Episode #020

Building a Million Dollar Mailing List with Scott of Scott's Cheap Flights

Learn how Scott Keyes grew his mailing list from 300 to 600,000 subscribers and $4M in revenue in two years.

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Transcript

Courtland Allen 0h 0m 8s

Hello, this is Courtland Allen from indiehackers.com. On this podcast, I talk 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 their idea and the things they did to grow their businesses to where they are today. In today's episode, I am talking to Scott Keyes, the founder of a very interesting business called Scott's Cheap Flights. How's it going, Scott?

Scott Keyes 0h 0m 29s

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

Courtland Allen 0h 0m 30s

Thanks for coming on the show. It's great to have you. Scott's Cheap Flights is a mailing list for cheap flights. 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. As a subscriber, you get access of all of these deals in your inbox on a daily basis. We're talking things like $350 round trip airfare to Paris.

Scott Keyes 0h 0m 55s

Yeah, 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 for whatever reason, our obsession is literally just spending hours and hours and hours on Google Flights and Kayak and Orbitz and just trying to hunt down those cheap deals, almost like a treasure hunt. Then, when we find 'em, emailing 'em out to subscribers who want to know about these cheap flights and get them, the best deals, before they disappear.

Courtland Allen 0h 1m 32s

I think one of the coolest things about your story is that it kinda started as a personal obsession. It wasn't really a business from the beginning. In fact, you were just finding flights for yourself. This was back in 2015, a couple of years ago. Fast forward to today, it's transformed from this small mailing list that was really just for your friends and family into this 600,000 subscriber behemoth that's generating $3,000 a month, which is almost $4 million on revenue. How did you make this transition, and how did you start Scott's Cheap Flights?

Scott Keyes 0h 2m 5s

That's exactly right. I never intended to start a business. I was never really an aspiring entrepreneur. But I love to travel. And I didn't have hardly any money in the bank. So I wanted to try to figure out a way to still travel without liquidating my life savings. So I got really good at figuring out those tips and tricks to get as cheap a flights as possible, got really good at navigating the frequent flier miles world.

Then it all kind of culminated, in the middle of 2013, when I ended up finding and booking the best deal I've ever gotten in my life, which was nonstop from New York City to Milan for 130 bucks roundtrip. I didn't even know I wanted to go to Milan until I saw this deal. Who could say no to $130 round trip flight to Italy? Ended up going and, like, hanging out on Lake Como where George Clooney has a house there, like, hanging out, going skiing in the Alps, going and hiking in Cinque Terre. It was incredible. Then when I got back, that's when things changed because I was just hanging out in the break room at the office and people would come up and say, "Hey Scott, 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?" Then I had enough people ask that of me that I started to realize, like, "Okay, I can't keep, try to remember every single person I was supposed to tell. Why don't I start a little email list, and that way I can just send it out to everybody at once?"

Courtland Allen 0h 3m 44s

How big was your email list at first?

Scott Keyes 0h 3m 46s

At first it was just a few dozen folks. I started a little free MailChimp list because first I was just gonna do it on Gmail, but then I realized, I think there's a limit in terms of how many carbon copies you can have on Gmail. I can't remember what it is, something like 25 or 50 maybe. At least at the time it was not very high. So I started a little MailChip list and just kinda sent it out to my network, saying, like, "Hey, I'm doing this just for fun." And this is totally free, like, just a hobby, something I enjoyed doing. For, you know, like, a few dozen friends signed up the first day. And then, over the next 18 months, it just slowly started to grow out from that network. So then by the time of about April 2015, so just a little over two years ago, it had grown from that maybe initial 25, 50 people to about 3- or 400.

Courtland Allen 0h 4m 40s

How did you, like, were you actively promoting your list at this point in time, or was it growing entirely by word of mouth?

Scott Keyes 0h 4m 46s

Just word of mouth. I mean, I would, again, would, like, just one of those weird guys who really enjoys trying to find cheap flights. So then, once I found it's, like, I can take all of them, so I might as well just send 'em out to people who I know and like and would want to be able to take advantage of them, as well.

Courtland Allen 0h 5m 5s

Did you ever think in that early stage, like, "Hey, this is something that I could probably charge money for"? Or was it just like a hobby?

Scott Keyes 0h 5m 12s

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

Courtland Allen 0h 5m 15s

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

Scott Keyes 0h 5m 18s

You know, it was and was not. At the time, I was very, like, nowadays, we send out three or four deals departing the US every single day and then a number of ones departing, like, it doesn't just cover the US. We also cover flights departing Europe, flights departing Asia, Australia, Canada, Latin America, on down the line. We probably, as a company now, send out 15, 20 deal alerts each day. But at the time, I would send out, maybe I'd run across one or two a month. Because again, this was not even a side hustle because I wasn't getting any money for it. It was just a pure hobby. So it's just, like, you know, when I had some time, felt like going to search for some flights and, like, stumbled across something really great, then I would send it out. But it wasn't that much of a time suck initially just because it wasn't that big of a priority, at least in those initial hobby stages.

Courtland Allen 0h 6m 18s

Right, so when did things change?

Scott Keyes 0h 6m 21s

Yeah, so where things really sort of, like, the inflection point was April 2015. I'd been living down in Mexico and was getting ready to depart for a big two-month round the world trip with my now-fiancee. We'd basically amassed a bunch of frequent flier miles and were using them to get free flights all over the world. So we were going to 13 different countries, like, 20,000 miles, this big, big trip. I posted a little map on Facebook, just showing where I was gonna be going, something like for those doubters and haters of frequent flier miles, like, I am about to take this awesome trip for the next two months and it's all for free.

And just so happened, I was working as a journalist at the time. So I had friends working at other journalist outfits. And I had a friend of mine who worked at Business Insider, saw this and was, like, "Oh, that looks like an interesting story. Hey, Scott, can I pass this along to my friend here who writes about travel for Business Insider and see if she's interested in doing a story?" So, like, "Yeah, sure, by all means." So she was, and ended up doing an interview. The day we left for this big trip, the Business Insider article went up. It was with one of these sort of slightly click-baity, but made for viral headlines. You know, "Man travels round the world 20,000 miles, 21 flights, like, all for free, figures out how to game the airline industry." One of these that really gets people, a cross between, like, exciting travel, you know, frugal, the free part, all that stuff.

So it ended up going super viral, 250, 300 or 400,000 clicks on it. Like, literally over, you know, in that article it had a link to the email list. So literally overnight, it went from this just sleepy little hobby for 300, 400 people, 80% of whom I knew personally, to 5,000 subscribers, like overnight.

Courtland Allen 0h 8m 31s

That's crazy.

Scott Keyes 0h 8m 32s

Yeah, it was. And I didn't really quite know what to make of it, a. And b, it was kind of one of those crisis-tunities, because the bad part was this little hobby that I enjoyed doing and enjoy doing with a free MailChimp list all of a sudden, email list is big enough that I was gonna have to start paying hosting fees. You know, I love doing this just as a hobby for friends, but I wasn't really thrilled about the idea of just paying money out of pocket for server space to do a favor for my friends. So that was the bad part.

The good part was, I sort of realized, "Hey, maybe there's more interest in this type of thing than I had realized." Like, all of a sudden there are 5,000 people who are really into this. I'm not a businessman by background or trade, but I knew enough about business and marketing to know that getting that first 1,000 subscribers, those first 1,000 customers, is by far the most difficult thing to do.

Courtland Allen 0h 9m 34s

And you already crossed that at this point.

Scott Keyes 0h 9m 36s

Yeah, exactly. And the fact that I crossed that fivefold with doing nothing, like, not having to do any hustle, not take the time or anything. I was, like, "Man, maybe there's an actual opportunity for a business here." So it was during that trip that it then started to sort of percolate in my head, "Hey, how can I turn this into maybe a little business?" Throwing around some different revenue models in my head, like, ways to actually turn into a business. You know, "Should I do, like, a paid advertising thing? Should I do, like, a referral link type of thing? Should I do, like, a paid subscription?" Tossing all those around. Then, come August 2015, I ended up officially relaunching it as a business, went with the paid subscription model, and yeah, that was sort of the birth of Scott's Cheap Flights as a business, just about two years ago.

Courtland Allen 0h 10m 28s

I mean, you mentioned that you basically didn't have entrepreneurship 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, collaborating for the article in Business Insider, did you plan to put a link to your mailing list in there? Did you expect to get a ton of traffic?

Scott Keyes 0h 10m 46s

No, it was all completely serendipitous. I had no idea what link I should include, no idea that it was gonna go as popular as it did. I had never even considered at that time that there would be, like, a business opportunity here. It's just, again, something like, you're just kind of dealing with every once in a while in my spare time just for fun and got incredibly, incredibly lucky that it ended up turning into a big break.

Courtland Allen 0h 11m 15s

Today, Scott's Cheap Flights is not just you working alone, but you actually have a co-founder and a whole bunch of employees. Your co-founder, Brian, actually collaborated on your Indie Hackers interview a few weeks ago. How did the two of you guys end up meeting?

Scott Keyes 0h 11m 28s

Yeah, that was kind of a crazy story. This is very early on, a couple months after officially launched as 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. Just around that time where I was starting to think, like, "Man, how am I gonna find somebody as a business partner, someone to take on responsibility with this," Brian reached out to me because he was doing a giveaway.

Basically he was trying to start a travel blog, travel community thing and figured, "Maybe I can give away a couple subscriptions to Scott's Cheap Flights and do an interview with him." So we chatted for a while, gave it a couple subscriptions. And I just got a really good vibe from talking with him, like, "Man, this guy, he's got his shit together, like, he seems pretty hardworking, entrepreneurial. Like, I'm just impressed with the cut of his jib." So kind of on a lark, I just him, like, "Hey, look, this may sound kind of weird, but we kind of need help over here. Things are growing, we've got customers, but it's just more work than we have. Like, there's a lot of opportunity to help build this up. But yeah, is that something that you're interested in?" He said yes, we worked it out, and it ended up being just such, again going back to serendipity.

It's probably not a wise or advisable business partner search strategy to just take somebody who you randomly met on the internet and be, like, "Hey, you wanna go into business together?" And we'd never even actually met face to face until about five months ago or so. But I just, again, got so lucky because not only is he incredibly competent, incredibly skilled and hardworking, but also our skillsets really complement one another as well. I'm obviously good at the flight searching stuff and then good at, like, writing with the journalism background. Then he is really good at that behind-the-scenes back end stuff, like a lot of building systems, trying to get partnerships worked out, trying to build up marketing and development growth, all sorts of stuff like that behind the scenes that's hard to put a singular label on. But, I mean, Scott's Cheap Flights wouldn't be a 10th of what it is today if we hadn't had that serendipitous meeting and decided to go into business together.

Courtland Allen 0h 14m 1s

It sounds like you met Brian at 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?"

Scott Keyes 0h 14m 10s

Yeah, that's absolutely right. I mean, it was, like, at that time, probably when he came on there, maybe 10,000 total subscribers, maybe 500 or 1,000 were paying. So definite growth and bigger than I expected, but a fraction of what it is today, like, 18 months later.

Courtland Allen 0h 14m 35s

You made a lot of decisions early on about what your business model would look like. 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. Then, what did you charge money for?

Scott Keyes 0h 14m 55s

Yeah, initially we set the free and premium model. The thinking was, I was very, coming from a journalism world, I was very cognizant of the difficulties that a lot of newspapers went through going from their websites where they offered older articles for free to then trying to charge for it. I know how difficult it is to have a categorical shift in people's mind from trying to start charging them for things that they used to get for free. So I was very, tried to stay mindful of that. That's why I was, like, "I don't wanna just have a purely paid list and tell everyone, like, 'Hey, starting in August 2015, you have to pay for this. If you don't, then take a hike.'" That was part of the thinking.

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 and it's a massively lower barrier of entry for new subscribers. It, like, asking someone just to sign up for an email list is a way smaller than asking them, someone who'd never heard of Scott's Cheap Flights, to come in and pay for it. But even more than that, than having this built-in list of free subscribers, wound up creating a captive audience where any time we, like, when we send out deals to the free list, it includes little banners, like, "Hey, just FYI, free subscribers missed out on, like, I don't know, $350 deals to Rome yesterday" or something like that. Like, "Sign up for premium here to get all of the deals." Those types of things. And we have these folks who are interested, already know how Scott's Cheap Flights works, and are much, much much easier to convert to paying subscribers than just random Joe Schmo who just found out about Scott's Cheap Flights yesterday.

Courtland Allen 0h 16m 54s

You guys had a long-term view, basically. It was not the end of the world if someone doesn't pay immediately. It's fine, you can convert them later.

Scott Keyes 0h 17m 3s

Right, right, especially because the beauty of 21st century mail list business model is that the marginal cost is so low. It's effectively zero for any given subscriber. Obviously, once we hit certain thresholds, we have to upgrade server space and stuff like that. But for any given subscriber, it's effectively zero. But we found that, over time, just about 10 to 12% or so of free subscribers wind up becoming paid subscribers. That is incredibly lucrative then. If we can just sign up 10, convince 10 people to sign up for the free list, we know at least one of those people are gonna wind up paying for it.

Courtland Allen 0h 17m 52s

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

Scott Keyes 0h 18m 0s

Yeah. 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 list initially. We actually, on our website, when you come in, there's only one call to action. It's just, put in your email address. After you do that, then there's information about like, the premium list, you know, if they're really interested right away. But I want folks to start out on the free list 'cause I want them to get a sense of how Scott's Cheap Flights operates and make sure that it's what they're looking for, make sure that they don't have a preconceived notion about what it is that it doesn't ultimately end up being.

Some people think it's like Groupon, where we have this block of flights that we're selling ourselves, some people think it's like Kayak, where they can search for the flight themselves. Some people think it's like Flystein, where they can have an expert go look up the best flights for them. And Scott's Cheap Flights isn't any of those things. It's something new and different. So having people come in and see for the first week or two, just get the free deals, see what it's all about and then decide, "Okay, am I interested in getting more of the perks? Am I interested in getting all of the deals rather than just some of them?" The difference between the premium and the free list is, all the deals go to the premium list, whereas 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. Say, like, you live in New York. You say, "I only want flights departing JFK, La Guardia and Newark," or maybe you can add in Philadelphia and 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 they say, like, "I just want deals departing the Northeast," or "I just want deals departing the West Coast" or something like that.

Courtland Allen 0h 19m 57s

Is this something that you've played around with at all? Like, how did you determine exactly where to draw that line between what free users would get and what paid subscribers would get?

Scott Keyes 0h 20m 6s

If evolved a little bit over time. The one out of every three has been that way the entire time. Premium subscribers get a deal, like, when a deal goes to the free list, premium subscribers get it 30 minutes before the free subscribers, which for some deals doesn't matter. But for some deals, they legitimately only last a couple hours at times. So finding out about it early can sometimes make the difference. There's no ads in the premium emails. That's also been there since the beginning.

The two premium features that have changed since the beginning are that, like I said, that specific airport selection feature that I mentioned and we now offer text message alerts, as well. But that's only for premium subscribers, as well. Those are things that 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. Initially, when the premium list was a lot smaller, well, the entire list was a lot smaller, we offered free credit card consultations for premium subscribers. Going back, I got really good at frequent flier miles, generating them and using them for best value. A big part of that is which specific airline or points credit cards to open. I'd say, like, "Okay, yeah, if you're a premium subscriber and you're thinking about opening up a new credit card, send me an email, I'll help you choose." That went along great for the first six months or a year or so. But then it just ended up getting big enough that I was just every day having dozens--

Courtland Allen 0h 21m 53s

And swamped.

Scott Keyes 0h 21m 53s

Dozen. Yeah, just swamped in it. 'Cause that was sort of the one perk that was not really scalable, like, that each person who emailed has to have individual attention. So we ended up phasing that out and implementing these new features that I talked about, the city departure selection and the text message alert.

Courtland Allen 0h 22m 14s

Rewinding a bit, you've gotten to this point now where you went from 300 subscribers to 5,000, to 10,000 subscribers. 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 MailChip the entire time? Did you set up a website?

Scott Keyes 0h 22m 35s

Yeah, I was on MailChimp initially. I had a website that I just actually, my brother was good at web design. So he just kind of built out a website initially. MailChip that we used FormCraft initially, which was just a form plugin thing that connected well between the website and Stripe, which we use for payment processing. That was, like, the initial stack setup. We ended up over time phasing out form crafts once we got the new website built with our own form capture and then just connected directly to Stripe still for payment processing.

We did PayPal for a while. We offered that as a payment option. Ended up taking it out because it just didn't, without getting too wonky about it, it doesn't play nearly as nice with other apps and plugins. It ended up being, I'll just take one specific point here. When folks would pay with PayPal, it would automatically use whatever email address they had as their PayPal email as the email that they signed up for the list with, like for the Cheap Flights email list. But a lot of times, people didn't want that. They wanted a different one. So it would cause problems. Like, they didn't realize that and so they wouldn't be getting emails for weeks, and were, like, "Where are my emails?" And, like, "Oh, it went to the one that you signed up with." Ended up just being big headaches trying to figure it out with everybody.

So yeah, we ended up phasing out PayPal as an option, oh gosh, six months ago or so. We go back and forth on whether or not to bring it back. But I think we're all kind of happy to not have it, even though it's, like, slightly, we probably sacrifice just a marginal amount of revenue by not offering it. We, I think, are, like, amount of hassle and headache that we save by not doing it is by far worth it.

Courtland Allen 0h 24m 38s

What happened after you brought Brian on? Like, how did Scott's Cheap Flights as a business change?

Scott Keyes 0h 24m 45s

That was really where it started to get professionalized. The first few months were really just almost a test to figure out, "Okay, I've been doing this thing for free. Got a bunch of potential people. Are people willing to pay for this? Is this something that I could even cover my hosting costs with," which at that time, I think, were $50 a month. I just initially wanted to set a really low price point. We said, like, "Is this something that I can convince 25 people to sign up for two bucks a month? Like, can I do that?" Even the first day or two wasn't really clear if I'd hit it.

But then it started to pick up. I think by the end of the first month, had 100 or 120 paying subscribers at two bucks a month. So I was very happy. I was making money, like, it was profitable. You're already turning a profit the very first month. But again, when it had grown to 10,000, 15,000, you know, by the time that I brought Brian on, we really realized, "A, there's a lot of potential here." Most people who are signing up are really happy. There was no churn at the time. Expenses were next to nothing. 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 we just started to put our heads together. Like, "What types of tactics can we take to try to get things as good as possible?" He came up with a bunch of really, I think, smart ideas. I'll give you a few examples. We shifted away from the $2 per month model to, I think initially, the price was five bucks for three months, 15 for six months and 29 for, I'd have to double check to make sure that's what it was initially. It was something like that, five, 15, 29 for three months, six months or 12 month subscription. 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 every six months or once every three months, we ended up saving a ton on credit card processing fees because the way it works is, like, standard processing fee is something like 2.9% plus 30 cents. And that 30 cents out of two bucks is more than 10%. So we were getting eaten every transaction somewhere between 15, 20%.

So just by shifting to a longer payment structure, we ended up making and saving a ton of money. So that was A. B came with ideas about, like, a Black Friday sale and raising prices. We ended up raising prices right around new year, I believe.

Courtland Allen 0h 27m 46s

I was gonna say, one of the most common things you hear is that you should always charge more than you think. And $2 a month is so insanely cheap. Like, there's nothing online that I pay for that's that cheap.

Scott Keyes 0h 27m 56s

And that's sort of what I was thinking. Like, I wanted to be a low enough price point that the price point doesn't deter anybody. I just wanted to see, are there people who are willing to pay money, whatever amount, but pay money for this type of thing?

Courtland Allen 0h 28m 12s

At what point did you have enough validation to say, "Okay, people will pay for this. I should charge more"? Like, was there a certain target?

Scott Keyes 0h 28m 17s

After a few months. Yeah, I mean, that was right around when Brian came in and we shifted to this longer term structure, realized, "There's a potential to raise prices here." But there's always a little bit of a fear when you raise prices, like, are people gonna revolt? Are we undermining ourselves? So we did two things.

The first thing we did is, we kept everybody grandfathered at whatever rate that they signed up at. You signed up at two bucks a month, you can stay at that for life. And we still have some subscribers on the list who are paying two bucks a month. We had people who signed up, say, 15 bucks every six months, like, they're still at that. We are by no way affecting existing customers and so negate any chance of revolt, people canceling because of that.

The other thing that I realized from this was just a real surprise for me, is how much of a sales booster raising prices can be. That's because, again, because we had this grandfather clause, the result was that people realized, "Oh shit, if I don't sign up by the deadline tomorrow, prices are going up." It takes everybody who's, all these 10,000 people who are on the free list and are sitting on the fence deciding, "Should I upgrade or not?" It all of a sudden forces them to make a decision, and make a decision that's weighted in our favor because they realize, "Either I can do it today at 19 bucks or I can do it tomorrow at 29 bucks." So the sales just skyrocket in the day or two leading up to that deadline.

That's made me much less averse to price increases where they're warranted, because I know that when that happens, it's gonna drive a ton of upgrades in the time leading up to it.

The last insight, I think, just tangible example I can think of that Brian really came up with and executed really well was that he went back and did some analytical data crunching on existing users. He found that basically, he noticed an interesting little quirk. When someone signs up, there's a decent change that they're upgrade right away and there's a decent chance they'll 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 for more than two months was upgrading. Like, it was a very, very small number.

So what we realized from that is, okay, these people have a very low chance of upgrading and ostensibly are not, like, high value because of that low chance of upgrading. So what if we can offer them something to try to entice them to upgrade?

What we did was, we offered them a free month. We'd segment the list. We would say, "I only want people on this list who have been on for more than two months, on the free list, who have not upgraded." And we sent them all just a free upgrade thing. It said, "Hey, for the next couple days, you can try out 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 it. Cancel any time, no questions asked, in that month, you won't get charged. Even if you forget, 'It just got charged, I forgot, it's two days later. Can you cancel and refund?' Yeah, absolutely."

But we found that something like, we would get 1,000s and 1,000s of upgrades just from this, again, from this group that had almost no chance of upgrading to begin with. It was leading to 10s of 1,000s, 50,000-plus in revenue that was just free money because it wasn't gonna happen naturally. That was, again, just a tangible, really insightful thing that Brian noticed and implemented and one of the reasons why I'm so grateful to have him on the team.

Courtland Allen 0h 32m 25s

Yeah, that sounds huge. I think one of the cooler points from your interview is that you talk about, in terms of time, think it was April of 2016 was when you guys bought ScottsCheapFlights.com.

Scott Keyes 0h 32m 37s

Yeah, I know. Super lucky that it still existed. Before that it was just, I had written, like, a couple ebooks and it was on, like, FlyForFreeGuide.com. I just had, like, FlyForFreeGuide.com/emaillist or something, was the URL for the email for a long time. And it was kinda confusing. People were, like, "I wanna refer my friend over, but, like, what's the URL again? What the hell is it?" We were really lucky that ScottsCheapFlights.com still existed, that we got it. That was part of the professionalization of the company that Brian helped bring about.

Courtland Allen 0h 33m 18s

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

Scott Keyes 0h 33m 24s

Ooh, this is in April of--

Courtland Allen 0h 33m 24s

Last year.

Scott Keyes 0h 33m 28s

April 2016?

Courtland Allen 0h 33m 28s

Yeah, about a year ago.

Scott Keyes 0h 33m 30s

Okay, in that month, we brought in about $30,000 that month.

Courtland Allen 0h 33m 36s

So about a 10th of what you guys are making now, and probably similar subscriber numbers.

Scott Keyes 0h 33m 40s

Yeah.

Courtland Allen 0h 33m 41s

How have you guys grown by 10x in the last year?

Scott Keyes 0h 33m 45s

Hoo, man.

Courtland Allen 0h 33m 47s

That's a huge amount of growth. I imagine it was pretty hectic.

Scott Keyes 0h 33m 51s

I think a huge part of it, again, is the, going back to the freemium model, the fact that we don't have a big ask, just, "Hey, sign up, it's free. Try it out," and that's the one call to action. So a lot of the webpage right now is optimized for that type of thing. Again, there's one call to action, just put in your email address. There's, like, an opt in. You're going to leave, like, "Hey, just put in your email address real quick." A lot of that is optimized for collecting email addresses.

A lot of growth through Reddit. We've been posted a lot on Reddit Entrepreneur, on Reddit doing AMAs, stuff like that, that has led to a ton of subscribers.

Tons of media hits. You can always see a decent spike when there's a good article in Washington Post or 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. Almost half of people came because some friend of theirs had told them, like, "Hey, you should sign up for this." A, that's extremely flattering that it's something that people really recommend to their friends and that it's gotten so much growth that way. But B, it's been an interesting data point as we have gone back and forth about whether or not do to a referral program. Should we offer people, "Get a month free on your subscription for every person that you bring in," you know, something like that.

We keep going back and forth on it because on the one hand, people like referral programs. They work. It helps bring in new customers. On the other hand, if 45% of our people are already coming in, 1,000s, 1,000s, 1,000s a month are coming because they heard about it from friends--

Courtland Allen 0h 35m 42s

Do you even need a referral?

Scott Keyes 0h 35m 43s

Yeah, do we need a referral program? Do we need to boost? That could end up just being an expense at that point, by giving away money for something that we're already getting. It's tough, we go back and forth on it. It's an interesting problem to grapple with.

Courtland Allen 0h 36m 0s

I think one of the cool things about being freemium is that it really helps enable your word of mouth growth, too, because if you charged everybody up front and maybe 90, 95% people who would otherwise be on your free list just don't end up using at all because they're not willing to pay, then they never end up telling their friends.

Scott Keyes 0h 36m 16s

Oh yeah, no, I'm a super skeptical guy. I almost never pay for something right off the bat. I wanna try it out. I wanna see if I like it. And there are plenty of things that I've tried out, liked a little, liked, and then decided, "Yeah, I'll pay for this." I'll give you a real quick example, Slack. Once the team started growing big enough, we couldn't just use hangouts as our messaging service, 'cause there was no group aspect to it. Like, it was all just one-on-one conversations.

So we ended up moving over to Slack. But then, you get above 10,000 messages, it stops archiving, all these other things. We decided, like, "Yeah, this is actually pretty valuable. We've been using this, we really like it. Yeah, we'll pay 50 or 100 bucks a month, whatever, whatever it costs nowadays," and are really happy having done so. That, I think, is the model, I think nowadays. It just makes so much sense to let people try something out, see if they like it, and then figure out if it's worth paying for or not.

Courtland Allen 0h 37m 22s

Yeah, especially if you know that what the service or the product that you're offering actually provides value. Like, if you have something that's not that good, then okay, like maybe freemium's not gonna work for you because people will check it out and be, like, "I don't wanna pay for this, this sucks."

Scott Keyes 0h 37m 36s

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

Courtland Allen 0h 38m 16s

I think another cool thing about your business is that typically, it's pretty hard to get consumers to pay for things. Like, if you sell to businesses, businesses are making a lot of money and so there's a lot of opportunities to help them make more money, or to help them save money. So it's easier for them to do the calculation in their head of, like, "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 bit harder to get that point across. I think that Scott's Cheap Flights is in this interesting area where, like, consumers spend a lot of money on travel and on airline tickets. If you can save people 100s of dollars on that, then it's a no-brainer.

Scott Keyes 0h 38m 50s

Well, it's also just a very unique industry. It's not like, I don't know, buying an iPhone where the price is basically always the same, you know exactly where to get it, like, the price is gonna be the same today as it will be next week, you know what to expect. It's just one single product. Whereas with flights, I mean, literally the price is changing by the hour if not more.

Who has any idea what it's supposed to cost on any given route between, like, what's a flight supposed to cost between, like, D.C. and Sapporo or something? I don't know. 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 or you could tell them $1,900 and they would, like, "Yeah, you know, I guess that's probably what's right." Whatever Kayak spits back at you as the price, like, there's not always a good reference point for folks to know, like, "Is this a good price? Is this a bad price? Should I be buying it now? I wanna travel in three months. Should I pull the trigger now, should I wait?"

It's a super opaque industry, that almost every single person on any give flight is paying a different price than the neighbor sitting next to them. Almost positioning ourselves as this sort of concierge or decoder in the middle to tell folks not only to be your advocate and searching, like, "Hey, here's a really good deal." We're always looking for them, but also that we can tell you what's not a good deal, when you should book it, how long we think it's gonna last, that type of thing.

Courtland Allen 0h 40m 37s

You guys are so single-mindedly focused on this one thing. I mean, you guys don't do anything else. You guys are just purely flight search. So your home page, yeah, nothing else. Whereas every other site that I've been to is everything. I talk to people in the Indie Hackers home about this a lot. Like, there's so much of a temptation when you start a business to spread into all these adjacencies and do all these related things. But if you just focus on one thing, then you can do what you guys have done and streamline your home page so you only have one single call to action and you can increase your conversion percentage and you can deliver a product that's gonna be superior to everybody else's because you're not doing anything else. You're just focusing on one single problem.

Scott Keyes 0h 41m 14s

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

Courtland Allen 0h 41m 45s

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

Scott Keyes 0h 41m 58s

Everybody does different types of things. We have folks who do customer support. We get somewhere between 300 and 600 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.

I wanted people when they email in, to not have to wait the standard 24 to 48 hours to get a response. I wanted to get our response in a couple hours, if not a couple minutes, because I think that type of interaction, especially with a new company that you don't know are they trustworthy, is this good, is this bad? If you get a response back within minutes of emailing, that's a really positive interaction that you have with the company, especially answer your question, help you out.

I think, like, bringing on, really investing in customer support was something I 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 has a question, they just email it back. Like, they're not always gonna take the time to look on our FAQ on the website or anything like that. They're just, like, "Why am I gonna look there? Let me just email 'em back." So putting that emphasis on customer support folks was important.

We have some folks who are doing flight searching as well. I used to be the only one doing flight searching for US and Canda. Now I've got a few folks helping out with that as well. Then we've got folks doing the flight searching for Australia, New Zealand, Europe, Latin America. We have some folk, we have a social media manger, some folks doing web development, doing sort of the techie side of things. Yeah, it's kind of all over the map now, like a bunch of different roles. But one of the cool things is that everybody is based, everybody works remotely. We're in 10 different countries around the world.

Courtland Allen 0h 43m 55s

You're literally all over the map.

Scott Keyes 0h 43m 57s

Yeah. And only a few of us have ever met face-to-face. It's a very 21st century type of business.

Courtland Allen 0h 44m 5s

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

Scott Keyes 0h 44m 19s

I mean, I don't wanna say never say never. I'm just highly skeptical of the efficacy of ads. Like, I don't think, I think it's just something that nowadays, who likes to feel like they're getting sold something? People like to feel like they found out about something on their own, whether it's word of mouth, whether it's doing their research, that type of thing. I tend to think that the budget can be put to much better use in terms of customer acquisition, better than paid advertising.

I think there are slight exceptions to that. Like, the fact that Facebook, with their boosts, lets you engage more either with your own audience or like-minded audience, we started to dabble very minimal, you know, 10 bucks here, 15 bucks there, in terms of boosting a couple stories or posts that we'll put up. But I'd have trouble envisioning us ever having a four-figure, five-figure ad budget or anything like that, because I just… don't. I tend not to see that as not the best way to get, like, not the most effective way to get new subscribers.

I'll give you an example. I think, for instance, that money is better spent, if I had $1,000, I would not spend that on $1,000's worth of ads. I would do a giveaway and say, "Two free flights to Europe for you and your friend." This is something we've done before. When we do this, we'll get 30, 40, 50,000 new subscribers just because we, like, not only from doing a giveaway but also from doing a giveaway that is effectively tailored to promote social sharing. So you get, like, one entry for putting in your email address but you get five entries for every person who subscribes with your referral link, or not subscribes, enters the giveaway with your referral link.

Courtland Allen 0h 46m 27s

That's such a smart idea. It's cool because I see a lot of companies do 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 cares a lot about it is also going to enjoy Scott's Cheap Flights because they like cheap flights.

Scott Keyes 0h 46m 44s

Yeah, yeah, yeah, it's very on-brand.

Courtland Allen 0h 46m 47s

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

Scott Keyes 0h 47m 1s

We just never had to. Been lucky enough that we never, you know, we've been approached by various investors, VC funds and whatnot. But our profit margin is so high at this point and our expenses are just so low that we'd never had any need.

Not only that but 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 you're never getting money with no strings attached. You're giving up equity, you're giving up some control. And then you're shifting from being your own boss, the one making all the decision, to all of a sudden having to be accountable and answer to someone else, as well. That's a big mindset shift.

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

Courtland Allen 0h 48m 25s

What would you say your goals are at this point? Like, not only at a personal level but also at a business level. I mean, a year ago, you guys weren't making nearly as much money as you are now. You didn't have nearly as many subscribers. Do you wanna keep growing that fast or do you wanna turn it into more of a...

Scott Keyes 0h 48m 39s

I will preface this with saying, it is really hard to think long term because if you told me a year ago that we would be 10 times larger than we were then, I would have said you're flippin' crazy. It's hard to even, I think there's very little chance that we're 10 times bigger a year from today. But who knows. I guess it's possible, who knows?

So (a), it's a little bit hard to envision it. But (b), it's because it's hard almost to visualize, like, "Who would I be with six million subscribers rather than 600,000?"

It's a little bit hard to make long-term plans. We've almost kinda eschewed doing any type of super long-term planning. We've mostly stuck to short-term and middle and medium-term planning, kinda thinking three to six months ahead, like, what types of new features, what types of new outreach methods and stuff do we wanna pursue?

The main thing, I think, that we'd like to do, obviously without giving away too, too much of our plans, but the main thing that we really wanna do is improve the user experience. Right now, we're still kind of running on an MVP with some of the new systems in terms of premium subscribers choosing their departure airports and. We really wanna kinda build out a system that's much more user friendly, that's much more intuitive and much more visually pleasing for folks to be when they're setting up their account and getting that type of stuff.

And then just start to explore more types of outreach opportunities, whether that's building a blog, whether, again, we keep going back and forth on this possible referral program, even starting to, for instance, we sent out an email the other day, asking for folks, saying, like, "Have you gotten any really good deals on Scott's Cheap Flights and have a cool story with it?" We get people emailing us all the time about, "Oh, we took our honeymoon that we didn't think we could afford," or, like, "I visited this relative back in Europe who I hadn't seen for 10 years, 'cause prices were too expensive." Do you have any cool stories like that?

So we got 100s and 100s of stories and people were sending photographs and stuff, these, like, really touching, heart warming stories. So we started to post those a little bit on Facebook, but trying to figure out, you know, is there more ways we can focus to engage people with those types of stories, you know, sharing those types of successes?

Then we also have folks who are traveling all the time, like, thousands, tens of thousands of people taking these cheap flights who are taking photos, having experiences. Is there a way that we can start to tap into their experiences, have people be, like, "Oh, snap, when you're in Barcelona, you go to this really awesome hole in the wall restaurant," or if you're in Venice, like, "Here's the best way to, I don't know, hail a gondola" or something like that, and start to harness some of that user-generated content into something that we can share with everybody and build a little bit more of a community or a little bit of a knowledge base.

Courtland Allen 0h 51m 55s

How do you decide where to divide your marketing efforts? 'Cause it sounds like you've got some channels that work super well. You've got Reddit, where you guys have made a ton of AMA posts and showcase posts where you've gotten 1,000s of up votes. And you've got your viral giveaways, which you said bring in 40, 50,000 new subscribers. Why not keep doing those rather than switching to content marketing or a new type of marketing?

Scott Keyes 0h 52m 21s

It's a couple things. First of all, to a certain extent, it doesn't always have to be a choice. We can be doing giveaways and be doing Reddit and be trying to gin up on media and stuff like that. But you're right to the extent that you do have to focus your efforts somewhat and try to decide, on any given day, are we gonna try to do this or that?

Part of it is, we try to recognize the unescapable gravity of diminishing returns, that yes, we've had some really successful viral posts on Reddit. But if we try to do that every day, every week, or even every month, not only would it stop working but we would take all the goodwill that we've earned on Reddit and folks telling each other to subscribe, recommending it to other Redditers, stuff like that, and it would turn it instantly into bad will because they'd be, like, "This company is just on here, they're just advertising. They're just in it for themselves rather than trying to help people," stuff like that.

I think the same type of thing happens with giveaways to a certain extent. If you have it every week or every month, it stops becoming special. People just sort of start to tune it out. So we try to mix it up, try to figure out different types of areas.

One of the things that's made things much more complicated these days is the fact now that we're not just in the US and Canada. I cover flights departing Europe, Asia, Latin America, Australia. So that's trying to think about ways to grow larger in those types of markets can also get difficult because it's just a whole different ball game.

For instance, with the giveaways, I didn't realize this, but each country's laws regarding giveaways are vastly, vastly different. Sometimes they're as little as, 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 cost that it took them to enter your contest. Like, there are all these...

Courtland Allen 0h 54m 49s

That sounds fun.

Scott Keyes 0h 54m 49s

Yeah, there are all these random little things that we, for the most part, we've just avoided doing because it's so complicated. But we might have to start to try to navigate those waters a bit because it can be really fruitful 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 to Australia or to the UK or anything like that.

Courtland Allen 0h 55m 15s

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

Scott Keyes 0h 55m 34s

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

Courtland Allen 0h 55m 38s

All right, take it easy.

Scott Keyes 0h 55m 40s

All right, take care.

Courtland Allen 0h 55m 42s

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