From tourism to transit, the travel industry has taken a bigger hit than any other during the coronavirus pandemic. Despite this, Scott Keyes (@smkeyes), the founder of Scott's Cheap Flights, has managed to stay optimistic. In this episode, Scott and I discuss the frightening state of the travel industry and the economy as a whole, why a curated product is superior to a comprehensive one, and the keys to building a 7-figure paid newsletter that's capable of weathering even the darkest of storms.
Scott's Cheap Flights – Scott's paid newsletter for cheap flight deals
@smkeyes – follow Scott on Twitter
What’s up everybody? This is Courtland from IndieHackers.com, and you are listening to the Indie Hackers podcast. On this show, I talk to the founders of profitable internet businesses and I try to get a sense of what it’s like to be in their shoes.
How did they get to where they are today? How do they make decisions both at their companies and in their personal lives, and what, exactly, makes their businesses tick? And the goal here, as always, is so that the rest of us can learn from their examples and go on to build our own profitable internet businesses.
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In today’s episode, I sat down with Scott Keyes, the creator of Scott’s Cheap Flights. I first spoke to Scott on the podcast about three years ago. He had started a paid mailing list, where he would send out cheap deals on flights and he’d grown it to about 600,000 subscribers and $4 million in annual revenue, which is huge.
He’s actually grown it much more since then, but he’s facing a bit of a crisis today, because as we all know, COVID-19, this global pandemic, has affected the travel industry. People just aren’t flying anymore. So, I wanted to check in with Scott, see how he’s doing, and get some tips about how a company can survive in a crisis like this.
Also, Scott is an OG in the space of paid newsletters, paid content, which when he started Scott's Cheap Flights, it wasn’t popular but today is blowing up. We spend a lot of time in the latter half of this episode talking about how to start a paid newsletter, how to grow one, find an audience, and what his tips are for succeeding in this ecosystem today. I hope you enjoy the episode.
(end intro)
Scott, we’re living in very difficult times for the travel industry. It’s hands down the hardest hit sector of the economy due to COVID-19. Hotels are suffering, tourism is dead right now, and I think air travel is probably the hardest hit of the entire travel industry. Meanwhile, you’ve got a business where you're sending daily emails to people to help them save on flights. How are things going with you?
Well when you lay all that out it sounds stressful as hell. I'm not going to lie. It doesn’t sound like a very enviable position. Frankly, if you had told me a few months ago what coronavirus would look like over these past few months, how the pandemic would play out and what the future seems like it could be for this pandemic, I would have been, pardon my French, scared shitless. I would have been terrified.
It’s not that I feel, “Oh, yeah, confident. We’re good, everything’s going to be fine.” I think there are a lot of reasons why I’ve been much more impressed by the way the team has been able to rally together, impressed by the loyalty, frankly, fortunately, that our members have been able to show us, and the fact that there has been much less of a business impact, even though we are so exposed, if you will, to the travel industry.
Our fortunes are very closely tied to the travel industry, and yet it’s not a situation with the airlines, where every single day, they need to sell new tickets and every single day they’re starting at zero. They’re trying to generate new revenue.
For us, being an annual subscription business, there’s a significant amount of padding that is built in and you have that loyalty that’s built over the years from your members who aren’t necessarily quite as prone to churn or cancel as soon as things start to crater in the travel industry.
The fact that we were able to have this subscription business that renews on an annual basis I think limited our exposure, if you will, to the short-term cratering in demand. I would be quaking in my boots if I ran an airline and was looking at the numbers for travelers in March, in April, even in May. It’s horrendous.
But the fact that we are one step removed from that I think has helped the business along. It has taught me a lot of lessons about the importance not only of brand and brand loyalty, but also the importance of recurring subscription revenue as opposed to the more fickle, day-to-day selling and day-to-day revenue trends.
I want to give people an idea of how bad it is for the airlines. According to the New York Times, passenger traffic on U.S. airlines is down not 20%, not 30 or 50%, it’s down 95% from what it was this time last year, which is a borderline unbelievable number.
It’s interesting that you charging a subscription and annual subscriptions in particular is shielding you from some of this, because you have a lot of people who were paying for a Scott's Cheap Flights subscription last year who signed up in January who quite frankly already paid. They’ve got the service and all it provides for the next year.
By the time they have to make another decision, hopefully things will be recovered. What’s your game plan for the future and how are you preventing churn, besides just having an annual subscription?
Before I answer that, let me ask you. Baby noise in the background, too much? I'm more than happy to move to a different room where it might be a little bit quieter.
I think it adds to the atmosphere, the crisis effect.
Yeah, exactly. It’s a work from home lifestyle now. A couple things about that. You’re absolutely right. When you have a subscription membership, and especially one that has a long-time horizon, like a year-long thing rather than a month-by-month, you’re not nearly as exposed to the daily volatility and the monthly volatility.
Airfare, or airplane passenger loads, the number of people flying, are down 90, 95% sometimes, but we don’t see our numbers cratering 90, 95% like that, because we have the armor of the annual subscription revenue.
You can imagine, if the airlines lived in a different industry where they were, rather than selling tickets on individual flights, they were selling their passengers a year-long pass on American Airlines and fly whenever you wanted to on them, but you paid for it on, let’s say, January 1st and you had it for the rest of the year, it would be a very different business model, but in a sense they would be less exposed to the sorts of volatility that you would see with something like a pandemic.
That’s one thing. Two is, travel’s a unique sphere, unlike so many other things you buy where you pay for it usually well in advance of when you receive it. Imagine you go down to the shoe store and you’re trying to get your newest pair of Jordan’s and you pay for it and they’re like, “All right, you can get it in six months.” For most people that’s like, “What the heck is this?”
For most things, when you pay for your dinner, when you pay for your newest shoes, when you pay for your bike, you pay for your guitar, you get it right then or as long as it takes to ship it to your house. But for vacations, you book it three months in advance, six months in advance. I've booked flights up to a year in advance. It’s a different model than most other things.
What that means, though, is in something like a pandemic, even though we know it’s not safe to travel today, and it’s not safe probably to travel tomorrow or even necessarily next month, there is going to be a day, hopefully sooner rather than later, but there is going to be a day when it is safe to travel.
Folks are in a unique position right now, travelers are, where they are seeing both incredibly low fares for travel up to 12 months out, and the airlines have, because they’re seeing so little demand, they’re seeing their new bookings plummet, they’ve announced that they’re essentially waiving change fees on all new bookings.
What that means is that if you book a new flight today on Delta, even if it’s for, let’s say, Christmas or into 2021, Delta will say you can change your flight if it’s not safe to travel at trip time, if you don’t want to travel. You don’t even have to give a reason. It doesn’t have the normal change fees that are associated with booking flights.
That puts travelers in this, “Heads, I win. Tails, you lose,” situation where they can lock in the low fares today for future travel and still have the flexibility to change it if they feel like it’s not safe to travel.
I think the fact that people not only are wise to that, they recognize this is a unique and advantageous position that travelers are in that is not normal at all, but there’s a bit of FOMO. Even though folks know it’s not safe to travel right now during the pandemic, they might say, “Well, six months, nine months, twelve months into the future it might be. I sure hope it is. And I don’t want to miss out on some amazing deals, some once in a lifetime deals, because I churned my subscription to Scott's Cheap Flights, or because I didn’t sign up and I missed out on the deal.”
There’s that element of, even though they might not want to travel today, there is still a huge element of folks who might want to travel in the next year. For them, they said, “Yeah, it’s still worth it then, because I want to make sure I'm not missing out in the meantime.”
What’s cool is you seem to have changed your service to reflect this. So, with the core of Scott's Cheap Flights service, which sends out these flight deals, you’re sending out deals for flights that are taking off further into the future to sort of reflect that uncertainty and also deals, I believe, that feature these change fees that waive all change fees so that, assuming you're a Scott's Cheap Flights customer, you don’t even have to worry about figuring this out on your own. You just automatically get these advantages.
That’s right. I mean, we’ve always had certain criteria for the deals we send. Obviously, it has to be cheap. It’s right there in the name. But it doesn’t just have to be cheap. We’re not going to send out a six-stop, 50-hour flight to Europe, just a scented trash bag of a flight. Nobody’s interested in that.
We frankly should be promoting this more, but we use what’s called the Mom test. Not only does it have to be cheap, but it has to be a deal we think our moms would be interested in. And a five-stop flight to Europe, she’s not going to be interested in that.
But if it’s a non-stop or quick connection at an amazing price, then yeah. Not only do we have those original criteria for the deals that with send out, but you’re right, we’ve layered on these new criteria because of the pandemic, to balance a couple things.
First and foremost, we wanted to balance the fact that we are all living in a public health crisis right now. It’s a pandemic. We just passed 100,000 people who have died in the U.S. today. It’s horrible. Just awful.
We needed to be not just mindful and human beings first, but also needed to make sure that we were being good corporate citizens and a good company that is not only looking out for the bottom line but also demonstrating, in our actions, that this action really matters to us. This is important.
Not only did we want to make sure we were being good corporate citizens on one side of the ledger, but also balancing what we felt were our responsibilities to our members. Folks have signed up for this. They are signed up for Scott's Cheap Flights because they want to know about when these cheap deals pop up out of their home airport.
W,e didn’t want to say, “All right. We’re just going to close up shop until there’s a vaccine,” because we think there are ways to be able to travel responsibly and safely. Even if that is not today, we’re still very hopeful and mindful that that day will come. We hope it’s much sooner than later, so we wanted to make sure we’re doing right by our members while also doing right by the public health crisis that we’re all facing.
Frankly, it’s a difficult thing to do. I'm not going to pretend like, “Oh, there’s a silver bullet. There’s a playbook for exactly how any company in these situations should act in a pandemic,” because this is the first pandemic that most of us have ever been in.
I remember these conversations we were having two months ago. I was literally at the airport having these big long calls. “What should we do? How should we structure it,” going over a bunch of different options and finally settled on this one, because we felt like it was the right balance of being good human beings, good corporate citizens and a good company for our members itself.
I think it’s been well received. I sure hope so. I'm always a little bit suspicious of people’s evaluations of themselves because there’s a little bit of self-interest there, so don’t take it from me but if I had to go back and do it again, I don't think there’s much that I would do differently. I think we handled it about as well as we could have, given the circumstances.
I've been looking at how other travel companies have been handling this. I just went through the product pages on Indie Hackers earlier today and looked up bootstrapped travel businesses to see what milestones they’ve been posting.
It’s been tough. The last one I looked at was a company called HelpStay. They allow you to travel and stay for free if you agree to volunteer for whoever you’re staying with. One of their milestones is that they’re going into hibernation mode for the duration of the pandemic because travel for them is dead.
You have bigger companies, of course. Boeing just recently laid off 12,000 people. It’s looking like a lot of airlines are going to have mass layoffs in October when their funding runs out because they’re being artificially propped up by the government right now.
It’s interesting to talk to you where things don’t seem to be going that bad. I didn’t know what to expect from this conversation. I don't know if you were going to come on and be like, “Hey, please sign up. We’ve lost 95% of our subscribers.” So, I agree. I think looking at Scott's Cheap Flights from the inside, I would say you're handling it well.
I think it’s important to time stamp this because we’re talking on May 27th and things have been very far from what I would have imagined the worst case scenario would have been for the company, especially given how horrendous it’s been for the world as a whole.
That said, the future, I think, is largely dependent on questions that we don’t know the answers to right now, and those are largely medical questions. Sorry, I've got a cat in front of me. Podcast listeners might not be able to know this, but she stepped right in front of my mic.
Welcome, cat.
Yeah, exactly. So what I mean by that is if pharmaceutical companies and scientists who are studying drugs and therapeutics and treatments and vaccines make great progress and knock it out of the park in the next three to six months, that’s going to be a very different future for especially flights than one where the treatments fail, the vaccines aren’t looking effective, and we’re looking at two or three years until we feel like humanity’s beat this and travel craters for years on end.
Look, I'm not going to pretend like that wouldn’t be an incredibly challenging thing for Scott's Cheap Flights and for travel companies around the world. I've been relieved and impressed with the team and the way we’ve all been able to pull through it thus far, two and a half months in.
I think it is important to note from this standpoint that two and a half months in isn’t the be all and end all of where things are going to look. I think there are some hopeful signs of that we’re off of what might have been the worst-case scenario, from what we saw a month or two ago.
But look, we don’t know if there’s going to be a big second wave in the next few months. We don’t know what things are going to look like from a vaccine standpoint. Until we have answers to those questions, trying to medium to long term projections of what things look like for Scott's Cheap Flights much less the economy, much less the travel sector, your guess is as good as mine.
Are you doing much guessing in that area? Because those are two very different potential outcomes. On one hand, maybe things return to normal. On the other hand, maybe travel is dead for a few years and your business suffers tremendously.
What do you do in that crazy scenario? Do you pivot into a different kind of business? Do you lay off a bunch of people and downsize? What’s the game plan?
I think part of it is being conservative and very cognizant of the moment, being willing to make quick changes where you think they might be needed. We’ve got a couple things coming out here in the next few weeks or so, probably in the next month or two that I wish we were ready to announce right here, right now, on air. Not quite ready yet. But things that were loosely tinkering around in our minds before the pandemic became clear, once it became clear started to be, “Yeah, we need to hit the accelerator on these matters because they’re going to be extra important right now in a way that they might not have been in normal times.”
So, that’s one, being willing to change priorities as a result of this, not getting too wedded to your earlier priorities, your earlier game plan that’s frankly no longer appropriate or applicable. But part two there, at least for us, approaching it in a conservative manner was the right approach and I think is going to be helpful in the long run.
I don’t mean that conservative in a political sense, but conservative in a pulling back, being a bit defensive, so rather than pumping out tons of marketing dollars, tons of Facebook ads, tons of this, which we’ve never really done anyway. But we started to dabble, like, “Hey, maybe we should start to get into some paid marketing” and whatnot.
But we realized as soon as the pandemic hit, it wasn’t the right time anymore. It wasn’t the right time for two things. One, because the interest in travel just went off the cliff. Travel is not at the forefront of most people’s minds right now, nor should it be. Pandemic, people losing their jobs, getting furloughed, losing their hours, those things are much, much more important and need to be fixed before travel starts to become front and center.
But two, not only would it not be effective, but you're also looking at cash flow issues from a company standpoint. If you’re spending a lot of money on marketing, that’s money that can’t be spent on payroll, or that can’t be spent on health insurance or can’t be spent on things that are much more core to the business.
So, whereas we might have been in a much more growth mode in February, by March we said, “Okay. We need to get defensive right now. We need to make sure that if this thing becomes a worst-case scenario, if it’s looking that bad, we need to make sure we are well protected for as long as we can be.”
I mean, no company can ride it out if they’re talking about a five- or ten-year pandemic where there’s no vaccine and nobody can travel or get on an airplane. But certain decisions we make right now might be the difference between being able to survive 18 months versus being able to survive 24 months or 30 months, which is within the realm of possibility of when things could be getting back to normal.
That’s why you want to make those decisions now, because it gives you extra runway for when those sorts of world circumstances, for lack of better term, giving scientists more time to hopefully, fingers crossed, get this thing whipped. Then we can all be safe again, be able to travel again, and things slowly start to inch back to normal.
Look, we’ve been fortunate that we haven’t had to do any layoffs. We haven’t had to cut salaries. We haven’t had to do any of those things yet, and I'm really hopeful. We’ve got a six-point plan of everything we would do before it ever came to that.
We’ve shared that with the team because that’s the most important thing in our mind, is that we avoid those types of things. We want to avoid cutting anybody’s pay and we certainly want to avoid having to lay anybody off. I don't think that we’ll have to do that, but business is business. World circumstances are what they are.
We’re doing everything we can. Like I said, we’ve got all these other things that we would do before then, including taking mine and our CEO Brian’s salary down to a dollar, cutting stuff on the leadership team first, doing all these other things before that because the most important thing to us is to try to protect our team so that we can emerge from this on the other end as strong and successful as possible.
But the other thing, too, that I would note is that while it’s important, and I think it’s important for us to have been defensive, to have been conservative, literally to be conserving cash in case it’s needed later on, we’re also constantly monitoring, keeping a close eye on developments of the Coronavirus. Watching the TSA numbers, watching interesting travel, because when we start to see that we’re back on the upswing, we want to make sure we’re there to meet that demand. We want to make sure that we are not missing the moment.
You don’t want to be burning money on something you think is useless, like trying to convince people in mid-March that right now is the time to be interested in travel, but you also don’t want to be missing it on the other end where you’re so hunkered down that you’re missing out on when people are starting to feel safe and comfortable hitting the road again. Does that make sense?
Yeah, it does. It’s a tight balancing act, where you have to always be aware of what’s going on, because you’re right. You want to start investing very quickly if things start turning around and nobody knows when that’s going to be.
It’s a funny thing. I never would have expected that part of my job would become amateur, armchair epidemiologist. Who’d have thought that I’d have to be sitting there dissecting various things like seven-day rolling average charts and making sure I'm accounting for the number of tests vis-à-vis the number of cases. But these are unusual times we’re living in and I’m trying to do my best to be conversant in what’s happening without being overly optimistic, but also not being overly pessimistic either.
Let’s say I’m a founder and I don’t have a six-point plan. I may have already cut my salary. I may have already cut my marketing budget. What are some other points on that plan that I might want to adopt to help me survive for the long haul and get to the other side of this?
Look, there’s a number of other items that certainly we’ve explored that I know are on the table, everything from cutting the expenses of benefits, certain perks that are important in good times, equipment perks, work from home perks, various other, 401k matching, things that are important and nice to have, but less important than somebody having a job, less important than somebody being able to have a salary and put food on the table.
There are things like that, things like loans from banks, things like maybe you’re a company that either had only taking very little angel investing or had been totally bootstrapped and maybe you decide, “Look, it’s more important to me that my company survive or that I don’t have to do layoffs than being able to say I've been a bootstrapped company for forever and ontologically it’s very important to me.”
Maybe that is, and for a lot companies that’s going to be important, but I think it’s also important to be clear-minded. Is that as important to you as not having to lay off folks who are your coworkers? Everybody’s decision is going to be different on matters like that.
It’s also being very ruthless with cutting spending on things that might feel extraneous when you are in a pandemic. There are a lot of things that can be nice to have. Everybody has their own account on various SaaS companies and being able to do things efficiently, but look, that comes at a price.
When it’s economic boom times, absolutely. Go for it. Pedal to the metal. And when we’re in a recession, possibly bordering on a depression, it looks a little bit different when you’re looking at four or five figure expenses going out for these various SaaS companies and plugins and whatnot and you start to have to tell the team, “Look, it might, in normal times, be important to have this, but is that more important than not having to lay off folks, or is that more important than not having to cut salaries?”
It’s not an easy thing to do and every team has to go through and look ruthlessly at their expense sheet. But I think it’s important especially with something like this. That is so wide reaching, not only the impact of the virus itself, but the second economic effect of the economy as a whole looking in far worse shape today than it did three months ago.
You mentioned this idea that you might be a bootstrapped company. There’s a lot of pride in being a bootstrapped company and the idea of fundraising is beyond the pale for you. But you might have to do it to get through the pandemic. I know the last time we spoke, Scott's Cheap Flights had bootstrapped. Are you still a bootstrap company today?
We are still a bootstrapped company. We’ve been profitable since day one, very fortunate and lucky to be able to say that. I personally have never been ideologically, “Oh, I never would take funding,” or “Oh, I definitely want to take funding but only in the right circumstances.”
For me, it was just a practical question, like, “Did we need the money?” We were fortunate that we never did. The very first month that I started when it was just me, my expenses were $50.00. That was what it cost to have a Mailchimp account and be able to send out to 5,000 people. My revenue that month was $200.00.
I got a hundred people to sign up at two bucks a month and I made $150.00 that month. Let me tell you, I felt like Scrooge McDuck, swimming through those gold coins. I was living it up. That continued over the months and over the years now, that our revenue has always well outpaced our expenses, fortunate enough to be a work from home company since the beginning, so we’re prepared for something like this pandemic and not having to pay the overhead of an office for rent, equipment, that type of thing.
That is why, for me, fundraising never felt that pressing, because we never needed it. I wouldn’t say my thinking has super shifted one way or another, like, “Oh, definitely I’ll never take funding,” or, “Oh, we’ve got to go start fundraising tomorrow.” For me, it’s mostly still a practical question, like if it’s what needs to be done to make sure that the team is going to be okay, that the company is going to make it through then yeah, it’s going to be something that I’ll explore.
If it feels like we’re going to be just fine, we’re going to make it through then I would feel a little bit less inclined. It’s a tricky thing, too, because what is one of the things that they say about fund raising? You want to be able to do it from a position of strength, you only want to do when you don’t need it, which has a lot of merit to it. I don’t want to pretend that that’s silly advice.
But it’s easy to say that without also accounting for the things that you might give up as a result of fundraising. I will tell you, not having to answer to somebody else during this pandemic has been a blessing.
Not having to meet certain user numbers or certain financial metrics during this pandemic when frankly nobody could be expected to meet whatever metric they had set for themselves in February. Nobody could be expected to meet those in March or in April or in May.
Not having to do that and only being answerable to ourselves and only having to make decisions that we are comfortable with and that we feel is right for the company, I feel very lucky to be in that position.
I'm loathed to give that up easily but I'm also cognizant of where the company is and making sure that we are doing right by SEF in the long term.
I know a lot of high-growth startup founders who have raised money from investors, and they are expected to hit certain targets. A lot of them are not sitting on a large war chest. They needed to raise money in April or May. Right now, valuations are down. They’re having to accept down rounds. It’s brutal.
Have you heard from folks about their investors? Did they give more leeway given the circumstances, or did they say, “Look, business is business. You’ve got to meet your obligations”?
I've heard a lot of that. Investors are quite aware of what’s going down and they don’t necessarily think that companies are going to perform the same way that they always have.
But it’s different by sector. For example, I have a friends who’s got, the best way to describe it, is it’s a wine gambling business, where you can subscribe to this wine subscription box, and every now and then you might get a really expensive bottle that you paid way less for. Business for him is booming.
From what I know, his investors might expect him to have higher targets because that industry’s doing so well right now, whereas in travel, it might be the opposite. I think across the board, regardless if you’re trying to raise money, you’re probably going to get a lower valuation because investors realize that people are in dire straits right now and they’re also themselves uncertain about the future.
We might be heading into, like you said, a depression which is just insane to be saying this and being serious about it. If you’re an investor, you probably want a better deal. I think as a bootstrapper, you just have so many natural advantages going into something like this.
We’ve talked about a few of them. Number one, you’re already generating revenue. You already know how to turn a profit because you had to get to this point. You have 2 million subscribers. Many of them are paying. Even when I interviewed you three or four years ago, you were already doing millions a year in revenue.
It’s wild.
Yeah, yeah. It’s crazy. But that means when a pandemic hits, you’re not like, “Oh, crap, how do I make money?” like a lot of my high growth startup friends are trying to figure out now. You already had a business model.
You don’t have any one to answer to. You’ve already figured out that charging annually is the best way to maximize cash flow. You have a ton of these advantages that I think other companies don’t have.
Yeah, and the other thing, too, that occurs to me there, is the benefit of having high margins, which on the one hand sounds like, “Well, of course it would be nice to have high margins. It would be nice to have a Ferrari and it would be nice to have a beach house in Lake Como.”
On the other hand, many companies, especially ones that are funded, would view a double-digit, high profit margin as a bug, not a feature, because they would say you’re not growing fast enough. You should be taking that profit margin that’s sitting around and be plowing it back into marketing. You should be getting more users. You should be doing this and that.
Without saying whether one side is correct or incorrect, I think it’s clear that when a pandemic hits and with cash, you need to be conservative, having that buffer, having that margin, it’s literally a margin, where you can say, “Yeah, we can have a lot less revenue and still not need to make the cuts” that accompany spending as much money as they take in, and then all of a sudden sees their revenue drop by 20 or 30%, they all of a sudden make some huge cuts, including probably layoffs, including salary cuts.
And so, when you are the type of company that has that more slow, sustainable growth, you don’t necessarily see as much volatility. You’re not going to have the high highs of Rocketship, millions of users a month because you plowed tens of millions into Facebook ads, but you also don’t have the low lows of as soon as something drops or as soon as something goes wrong you have to say goodbye to dozens of coworkers or you have to tell them that, “Hey, sorry, we need to cut your salary by 25%.”
It’s hard to put a price on not having to have that conversation, and I feel very lucky to be able to continue to provide for so many employees. We’re up to almost 40 people on the team right now. Not only to be able to provide for them but also their families in such a tough economically perilous time.
The fact of being able to prevent them from having to feel even worse during this pandemic is a valuable thing to me that doesn’t show up as much in this balance sheet or in the discussion of margins and growth. But that’s also the bleeding-heart liberal in me and like, “I want everybody to be happy and good.” Take it with a grain of salt from me. I'm not necessarily the world’s best businessman.
I think you put it perfectly, though. To the extent that you prioritize growth at all costs as a company, you increase the variance. It’s much more extreme, where okay, you can reach these higher highs, but the risks are much greater. If something bad happens you're not necessarily going to have the cash in the bank to weather this storm.
I think for the vast majority of people starting businesses out there, if you can generate a few million dollars a year in revenue or profit, or more, you’re not going to be a unicorn company. That’s fine.
I look at you right now. You seem way happier and way more chill and relaxed than anybody running a travel business has a right to in this particular situation. I think that’s a direct consequence of the fact that you're not prioritizing growth at all costs, that you are running a healthy, stable business.
Yeah and listen. Fingers crossed that two months from now, three months from now, that continues to be the case, because look, it’s a medical question. If this doesn’t get licked in the next two, three years, I might not be quite as pleasant and happy-go-lucky as I am today.
Let’s analyze Scott's Cheap Flights as a business. It’s been several years since you’ve been on the podcast. I’m sure at least a few things have changed about your business model.
I know you have a new CEO. I know you probably raised prices. I don’t think you used to only have annual plans back in the day, but you do now. Run us through the nitty gritty. How do you make money and how do you generate profit as a newsletter?
The way it works is, essentially, airfare is such a bizarre thing that we all buy, where you have no idea what the price of any given flight is going to be on any given day. It’s not like buying a gallon of milk where you go down to the store and if you buy a gallon, it’s probably going to cost more than a half-gallon and what it cost yesterday is about what it costs today and about what it will cost tomorrow.
Airfare is nothing like that. The exact same flight, we’ll say from Atlanta to Amsterdam, will be literally, and this is a true example, $800.00 on Monday, $300.00 round trip on Tuesday, and $1300.00 on Wednesday. It’s the exact same flight, and if you bought that on Tuesday, glory and rainbows to you. If you bought that on Wednesday for $1300.00, gnashing of teeth.
It’s horrible. Just awful. Because it’s such a confusing, horrendous purchase that people have to make, but you know that if you want to take an overseas vacation, if you want to travel somewhere that’s more than a couple hours from your house, you almost certainly have to get on a flight.
There’s no railroad across the Atlantic Ocean. You have to buy airfare. There’s this thing that nobody understands how it works and yet we all need, in order to take our vacations. And that’s why it’s such a stressful, such a terrible thing.
Layer on top of that the fact that cheap flights are popping up all the time, we just don’t know when and where they’re happening. They’re probably popping up right now while we’re on this call, but if you didn’t happen to be searching the exact right routes or the exact right dates at the exact right time, you would miss it.
Rather than having to be chained to your computer 24/7 searching for flights or having to fear that you’re going to miss out on the next really good deal out of your home airport, what we do is we say, “Look, we love searching for flights. We love finding those deals, and when we find that next deal from your home airport, we’re going to find the full extent of it and we’re going to send you a little alert.”
That way you know, “Oh wow, that $300.00 roundtrip flight to Amsterdam just popped up. Do I want to take that or not? Oh, that $250.00 roundtrip flight to Hawaii just popped up. Are there dates in there that work for me?” You can decide for yourself, but be in the know for when those cheap flights pop up.
That’s the way Scott's Cheap Flights works. We’re constantly searching all day every day for those cheap flights, and we alert our members to them when it pops up out of their home airport. And you’re right, it’s changed a lot over the years. It started out as a hobby for my friends. This is about five years ago. No, no. I take that back. That was seven years ago, 2013 is when—
It’s a new decade, man.
I know. Good Lord. I cannot believe it’s been a better part of a decade that I've been a cheap flight expert. This is my life now. Since 2013, it started out as a hobby, just something I did for fun, for the love of the game.
Then, in 2015, it became an actual business, where there was both a free list that you could sign up for free, and there was also a premium list, where you could pay a few bucks a month and be able to get additional perks. Those types of perks have evolved over the years and certainly evolved a lot since we last chatted. I wouldn’t be able to recall exactly what the price point was then. You don’t happen to know off-hand, do you? It was probably $29.00 a year.
I think you still had monthly plans, too. You had some sign up for three months or sign up for six months or something like that.
Yeah. It was a little confusing. We had where you could pay by quarter or biannually. We decided to scrap all that since the last time we talked and just went for a simple, you sign up for the premium annual plan. Right now, it costs $49.00 a year, so it works out to about $4.00 a month or so.
Or you can be on the limited list. The folks on the free tier, they sign up and you get a limited number of deals out of your home airport. You can see what it’s all about. For the premium list, which we have as a free trial, you get a bunch of extra perks.
Not only are you getting all the deals out of your home airport rather than just a few of them, you’re also getting the mistake fares. These are the Holy Grail of cheap flights, when an airline makes a mistake and accidentally sells a ticket for way less than they meant to.
Scott's Cheap Flights actually started after I personally got a mistake fare, took the cheapest flight I've ever gotten in my life, which was nonstop from New York City to Milan for $130.00 round trip. I didn’t even know I wanted to go to Milan. I woke up that morning. I had no idea. Milan was not on my radar. But when that $130.00 round trip flight to Milan pops up, it’s not a question.
And this is just an airline employee fat-fingering something, type in the wrong number and they’ll honor it.
Exactly. Exactly. They probably meant to sell it for $1300.00 and the forgot a zero.
Left out a zero. Tragic, but great for you.
I know. Shit happens, but they only last for a few hours, those mistake fares, and so you’ve got to find out about it early so that you have enough time to book it before it disappears.
And this is powered by, just so everybody knows, you and a team of flight searchers, who are experts at finding cheap fares, doing this by hand and then sending out these emails to subscribers so that we can get the deals as fast as possible.
That’s exactly right. That’s the secret sauce to finding cheap flights. It’s literally just searching 16, 18, 20 hours a day. There’s a rule of thumb, call it the hot kicks principle, that the better the deal the shorter it’s going to last.
That $130.00 roundtrip flight to Milan, that thing only lasted about three or four hours. It only lasted as long as the airline realized it and then was able to pull the fare. Fortunately, I and who knows however many other people were able to buy that flight before they pulled it and got $130.00 flight to Milan.
Mistake fares, we reserve for just the premium members, deals to Hawaii and Alaska, and then the peak season deals, so in the middle of summer, Christmas/New Year, those peak travel periods when airfare is especially expensive but cheap flights can be especially valuable because it normally it costs an arm and a leg to fly somewhere in July or over Christmas break.
We reserve those for the premium members and a couple of other perks. There are no ads in the premium emails. They get them about 45 minutes or so before folks on the free list because for the folks who are paying, we want to make sure that they feel special and that they’re getting what they’re paying for.
Your business is technically like a paid newsletter, paid content business. This is my favorite kind of business this year. For whatever reason, I'm obsessed with it.
Very trendy.
It’s very trendy and I think people are sleeping on it. In general, technology’s becoming a commodity. It’s very easy for people to code. It’s not the differentiator moving forward. If you build a feature, your competitors can build a feature.
I think that makes code similar to media in content, to be honest. If you find a cheap flight, someone else can find a cheap flight. If you write a blog post, someone else can write a blog post. It’s a little bit hard to defend in some ways, but I think it also means that code and media are on a level playing field.
If you're a fledging Indie Hacker just getting started and you don’t have that much money in the bank, you don’t have a big team, do you want to start a SaaS company that’s going to take you nine months to code some extremely complex app, or do you want to start writing a newsletter, providing immediate value to people today or tomorrow?
I think this is a big part of the reason why it’s blowing up. People are figuring out that people will pay for content as long as that content is actually useful. It’s not just something that’s fun, it’s something that’s making them money or saving them money. That’s very clearly what you’re doing with Scott's Cheap Flights.
It’s also a way, an easy lightweight way to test the market to see if you’ve got product-market fit. Because people tell you right away. You’ll see it. Are people willing to pull out their credit card and pay for the information that you’re gathering and sending out?
I see this as a problem in a lot of budding entrepreneurs, is that they’ll get very hung up in their own head gaming out various scenarios, all very theoretical, all very business plan for x, y or z.
They’ll spend so much time on the theoretical plan without realizing, “Why don’t we test a few of these things out? Why don’t we stress test it in the real world and start to see what people say?” because in the end, that’s the most important metric.
Are people willing to buy what you’re selling? So many business plans treat that as a, “We’ll eventually figure it out,” whereas, I would argue, that should probably be one of the very first things that you do.
Agreed.
You can improve the product later on. The people who stick with you, those are going to be your early evangelists. This is one of the reasons why I think newsletters have taken off, places like Substack.
It’s interesting, I can count at least three of the top 20 Substack writers, this paid newsletter service, at least three of the folks who are in the top 20 list there are former coworkers of mine when I was a journalist. Literally, people who I could just call up on the phone right now, “Hey, how’s it going?”
We had all worked together as political journalists in DC. I think we learned a lot of lessons early on, not just about how to frame content and how to deliver quality content, but also recognizing the difficulties and issues of the media business and the ways trying to monetize it can be the perniciousness of relying sometimes on paid advertising as your sole source of revenue.
I admit, it’s horrible, but seeing what’s happening with so many news outlets in the media business and the revenue plummeting, even as their readership is going through the roof, because no advertisers are wanting to put their ads on a Coronavirus story. And that’s the only news out there right now is Coronavirus news.
You’re seeing people getting laid off left and right. I think it’s indicative of a broken media model. So a lot of the folks in the newsletter industry have realized, your fortunes can be directly tied to how much people are subscribing to what you’re saying, signing up for that, and you can build on that rather than it being this two-step dance where you build an audience and then sell that audience to advertisers. It works a lot simpler and more sustainably when you and your audience can have a much more direct financial relationship.
Yeah and that’s what you guys have always had at Scott's Cheap Flights. It’s always been a freemium model, where people are either on the list for free or they’re paying you directly. There is no third party. There is no middleman. There are no misaligned incentives.
Talk to me about your freemium model. How necessary is that? Do you need to have a free tier in order to get paid subscribers? Also, do you think you can start a paid newsletter today and just charge right out of the gate? Or do you need to spend time building up some goodwill among free subscribers before you can put a price on it?
That is a good question. Let’s rewind to the beginning of Scott's Cheap Flights. I found this $130 trip to Milan. I get back. All my coworkers and friends heard about it, I guess, and word had spread.
They came up to me, “Hey, Scott, I heard about that great deal you got. Can you let me know next time you find a fare like that so I can get in on it, too?” So rather than trying to remember every single person I needed to let know about these deals, it was like “Why don’t I start a simple little email list? That way I can let everybody know at once.”
That’s how Scott's Cheap Flights began. It was literally the simplest way to be able to broadcast information to everybody who wanted to get it. I did it for 18 months just as a hobby, just for fun.
When it had grown enough to the point where I had graduated out of the free tier of Mailchimp and started having to pay $50.00 a month to do that, I wasn’t thrilled about that idea to have to pay Mailchimp money so I could email information about flights to my friends, but it also told me, “Wow, there’s enough people signed up to this that maybe there’s a business opportunity here.”
I started throwing around different models in my mind. We talked about advertising, supporting business. Not only my issues with that from a media and journalism background, but also the fact that look, when you only have - like, 5,000 people is incredibly impressive. That 5,000 people want to listen to what you have to say, go tell an advertiser that you have 5,000 people listening to what you have to say, they will laugh you out of the room..
They don’t care.
They’re like, “Okay, we’ll give you fifty cents to advertise against that.” It’s problematic for a number of reasons. Consider the affiliate route. What about having affiliate links, where if somebody buys something, throw a link in there or buys a flight that I mentioned?
I didn’t like that for two reasons. It erodes some trust or has the potential to. I don't think affiliate links inherently are always going to erode trust, but I think it can for a certain segment of the audience and you would have to have a ton of credibility built up for somebody to say, “I am going to ignore the fact that he financially benefits from me personally, and I'm going to take what he has to say at face value.
We’d all like to think we have never been influenced. The number of times that I've read on some cooking blog, some financial blog, “Yes, I get an affiliate fee for this but it’s my true opinion.”
That may be true. You might believe that. But it’s still going to be a lot of folks in the audience who have to question, who have to run through that question in their mind and are viewing what you have to say through that credibility lens.
I didn’t like that as a model where they have to be thinking about it. I set that aside with the freemium model. Spotify was the one that occurred to me as the most prominent version, where they have both folks who are on the free list and folks who are on the premium list, with extra perks for folks who are on the premium.
The reason why I went with freemium rather than just an all-premium tier was two-fold. One, first and foremost, I didn’t want to kick anybody off. Like I mentioned, I’m a soft, squishy liberal. I'm just like, “I like people. I've been doing this for a year and a half just for my friends.”
I didn’t want to have to tell any of those 5,000 people who said, “Yeah, we want to listen to what you have to say, Scott.” I didn’t want to tell them, “Well, you’re going to have to pay me a couple bucks a month if you want to listen to what I have to say.”
Obviously, I wanted to be able to build a business that would need some amount of revenue to sustain itself, but I wanted there to be the possibility for folks to continue to have that relationship without necessarily being ready or willing to take things to the next level, if you will.
I figured, “I don’t have to kick anybody off. It’s not costing me anything to have these folks on the free list.” It’s a matter of trying to create the structures in place in the business where I can have a limited number of perks for folks who are on the free list and a much greater number of perks for the folks who are on the premium list and let them self-sort in terms of what they want.
What’s interesting, going back to your earlier question about what’s changed, is that’s been a big on-going balancing act on our end, of trying to make sure that the free list is good enough and appealing enough that folks want to sign up and that they have a good experience, but not so appealing and not so good that there’s no reason for anybody to upgrade to the premium list.
I didn’t realize coming into this how tricky that balance would be. It sounds obvious when I say it in retrospect, but it is incredibly important. You might say, “Oh, let’s just make the free list terrible and that way the premium list is way better and folks on the free list have a huge incentive to upgrade.”
Well, they can also leave. They could also never sign up. There really does need to be a well thought out and constantly adjusted balance between giving enough of a taste, enough of an appetizer on the limited list while also not kneecapping yourself and preventing those folks from upgrading.
Frankly, we’ve done some studies. We found out we made the free list too generous early on. That sounds like patting yourself on the back, but we were providing too much value to the folks on the free list in a way that was preventing folks from upgrading.
We would see it on Reddit and on Twitter and elsewhere, they’d be like, “Oh, yeah. Just sign up for the free list. It’s great. You don’t need to sign up for premium. You already get what you need” and I was like, “Ugh.” I mean, I like being able to help people. I want people to get value, but I also want to put food on the table. I also want to be able to continue growing the business.
What have you changed since then to make it more evenly balanced, so you get people upgrading to the paid list?
We changed a few things. We had a much more convoluted structure early on where folks who were on the free list could only sign up by region rather than by airport. You would sign up for the Northeast.
Maybe you lived in New York. You couldn’t sign up for just New York airport, you’d sign up for the Northeast, so you might get a deal out of Boston. You might get a deal out of D.C. or Philly, not New York. It just depended, whereas in order to get deals out of your specific airport to choose one you had to be on the premium list.
It was a little bit convoluted and it ended up creating a tech nightmare behind the scenes. Fortunately, we decided as a company to shift away from that and though we let free members select their home airport, which made it a better experience, we changed it in a few other ways.
We said, whereas previously any deal could go out to either list, we started to make it explicit that there are certain types of deals that were only going to go to premium members. So a mistake fare, highly sought after, hugely valuable deal. There was a mistake fare the other day, Boston to Puerto Rico for $23.00 round trip including Christmas and New Year’s. Twenty-three dollars.
It’s ridiculous. If you’re on the free list you don’t get this at all.
That’s right.
Presumably you see that you didn’t get this deal and so you’re like, “I should convert to paid.”
That’s the hope. Yeah, so those deals, the ones over Christmas/New Years, the ones to Hawaii/Alaska, we make that now explicit that we reserve those just for folks on the premium list, because we want to balance the appeal of the premium list for folks who aren’t on it yet.
I think one of the cool things about having a freemium business is that your particular company, and this is not true for every company, in fact it’s not true for probably 90% of the people I talk to, your company grows a lot through word of mouth.
If somebody saves a lot on a flight they naturally want to brag to their friends and tell people, “Hey, look how much money I saved on this flight. I'm going to so and so. I'm going to this place.”
Nobody has ever bought a $300 flight to Paris and quietly went about their day.
It doesn’t happen. People brag about it and talk about it. A lot of people talk about word of mouth growth as something you can engineer. Of course, there are things you can do to get people talking about you, having better customer support, having a better product. But a lot of it is inherently baked into what you do.
If you have a ton of free users, they act as evangelists for Scott's Cheap Flights. They tell their friends and they grow the product for you. The last time we talked, I think you said something like 40 or 50% of your traffic was coming from just word of mouth. Is that still the case today? How else do you acquire customers besides your users recommending it?
I think it might even be higher than that because it’s still to this day far and away the number one source of new signups. We’ve done almost no paid marketing up to this point.
Like I said, what we had planned on doing until about March was, “Okay. We’re going to finally start doing some paid marketing this year. We’re going to finally start trying to put some Scott's Cheap Flights ads out there.”
Then the pandemic hit and we’re like, “Well, so much for that plan.” That’s why I think we’ve been so fortunate to have been a company that’s grown through that organic word of mouth because it doesn’t cost anything, and I think the folks who sign up through that are a lot stickier.
They’re much less likely to churn. They’re much more likely to convert. They’re much more likely to come into the situation with a charitable lens. Imagine you’ve got two people who come to your product, one person who came there because he clicked a Facebook ad and another person who came there because their best friend told them, “Hey, I've used this service and I love it.”
It doesn’t take a rocket scientist to say which of those two people is more likely to become a customer of yours. It’s going to be the one who has recommended it, because they come in looking for reasons for yes, whereas I think with a lot of paid marketing, you might come in being a bit more skeptical. You have a higher bar that you need to clear as a company to convince that person that you’re providing good value.
I don't know the exact numbers off the top of my head with organic word of mouth signups, but it’s been the majority of our signups since day one. It’s not to say that the rest of it is not paid marketing. Again, we’ve done basically no paid marketing. It’s media, trying to do a lot of not just social media but a lot of interviews, talking with journalists and reporters about flights, demystifying airfare, talking about flight refunds, all this and that, and then trying to get the word of Scott's Cheap Flights out there as a result.
But the other thing too, that not only do I think the folks on the free list are valuable as a source of referrals. Someone on the free list might refer their friends just like someone on the premium list might.
But I think it’s also beneficial because they are a source of people who are much more likely to convert into a premium user than somebody who’s never heard of your product. It’s a lot shorter step between being a free member of Scott's Cheap Flights to being a premium member than it is to being somebody who’s never heard of Scott's Cheap Flights to becoming a premium member.
This is why free trials exist. This is why freemium models exist. You want to ease folks into it so you can have a chance to demonstrate value in that time. For us, even though I would love for every single person who’s on that limited tier to become a paying member of Scott's Cheap Flights, we know we have work to do with them.
There are a lot of folks that we haven’t convinced yet, but if we value you enough that we want to get your emails, it’s incumbent on us to continue providing that and looking for opportunities where can try to maybe give a nudge or demonstrate enough value that they say, “Yeah. Maybe the premium tier is right for me.”
But look, I'm not going to pretend that there’s not some segment of folks who have for one reason or another decided, “Free tier is where I'm at and I'm not ever going to sign up.” Those people are still valuable to us, not only because I love being able to help people travel and enjoy the world and being able to not have to overpay for flights, but also because, like you said, they have friends who they can refer.
We have ads in the free list that that’s important for us to have those numbers. There’s a lot of reasons why folks on the free list are still very much a net benefit for the company as a whole purely in business terms.
Well listen, Scott, I'm going to respect your time. We’ve been going for about an hour. I have four or five more questions I want to ask you.
Yeah, let’s do it.
Okay. Great, because I want to dig into this stuff. It’s so fascinating.
Sure.
First you mentioned growing through press, and I've noticed this. I incidentally saw a quote from you in the New York Times. I was just reading about airlines and flight cancellations and it was like, “Flights Expert Scott Keyes” or “Scott’s Cheap Flights.”
They even put a direct link to Scott's Cheap Flights in this New York Times article, and multiple quotes and links to your Twitter. What’s your press strategy? How are you so successful to get into these top-tier publications? And what are the results? Do they drive meaningful traffic? Is it worth the effort?
Awesome question. Early on, you would see it very much. Any time there was press mention you would see spikes in new signups. I'm sure those still exist today. They probably exist as much as or more than they used to, but because we’re a much bigger company than we were three or four years ago you don’t necessarily see any given day having that huge spike.
Now every once in a while, there might be. The press strategy has been one of a couple different things. One, we’ve got a really shrewd, savvy guy on the team, a PR guy named Andrew, who’s amazing. We’ll have different studies or points we need to make or different how-to guides for members.
For instance, right now a lot of members have been struggling trying to get refunds for flights that they purchased for travel during the coronavirus pandemic where the airline is either canceling their flights or it’s not safe to travel, or destinations have bans on outside visitors.
In many cases, the airlines have been stonewalling them on a refund that they’re legally entitled to, but folks don’t necessarily know this, nor should they. Who has time to be an expert in everything else in your daily life but also be an expert in the refund rules of airlines and the regulations that the Department of Transportation has put out on this? Nobody. Nobody’s got time for that. Except for -
Except for Scott's Cheap Flights.
Yeah. That’s what we view our service as, is helping people demystify the weird minutia of this world, so that they can be able to use it to their benefit, knowing that it’s not important for people to be able to quote chapter and verse of the Department of Transportation’s regulations, but it is important for them to know at a high level what their rights are. The airline isn’t going to be forthcoming with providing a refund.
The airline would prefer you take a voucher. It’s in their financial interest for you to do so. If you didn’t know that you have a legal right to a refund when an airline cancels your flight, you wouldn’t know to press for it and you wouldn’t necessarily get that refund that you’re legally entitled to, which is incredibly important for people right now during these tough economic times.
Even something like that, where we’ll go on some rants on this about on Twitter and helping break down section by section of the Department of Transportation, calling out when airlines are doing a crap job of treating their customers right, any instances where the airlines are doing a good job, all trying to not only educate members but knowing there are a lot of reporters that are interested in this, especially if there’s a lot of local TV that is trying to stick up for consumers, consumers’ rights, looking for instances where folks have been mistreated.
Between trying to get information out there through various social media, through our emails, through doing PR pitches, it’s been lucky to be able to get a bunch of press that way.
Then, once you start to develop those relationships and they can tell through discussions with you that you know what you’re talking about, that you're not some flimflam man, that you can make interesting points, that you're conversant in the material, you’re not flying off at the hip but you are an expert in these matters.
It’s a rare and interesting niche where so few people are experts at airfare. There are a lot of industry experts who might talk about the financials of airlines or the science on airplanes, or even the economics of airline routes, but that’s not exactly directly applicable to you as a traveler who wants to buy a flight, or you as a traveler who wants to get a refund for your flight. There are very few people that are experts in that specific domain.
So, being able to own that domain, and being able to say, without sounding too braggadocios, “We are authorities on this subject. This is what we have become experts in and this is what we want to be able to speak about,” then you become top of mind any time a reporter, journalist, somebody is working on a story that might involve a flight refund.
They just go to you.
Exactly. There’s no silver bullet to be able to say, “Oh, do this one weird trick and then you’ll get a whole bunch of press.” It literally involves years of developing your credibility, developing your authority, showing that you have integrity, are a man of your word and you can speak authoritatively on these subjects, and then it will start to reinforce itself.
This something that is not an option enough people consider. If you’re working on some app that’s in an industry or sector, chances are you have a lot of time because this is your job, to read about it and become well versed in it.
The average person, like Scott was just saying, doesn’t. They’re going on about their day. That’s an opportunity for you to become an expert and share your expertise with your audience, with other people and be genuinely helpful.
Even if a lot of the help doesn’t translate into dollars, indirectly it establishes a reputation among the press and the media, and it establishes trust among your readers and your subscribers. I think if you’re working on anything, whether it’s productivity software or something in the recruiting space, you're going to have the time to be an expert at that, and you should share the things that you're learning and give tips to the people who follow you.
Especially doing it in a way that is immediately accessible and valuable from the user’s perspective. I can’t tell you how many bizarre, interesting things in the airline industry that are interesting to me because I'm obsessed with it, but my wife, she loves to travel to travel. She doesn’t give two shits about random airplane that is being retired.
I went down a rabbit hole the other day. Have you heard of Krystal Hamburgers, like the White Castle slider? You know they had an airline company in the mid, late 70s, early 80s? I found this out randomly because I was reading about airline bankruptcies because I wanted to do a Twitter thread.
A lot of questions folks have are like, “Should I book a flight if I'm worried that airline is going to go out of business?” I did this whole big Twitter thread about how bankrupt airlines declaring bankruptcy is very different from an airline going bust. Airlines declare bankruptcy all the time.
American has declared bankruptcy. United has. Delta has. They all keep flying. The point of the Twitter thread was, it doesn’t impact you if an airline declared bankruptcy as a traveler. Even if you have existing reservations, your miles, are almost certainly going to be completely fine. That was the information that I posted publicly because that’s what’s valuable for users.
For me, I loved going down this rabbit hole when I found out looking through a list of airline bankruptcies that Krystal Hamburgers had an airline in the 70’s and 80’s. I literally spent an entire afternoon reading through the Krystal Glazer. It’s an internal corporation publication where I was reading every random-ass thing about this airline.
Totally uninteresting, probably, to most people, but I was obsessed. Being able to differentiate between the information that I think is valuable for members, valuable for the general public, information that is interesting to you personally, is a valuable skill, knowing where to espouse the information and where to bite your tongue.
Well I’ll tell you it’s interesting to me, from a business perspective, what the synergy was between having an airline and a hamburger fast food restaurant. There are no pretzels. There are no peanuts. It’s only Krystal Hamburgers on the plane or something like that?
Funny you should mention. It was based out of Chattanooga, I believe. There were no Krystal’s nearby, so they would put a freezer in. You could buy frozen Krystal hamburgers. They were disgusting, but they were like the 70’s, 80’s TV dinner type of thing.
Not surprising they went out of business.
Yeah, exactly. Well that’s part of it. They just declared bankruptcy a few months ago. But I guess the purpose was so the mangers and the corporate executives could fly to Krystal locations that were in random places around the country, not near a major commercial airport or a place that Delta or United flew.
But yeah, apparently it was a big thing in the 80’s. President Reagan held a rally there. George Bush and Bob Dole both campaigned there. I was reading about this bizarre bygone era. They also bragged about having a 94-year-old pilot, which I was like, I don’t think that’s something you want to brag about. I think you want to hide that.
It was simpler times.
I don't think you want to sing the quiet part out loud there.
We’re talking about providing value to people, not just telling them everything that you're interested in. Before we started recording, you and I were talking about Sam Parr from The Hustle who just started his newsletter, Trends.
I asked him for his tips on how he would start a paid newsletter today. One of the things he said is very similar to what you're saying. You can’t just give people any information. You have to give them valuable information. In his case, that was helping people make money.
The Hustle Trends is spotting gaps in the market and helping aspiring founders and entrepreneurs start businesses and make more money with their businesses, whereas you're providing value in almost the opposite way. You’re helping people save money with Scott's Cheap Flights. For the vast majority of subscribers, if I'm a premium member, I'm paying you, what is it, $50.00 a year for a membership?
$49.00.
Yeah, $49.00. I'm going to make more than that in savings. But I wonder what the differences between the two are. For example, if you’re saving people money, does that mean you can’t charge $100, $200, $300 a year like The Hustle Trends would charge?
A couple thoughts there. We’ve had folks tell us, “Scott, why aren’t you charging $500.00 a year?” We only focus on the best of the best deals. The average flight that we send out is $550.00 off of normal prices. If you think about that if you buy one ticket in the next eleven years.
So you might ask, “Why don’t you charge $500.00?” And the reason why is, we want to make sures that it is important to us as a company that we have a broad appeal that is not just at the top. It’s still a driving factor for us to be able to share a love of travel and to be able to help folks be able to see places and travel the world where they might not have been able to otherwise afford.
Frankly, if you have a $500 sticker price, there are a lot of people that aren’t going to ever sign up for that or are not going to be able to necessarily afford that in the first place. The $550.00 savings that they had is not just a matter of me trying to be a rent extractor and pick as much of that as I can.
It can be the difference between John Doe down the street being able to take his family on a vacation next year or not. That doesn’t have to be a vanity metric of, “Oh, I saved $500.00 on my flight.” It can literally be the difference for a lot of people in whether or not they can take a trip to somewhere that they’ve always wanted to see or not.
That’s always been a very top of mind thing for me, again coming at this as someone who didn’t come at this as a businessman. I never took business classes in college. I don’t have an MBA, never had a business plan, never even frankly was an aspiring entrepreneur. It was all very serendipitous, falling into this life as a cheap flight expert and entrepreneur.
But I came at it as somebody who loved to travel and loved to be able to help other people be able to travel and not have to overpay for their flights. Because that was the North Star for me, that helps guide those decisions. The other thing, too, though, that occurred to me when you were talking about providing valuable information and The Hustle Trends, do you listen to jazz ever?
Yeah, a little bit. I played alto sax in high school and was part of the jazz band.
Nice. Beautiful. I played the trumpet. Not well, but I played it. One of the things that they always say about jazz is it’s not just the notes you play but it’s the note that you don’t play, the space in between the notes, the ones that go unsaid.
I think about that a lot and try to employ that as much as I can in the types of information and the types of deals that we’re sending, because it’s not just the deals that we’re sending out. It’s not just the information that we provide on Twitter. We sent out this big thing about flight refunds to all our members this past weekend to make sure that they were educated on it.
Even in the way I structured that, I wanted to make sure that it was as cut-to-the-bone with no excess fat on it, no wasted words, because we’re recognizing that there’s an attention economy out there. People have so many things asking for their time. You're lucky if somebody gives you 30 seconds, gives you 45 seconds.
It’s important to me that the information that I provide to them in that limited time they’re going to give to me is valuable stuff, is stuff that would be important to them, and I don’t spend tons of time on fluff, talking about the weather, talking about my childhood memories of visiting Puerto Rico. I want to get to the things that are important to them.
On the deals front, it’s as important to me not only the deals that we do send but the deals that we don’t send. I’ll see some places out there, “We have thousands of deals a day,” and that’s great but people aren’t booking thousands of deals a day.
People are booking one, maybe two trips a year. Could you imagine signing up for a company who sends you flights, and they send you a thousand emails every day of places that you could go? I wouldn’t get past 10 before I clicked unsubscribe.
I mean, the value you’re providing is curation.
Exactly.
The whole point is, you do the work of looking through the thousands and figure out what’s good for me, and I don’t want to do that work.
That’s exactly right. I think people fall into a trap of thinking comprehensiveness is the key. You want to be everything. You want to provide it all. It needs to be as thorough as possible, when in reality, the key is curation.
The key is giving the people the information that’s relevant, that’s important, that they need to know, and as importantly, not giving them the information that is not important, that they don’t need to know. The notes that are played and the notes that are unplayed are equally important with one another.
I know you said people have a million things to do, and it reminds me of something I tell founders all the time, which that there are literally billions of options for what people can do with their time or their money.
There’s billions of websites and Netflix shows and YouTube videos and books they can read and stores they can go to and blogs they can read, so it’s always a minor miracle if someone has chosen you over all these other options on what they could be doing in this particular moment.
I think one of the issues that people have with content-based businesses, especially paid content, is they worry so much about the competition, which I think is a legitimate concern. Someone else can write something. There’s so much information online, why is anyone ever going to pay for what I'm doing?
I know through my interactions with you. We did an interview with you on Indie Hackers in 2016 and then we interviewed someone who turned out to be a clone of Scott's Cheap Flights. We exchanged some emails about it.
How do you think about the competition? How do you ensure that customers stick with you and it’s not a race to the bottom and your prices drop to zero because other people are offering cheap flights as well?
I think for the most part, if you’re focused on doing the best job that you can and focused on that relationship with your members, competition doesn’t matter. You need to be mindful of competition. I think it can be useful and helpful as a way to make sure you don’t get complacent, a little spur in your butt type of thing to make sure you don’t rest on your laurels.
But I think for the most part, very few people are doing a ton of comparison shopping in their day-to-day life. It’s mostly a question of, “Am I enjoying this product or not? Do I want to continue to get this service or not?” We’re much more judged against a quality metric in and of ourselves than against somebody else.
For us, the biggest competition in our mind has always been apathy. Yeah, one, it’s also the fact that I cannot believe the fact that there are 2 million members of Scott's Cheap Flights. That is remarkable to me. I would never in a million years have dreamed that.
And yet I need to remind myself that in the United States alone, there are 328 million people who are not Scott's Cheap Flights members and who we still need to go and try to convince that, “Hey, yeah, stop overpaying for flights. Find out about cheap flights here.”
And so that’s a reminder that’s always helpful, but also trying to remember that for the people who are signed up, they’re going to be happy as long as you're continuing to give a great value to them, as long as they’re enjoying the deals we send.
Part of that is making sure that we’re only sending the good ones and not sending them the fluff, that we’re building that trust by not taking affiliate fees and that they can know that every deal we send, we a hundred percent believe this is an amazing fare that might not last very long.
So it’s partly building that trust, but then also being evidenced through your work over the years that people see if they’ve been on it for a while, and they’re like, “Yeah, it’s a higher quality, it’s the types of deals I get, the speed that I get it, knowing that these mistake fares that don’t come in very quickly, that I need to find out about that as early as possible before it disappears.”
If you find out about it two hours later it might be too late. Those are the types of things that we’ve been doing everything we can to try to continue. It’s almost like a Michael Phelps thing, where you’ve already set the Olympic record. You’ve already set the world record, and then you’re just trying to beat that.
You're just continually trying to challenge yourself to get better and do more and that, I think, has been helpful for us, but always with the North Star of trying to put ourselves in our members’ shoes, only if it’s providing value and only if it’s making members happy is it something that we’re interested in.
On the topic of competition, you mentioned Substack earlier. This is something that I've been thinking about a lot. There are so many more platforms now.
Platforms have been around for a while. For example, if you're a video-based content creator, you’ve got YouTube, and there’s this promise that they’re going to help you with distribution, which they do because they have the viewership numbers to be able to do that.
Now, we’re seeing the same thing emerge with paid newsletters and paid blogs. Substack is a platform that helps with distribution, et cetera. You mentioned you’ve got some journalist friends who are doing very well on Substack.
There are also platforms like Medium which help you get paid for your writing. Then there are also tools that aren’t platforms, but they make it easier to get it set up, but they don’t take any of your revenues.
I don't know if you’ve seen Ghost. It’s a slicker version of WordPress. They have a direct integration with Stripe now where you can set up a blog and a newsletter and start accepting payments from your readers from day one.
If you were to start Scott's Cheap Flights from scratch today, would you use any of these platforms or any of these tools? If you did, how would you differentiate and set yourself apart? I know you spend a lot of time optimizing your home page. It’s a work of art in getting people to subscribe and differentiate your brand. What are your thoughts on the ecosystem facing writers today?
Man, that is a great question. I think it would depend what my goals are. If my goal is I want to be able to make a living for myself doing what I love to do but I'm not necessarily interested in building a whole business beyond myself or maybe an assistant or something like that, then yeah, I would absolutely be going with a Substack model or something like that.
Frankly, that appeals to me as somebody who is a former journalist who loves to write. I 100% see the appeal to it. In an alternate reality, where I'm not running Scott's Cheap Flights, I might be on the Substack train doing that. Like I said, I have a lot of friends who are doing them themselves and have been having great experiences with it.
I think if you have ambitions of building a business, a model like that is helpful for the early days for getting started, taking care of the logistics of all the behind-the-scenes framework, the unsexy stuff of sending emails and IP reputations, stuff that even today makes me doze off but that is critical infrastructure if you want to send emails and not have them go to people’s spam boxes or not have them go to people’s promotions tab or things like that.
I think places like Substack are amazing for being able to start get up and running, especially if you're writing for yourself. You’re still able to retain most of the revenue. But I think if you’re talking about building a business and especially have ambitions to grow it to a medium-size business or larger, the hurdles would probably start to become untenable pretty quickly.
A couple hurdles in mind stand out to me. One is obviously the revenue cut. There’s already revenue cut any time you’re processing credit cards, whether it’s Stripe or Square or whoever, they’re always taking some cut of the transaction. That’s unavoidable. But then the more services you layer on top of that, the more mouths there are to feed before the money starts to get to you.
When you’re talking about you're making a hundred dollars, and I don't know exactly what Substack’s fees are. Let’s say it’s 10% and then you’ve got 3% for the credit card. Well, you’ve made $87.00 rather than $100.00. That’s still pretty good. But let’s say you’re talking about $10 million. All of a sudden, you're paying $1 million to Substack and $300,000 to the credit card company.
You can see how it starts to become a huge expense quickly as you start to scale up. There are questions about that, and the question about you and your relationship with your audience. Your email list is incredibly important, incredibly valuable if you’re building that sort of structure.
I’ll be honest. I don't know exactly how it works with Substack. Let’s say you’re a writer on there and you decide to leave because you want to start your own business. You don’t want to be paying the fee.
I don't know if you’re allowed to bring your email list with you to still have that connection with your audience or not. If you're not that’s a huge hurdle, and that would be something that would scare me off if I had ambitions to build a company, because that would tell me I'm locked in to being on Substack in perpetuity. I could never leave if the circumstances change. You don’t happen to know, do you, how it works?
No, I'm not quite sure. I should sign up and check it out. But there are other models, too, like Patreon for example, which I’m pretty sure doesn’t give you direct access to your subscribers’ email addresses and contact information.
It’s a tough balance for those platforms I think, because on one had they want you to sign up so they want to offer your perks like that, but they don’t want it to be that easy for you to leave and graduate. They don’t want to have a business model where literally everyone who’s successful leaves their platform.
I agree with you and I like that your framed it in terms of, “What are you doing this for? Are you a writer who loves to write or are you more trying to wear the business hat?” In which case, you probably what to be responsible for all areas of your business. It’s almost like being an artist or a musician.
You go to the record label because you love to sing. Well guess what? You’ve just outsourced three quarters of your business to them. They’re in charge of distribution now and the business model and the marketing. All you're doing is the product, the singing, so of course you’re going to give up a ton in response to doing that. It’s the same for writers, I think.
Yes. Couldn’t have said it better myself.
The last thing I want to ask you about and I’ll finally let you get out of here and go back to your life is scalability. I mentioned earlier that one of the advantages that code has is that it’s always been a rare thing. There are much fewer coders in the world than there are writers.
Coding is slowly disappearing, and technology is no longer becoming - unless you're Google or something and you can afford to invest in all sorts of technology that others can’t - it’s no longer remote. Whatever you build, others can build.
One of the advantages that I think code has over media is that it is infinitely scalable. You build a product. That product provides a service. You don’t have to keep working on it and keep hammering away at it to provide that service, whereas if your service is providing business advice or finding cheap flights for people or something, you have to keep doing that every day, week after week, month after month on end.
If you want to scale up your team and do it even bigger, then you have to hire people rather than just writing more code. How do you think about scaling your team? What’s your advice for someone out there who’s stymied by this stumbling block and they’re not sure that they can build and scale a team, and they're worried that it’s going to be a lot of hassle to do that?
There’s a temptation among tech founders, Silicon Valley types, to always be asking the question, “Can it scale?” but especially always looking for scalable solutions. It’s not that that is wrong or misguided, but I think there is a temptation to always be looking at that as a solution, without necessarily thinking about the areas where that might not be applicable. It’s a classic man with a hammer, everything looks like a nail.
You take something like content curation, finding cheap flights, even something like writing articles, there are certain things that humans do well that computers that are not especially designed to do well. It would be hard to train a computer to have the creativity to paint the Mona Lisa or to write Moby Dick or something like that, because there are x, y and z technological reasons.
To me, in my mind, differentiating between those two factors is the key there, realizing what are the things that you don’t necessarily want humans having to do, every single little thing that can be eminently repeatable, yeah look for scalable tech solutions on those.
But also, make sure that you’re not trying to apply that solution to areas where it is important that humans write it, not just because they can do it better but also because what that’s telling your audience.
If you're a subscriber, you're a reader, people aren’t stupid. People can realize, even take something like customer support. They can tell when that email that they’ve gotten returned is written by a computer or a person. They can tell when that Twitter account is a bot or a person a lot of the time, especially in the world of companies, business, tech.
While I admire the pursuit of efficiency and trying to do things as scalable as possible, reputation and brand, it’s easy to overlook how important those can be as you're building your company, but also as you develop a user base as a member base in building that two-way relationship with them.
If they feel like, “Yeah, that’s another person over there behind the screen who I understand, who gets me, who’s listening to me,” that is a much different relationship than one where they feel like they talk to some chat bot that’s talking to them and has decoded what they said and gives you x, y and z options.
I’m not saying, “Oh, self-help FAQ’s are a terrible thing.” They can be important in some contexts, but don’t overlook the importance of building brand loyalty and building customer loyalty by looking for those areas of human interaction where, by having that interaction with the person, they grow to like your brand more.
It’s not always a question of efficiently connecting the customer with the answer to the question that they have. It can also be an opportunity to have a good-quality interaction with that person, where they leave that interaction, they leave that conversation with a higher opinion of you and your company than they had coming into it. Does that make sense?
That’s such a good point, because even a company like Google, for example, where primarily people say good things about it and like it, consistently the negative things I hear are, “They’ve automated their customer support. Your account can get deleted or closed and you have no recourse. You have no idea what’s going on. They could take down your Chrome extension and it’s all automated.” That’s a tremendous source of frustration.
To your point earlier that it’s the man with the hammer, the full saying is, “To a man with a hammer, every problem looks like a nail.” If you’re a developer, you think your company's going to be a hundred percent code all the time, then you’re going to neglect the fact that some parts of your company don’t scale with code.
Eventually, you’re going to have to hire. If you grow your business, you're going to have to hire no matter how much code your company depends on, so it’s not a disadvantaged company where you get to practice hiring from the beginning because even if you have a SaaS business, you're going to do that eventually.
That’s what I've seen talking to hundreds of founders. I've never met anyone who’s like, “We’re doing $10 million a year in revenue and it’s just me by myself writing all this code.” You have to hire customer support. You have to hire people to help you out, so you might as well get practice doing that early on.
Yeah. Absolutely.
Anyway, Scott, I've taken up way too much of your time. Thank you so much for sharing your advice and your wisdom with us and coming on and telling us how you're handling the pandemic and surviving things.
Not at all. This has been fun. I appreciate you’re having me on, getting to chat about this stuff. It’s been fun, so thank you. I’m indebted to you.
Yeah. Well best of luck in the future. Can you tell listeners where they can go to learn more about what’s going on at Scott's Cheap Flights and where they can find more about what you share?
Yeah. You should come to scottscheapflights.com, no apostrophes, no underscores, no spaces, just scottscheapflights.com. We’d be honored to find cheap flights for you out of your home airport, because it’s what we’re doing all day every day. We’d love to be able to connect you, make sure you don’t miss out when those great deals pop up out of your home airport.
Alright. Thanks so much, Scott.
Awesome. Thank you, Courtland. Take care, now.
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Scott is honestly fantastic to listen to. He's just got a voice and a style of speaking that I find enjoyable.