little bit more of a knowledge

base. How do you How do you decide where to divide your marketing efforts because it sounds like you've got some channels at work. Super Well, you've got red it where you guys have made a ton of AM, a post and kind of showcase post where you've gotten thousands of up votes and you've got your viral giveaways, which he said, you know, bring in, like, 40 50,000 new subscribers. Why not keep doing those rather than switching into content? Marketing are a new type of marketing.

It's a couple things. First of all, you don't to a certain extent, it doesn't always have to be a choice you can do, you know, we can be doing giving giveaways and be doing read it and be, you know, tryingto Jinnah earned media and stuff like that. But you know, your your right to the extent that you do have to kind of focus your efforts somewhat on and try to decide, you know, on any given day, we're gonna try to do this or that. Part of it is we try to recognize this sort of inescapable gravity of diminishing returns that yes, you know, we've got we've had some really successful viral posts on Reddit. But if we tried to do that every day or for a week or even every month.

Not only not only would we would it stop working, but we would get were take all the goodwill that we've learned on Reddit and folks, you know, telling each other to subscribe, recommending it to, you know, other Reddit er's stuff like that and it return it instantly into bad will because they'd be like, this company is just, you know, on here just they're just advertising. They're just tryingto you know, uh, their extended for themselves rather than trying to help people stuff like that. Um, I think that same type of thing happens with giveaways to a certain extent. You know,

if you have it every every week, every month, it stops becoming special. People are just sort of start to tune it out. And so we're trying to mix it up, tryto, um, figure out different types of areas. One of the things that's made things, you know, much more complicated these days is the fact now that we're not just in the US and Canada that you know, have cover flights departed Europe, Asia, Latin America, Australia. And so that's trying to think about ways to sort of grow larger in those types of markets can also get difficult,

right, because this is it's just a whole different ballgame, for instance, with the Give always I didn't realize this, but they like internal, like each country's laws we're gonna give ways are vastly, vastly different. You know, sometimes there's little is like in Canada. If you do a giveaway, I think in the province of Quebec you have to also post the language of the giveaway in French. In some places, like I think in France, if you're doing a giveaway, you have to reimburse people for either the postage or, like the Internet costs that they took them to enter your contest like all these.

Sounds fun. Yeah, they're all these random little things that we, you know, for the most part, we just avoided doing because it's so complicated. But we might have to start to try toe navigate those waters a bit because it can be really fruitful if you if you pull it off well. But it's not as simple as just taking what's worked in the US and then applying it, you know, to Australia or toe the UK or anything like that.

Got it? Well, we are running towards the end of our our I think your story is super interesting and hopefully will inspire other people who might not be programmers or might not be, You know, career entrepreneurs to get out there and do something valuable and, you know, start from nothing and build a successful businesses. You have thanks so much for coming on the show. Scott.

Hey, Thank you for having me. This is great. I appreciate. Ah, the opportunity.

All right, take

it easy. All right, Take care. You

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