What's up, everybody? This is Cortland from IndieHackers.com, and you're listening to
the IndieHackers 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 did they make decisions, both of 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. If you've been enjoying the show and you want
an easy way to support the podcast, you should leave a review for us on Apple Podcasts. Probably
the easiest way to get there if you're on a Mac is just to visit IndieHackers.com slash
review. In today's episode, I sat down with Scott
Keys, 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 really affected the
travel industry and 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 kind of an OG in the space of paid newsletters, paid content, which
when he started Scott's Cheap Flights wasn't super popular, but today is blowing up. So
we spent 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.
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 basically
dead right now. And I think air travel is probably the hardest hit of the entire travel
industry. And meanwhile, you've got a business where you're basically 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. And 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
part of my French scared shit list. I would have been terrified. And it's not that I'm
like totally feel, oh yeah, you know, confident. We're good. We're going to, you know, everything's
going to be fine. But 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 so there has
been much less of a business impact, even though we are so exposed, if you will, to
the travel industry. I mean, our fortunes are very closely tied to the travel industry.
And yet, you know, it hasn't needed to, it's not a situation like with the airlines where
every single day they need to sell new tickets. And every single day, you know, 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 just
turn or cancel at this as soon as things start to crater in the travel industry. And so the
fact that we were able to fortunate enough to have this subscription business that renews
on an annual basis, I think gave us a lot more limited our exposure, if you will, to
the sort of like short term, just cratering in demand, like 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. I mean, it's horrendous. But the fact that we are one step removed from
that, I think has helped the business along. And it's really kind of 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 sort of day to day selling
and day to day revenue trends.
I just want to give people kind of an idea of how bad it is for the airlines. So according
to the New York Times, passenger traffic on US airlines is down, not like 20%, not 30
or 50%. It's down 95% from what it was this time last year, which is a borderline unbelievable
number. And it's interesting that you charging basically subscription and annual subscriptions
in particular is kind of shielding you from some of this because you have a lot of people
who are paying for a scotch cheap flight subscription last year who signed up in January, who quite
frankly already paid and they've got the service and all that provides for the next year. And
by the time they have to make another decision, hopefully things will be sort of 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
I think it adds to the, to the, the atmosphere crisis effect.
Yeah, exactly. It's a work from home, a lifestyle now. Yeah. So a couple things about that. I
mean, you're absolutely right. Like 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 this sort of daily volatility and the monthly volatility.
I mean, you know, airfare or like airplane passenger loads, the number of people flying
you're down 90, 95% sometimes, but we don't see our numbers cratering 99 to 95% like that
because we have the kind of the armor of the annual subscription revenue. I mean, you can
imagine if the airlines lived in a different sort of industry where they were rather than
selling tickets on individual flights, they were selling their passengers, you know, you
could buy 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, they
would be, it'd 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.
So that's one thing. Two is travels are really unique, a unique sphere, unlike so many other
things you buy where you pay for it, usually well in advance of when you receive it. You
know, imagine you go down to the shoe store and you're trying to get your newest pair
of Jordans and you pay for, and they're like, all right, you can get it in like six months
or something. Like for most people, that's like the heck is this? You know, 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 like, you know, as long
as it takes to ship it to your house, but for vacations, you'll book it three months
in advance, six months in advance. You know, I've booked like up to a year in advance and
it's just a different sort of model than most other things. And so 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. And folks are in a really unique position right now. Travelers are where
they are seeing both A, incredibly low fares for travel, you know, up to 12 months out.
And B, the airlines have, because they're seeing so little demand, they're seeing their
new bookings plummet, they have announced that they're essentially waiving change fees
on all new bookings. So 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 come trip town. If you don't want to travel, you don't
even have to give a reason. It's just, it doesn't have the normal sorts of change fees
that are associated with booking flights. And so that puts travelers in this really
kind of 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. So I think the fact that people not only are wise to that, they recognize
this is a really unique and advantageous position that travelers in that is not normal at all.
But B, there's a bit of FOMO, you know, even though folks know it's not safe to travel
right now during the pandemic, I might say, well, six months, nine months, 12 months in
the future, it might be I sure hope it is. And I don't want to miss out on some amazing
deals, you know, some once in a lifetime deals, because I turned my subscription to discussion
fights or because I didn't sign up and I missed out on the deal. So there's that element of
even though it might not want to travel today, there is still I think a huge element of folks
who might want to travel in the next year. And for them, they said, Yeah, it's still
worth it then because because I want to make sure I'm not missing out in the meantime.
And what's kind of cool is you seem to have changed your service to kind of reflect this.
And so the core scotch cheap flight service, which sends out these flight deals, you're
sending out deals for flights that are taking off further into the future, sort of reflect
that uncertainty. And also deals, I believe that feature these change fees and wave all
change fees. So that, you know, assuming you're a scotch cheap flights customer, you don't
even have to worry about figuring this out on your own, you just kind of automatically
get these advantages.
That's right. You know, we I mean, we've always had certain criteria for the deals we send,
like a obviously it has to be cheap, like it's right there in the name. But it doesn't
just have to be cheap, like I'm not we're not going to send out, you know, a six stop
like 50 hour flight to Europe, just like a scented trash bag of a flight like that. Nobody,
nobody's interested in that. We have a test, we frankly, we should probably 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 you know, a five hour
flight or sorry, a five stop flight to Europe. She's not going to be interested in that.
But if it's a nonstop or you know, quick connection or something at an amazing price, then yeah,
so not only do we have those original criteria for the deals that we send up. But you're
right. We layered on these new criteria because of the pandemic to balance a couple things.
Right. I mean, a first and foremost, wanted to balance the fact that we are all living
in a public health crisis right now. I mean, it's a pandemic, which has passed, you know,
100,000 people who died in the US today. It's horrible, just awful. And so 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 good company that isn't trying to just like, only be looking
out for the bottom line, but also kind of demonstrating in our actions that that this
actually really matters to us. This is really important. And not only did we want to make
sure we're being good corporate citizens on one side of the ledger, but also balancing
what we felt like our responsibilities to our members. You know, folks have signed up
for this way. They are signed up for Scotty Puts because they want to know about when
those really cheap deals pop up out of their home airport. And so we didn't want to say
like, all right, we're just going to close up shop until there's a vaccine. Because we
think that there is, 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.
And we hope it's much sooner than later. And so we wanted to make sure we were doing right
by our, our members, while also doing right by sort of the public health crisis that we're
all facing. And you know, look, 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
any situation should act in a pandemic, because this is the first pandemic that most of us
have ever ever been in. So I remember these conversations we were having two months ago,
like I was literally at the airport, you know, we're having these big long calls, what should
we do? How should we structure it? You know, going over a bunch of different options finally
settled on on this one, because we felt like it was the right balance of being good human
beings, good corporate citizens and good company for our members itself. And 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, you know, a little bit 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.
Well, I've been looking at how other travel companies have been handling this. I just
went through the product pages on any hackers earlier today and just looked up bootstraps
travel businesses to just see what kinds of milestones they've been posting. And it's
just been tough. I mean, there's a company, the last one I looked at was a company called
help stay. They basically allow you to travel and stay for free if you agree to volunteer
for whoever you're staying with. And they're one of the latest milestones is basically
that they're just going into hibernation mode for the duration of the pandemic, because
like travel for them is just dead. And then you have bigger companies, of course, Boeing
just recently laid off 12,000 people, it's looking like a lot of airlines are gonna have
mass layoffs in October when their funding runs out, because they're sort of being artificially
propped up by the government right now. So it's pretty interesting to talk to you where
things don't seem to be going that bad. You know, I didn't know what to expect from this
conversation. I didn't know if you're gonna come on and be like, Hey, please sign up.
We've lost 95% of our subscribers. So yeah, I agree. I think looking at scotchy fletch
on the inside, I would say you're handling it pretty well.
And I think it's important to timestamp this, right? Because we're talking on May 27. And
things have been very far from what I would have imagined the worst case scenario would
be for the company, especially given you know, 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. Any podcast listeners might not be able to notice pushy stuff right
in front of my mic.
Welcome cat. Yeah, exactly. So what I mean by that is pharmaceutical companies and scientists
who are studying, you know, drugs and therapeutics and treatments and vaccines make great progress
and really kind of knock it out of the park in the next three to six months. That's going
to be a very different future for scotchy flights than one where, you know, the treatments
fail, the vaccines aren't looking effective. And we're looking at, you know, multi, like
two or three years until we feel like humanities beat this and travel just craters for years
on end. And so look, I'm not going to pretend like that wouldn't be an incredibly challenging
thing for scotchy 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, you know, two
and a half months in. I think it is important to note from this standpoint that two and
a half months in is it isn't the, the be all end all of where things are going to look.
I think there are some hopeful signs that were off of what might've been the worst case
scenario that from what we saw like a month or two ago. But you know, look, we don't know
if there's going to be a big second wave in the next few months. We don't know if what
things are going to look like from a vaccine standpoint until we have answers to those
questions trying to do really long luck, like medium to long term projections of what things
look like for scotchy 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. You know, on one hand, maybe things return to normal. On the other hand, maybe
travel is just 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. So we've got a couple things
coming out here in the next few weeks or so that I'm probably in the next month or two
that I wish we were ready to announce right here, right now on Eric. Not quite ready yet,
but things that we had sort of loosely been tinkering around in our minds before the pandemic
became clear, but once it became clear, started to be like, okay, yeah, we need to really
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 I think was the right
approach and I think going to be helpful in the long run. And I don't mean that conservative
in a political sense, but conservative in a sort of pulling back, being a bit defensive.
So rather than pumping out tons of marketing dollars, tons of Facebook ads, tons of this,
which we'd never really done anyway, but we'd started to dabble maybe like, hey, we maybe
wish to start to get into some paid marketing and whatnot, but we realized, yeah, as soon
as the pandemic hit, it wasn't the right time anymore. It wasn't the right time for two
things. One, because interest in travel just went off a cliff. Travel is not at the forefront
of most people's minds right now, nor should it be. I mean, pandemic, people losing their
jobs, getting furloughed, losing their hours, those things are much, much more important
and need to be picked before travel starts to become front and center.
But two, so not only would it not be effective, but you're also looking at cashflow issues
from a company standpoint. I mean, 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 it can't
be spent on things that are much more core to the business. So rather than, 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 really 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 10 year pandemic where there's no vaccine and nobody can travel or get on an airplane.
But if it's, you know, certain decisions we make right now might be the difference between
being able to survive, say 18 months versus being able to survive 24 months or 30 months,
which is really in the realm of possibility of when things could be getting back to normal.
And so 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, you know, get this thing licked, and that we can all
be safe again, be able to travel again, and things kind of slowly start to inch back to
normal. So, you know, look, we've been really fortunate that we haven't had to donate layoffs,
we haven't had to cut salaries, we haven't had to do any of those things yet. But and
I'm really hopeful. And I, what we're basically doing, we've got a six point plan of everything
we would do before we it ever came to that. And 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, we certainly want to avoid having to lay anybody off. And
I don't think that it's like that we'll have to do that. But you know, businesses is business
that world's 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, you know, basically
making mine and our CEO Brian's salary based down to a dollar, like, you know, cutting
cutting stuff on the leadership team for doing all these other things before that, because
the most important thing is to try to protect our team, so that we can get, you know, emerge
from this on the other end as strong and successful as possible. But the other thing too, though,
that I would note is that while it's important, I think, and I think it's important for us
to have been defensive to have been conservative, like literally to be conserving cash in case
it's needed later on. We're also constantly monitoring, you know, keeping a really close
eye on developments on coronavirus, watching the TSA numbers, watching interest in travel,
because when we're start to see back on the upswing, we want to make sure we're there
to meet that demand. Like we want to make sure that we are not missing the moment. And
like 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 know, you're so hunkered
down that you're missing out when people are starting to feel safe and comfortable hitting
the road again. Does that make sense?
Yeah, it does. It's kind of 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 that I never would have expected that part of my job would become
amateur, armchair, epidemiologist. That I would have to be sitting there dissecting
various like seven day rolling average charts and making sure I'm accounting for the number
of tests vis-a-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 while without being overly
optimistic, but also not being overly pessimistic either.
So 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 sort of cut my marketing budget. And what are some other
points on that plan that I might want to adopt to help me kind of survive for the long haul
and get to the other side of this?
Yeah, I mean, look, there's a number of other items that certainly we've explored that I
know that are on the table, everything from cutting the expenses of benefits, certain
perks that are really important in good times, you know, equipment perks, work from home
perks, various other sort of 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's things like that, things like loans
from banks, things like, you know, maybe you're a company that either had only taken very
little angel investing or had been totally bootstrapped and maybe decide, you know, look,
it's more important to me that my company survive or that I have to do layoffs than
being able to say I've been a bootstrap company for forever. And I'm ideologically, ideologically
is very important to me, like maybe that is and for a lot of companies, that's going to
be important. But I think it's also important to be clear minded, like, is that as important
to you as not having to lay off folks who are your co workers, and everybody's decision
is going to be differently on on matters like that. And then it's also kind of being very
ruthless with cutting spending on things that might feel extraneous when you are in a pandemic.
You know, there are a lot of things that can be really nice to have, you know, everybody
has their own account on various SaaS companies and being able to do things real efficiently.
But look, that comes at a price. And when it's really when it's economic boom times,
yeah, absolutely go for it, you know, 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. You start to have to tell the team like, look, it might be in normal times
be important to have this boat 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 kind of 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 impacts of the virus itself, but the second order economic effect of the
economy as a whole looking far worse shape today than it did three months ago.
You mentioned this idea that you might be a bootstrap company is a lot of pride in being
a bootstrap company. And the idea of fundraising is kind of beyond the pale for you, but you
might have to do it to get through the pandemic. I know the last time we spoke, got sheep flights
had bootstrapped. Are you still a bootstrap company today?
We are still bootstrap company, we've been profitable since day one, very fortunate and
lucky to be able to say that. And it's something that we, I personally have never been ideologically
one Oh, you know, 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, Hey,
we need the money. And we're fortunate that we never did like the very first month that
started when it was just me. My expenses were $50. That was what it cost to have a Mailchimp
account and be able to send out to 5,000 people. And my revenue that month was $200. So I got
100 people to sign up at two bucks a month. And I made $150 that month. And let me tell
you, I felt like Scrooge McDuck just like swimming through those gold coins. I was living
it up. And that just sort of continued over the months over and over the years now that
our revenue is always well outpaced our expenses, fortunate enough to be a work from home company
since the beginning. So we're really prepared for something like this pandemic not having
to and not having to pay the overhead of an office for rent, equipment, that type of thing.
That is why for me, like fundraising just never felt that pressing because we never
really needed it. I wouldn't say my thinking has super shifted one way or another like,
oh, that definitely, you know, I'll never take funding or oh, we, you know, we 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 I'll explore. And if
it feels like we're going to be just fine, we're going to make it through. And that's
not assuming it might be a little bit less inclined. And it's a tricky thing too, because
you know, like what, look, what is the one of the things that they say about fundraising
that you want to be able to do it from a position of strength, that you only want to do it
when you don't need it, which has a lot of merit to it. I don't want to pretend like
that silly advice. But it's easy to say that without also accounting for the things that
you might give up by as a result of fundraising, you know, whether that I will tell you not
having to answer to somebody else during this pandemic has been a blessing, not having to
meet certain, you know, user numbers or certain financial metrics during this blood 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
has been I feel very lucky that to be in that position. I'm loath to give that up easily.
But I'm also cognizant of where, you know, the company is and making sure that we are
doing right by SCF for the long term.
Yeah, I know a lot of high growth startup founders who have raised money from investors
and they are expected to hit certain targets. And a lot of them, you know, are not sitting
on a large war chest, they needed to raise money in April or May. And like right now
valuations are down. They're having to accept down rounds. It's just it's brutal.
Have you heard from folks about how they're sort of investors? Did they give them more
sort of leeway given the circumstances? And well, look, you know, business is business,
you got to meet your your obligations.
I've heard a lot of that, like, 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. So for example, I have a friend who's got
kind of a the best way to describe it is it's a wine gambling business where you can basically
subscribe to this wine subscription box. And every now and then you might get a really
expensive bottle that you paid way less for. And business for him is booming. And like
to what for what I know, like investors, you know, might expect him to have higher targets
because that industry is doing so well right now. Whereas in travel, it might be the opposite,
you know, but 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 kind of themselves uncertain about the future might be heading into like,
like you said, a depression, which is just insane to be saying this and be serious about
it. So if you're an investor, you probably want a better deal. Yeah, 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, like, you're already generating revenue, you're already, you know,
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 like three or 40 years ago, you were already
doing millions a year in revenue. So yeah, yeah, it's crazy. But like, that means that
when a pandemic hits, you're not like, Oh, crap, how do I make money? Like a lot of my
sort of high growth startup friends are trying to figure out right now, you've already had
a business model, you don't have anyone to answer to, you've already figured out that
charging annually is the best way to maximize cash flow. You just 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
a, well, of course it'd be nice to have margin, high margin, it'd be nice to have a Ferrari
and it'd be nice to have, you know, a beach house in Lake Como. But on the other hand,
many companies, especially ones that are funded, would view a multi, like a double digit, like
really 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 market and that's sitting around
and plowing it back into marketing. You should be getting more users, you should be doing
this and that. And without saying, you know, whether one side is correct or incorrect,
I think it can, it's pretty clear that when a pandemic hits and when you need to, you
know, cash need to be concerned, having that buffer, having that margin, it's literally
a margin where you can say like, yeah, we can have a lot less revenue and still not
need to make the cuts that a company that's, you know, running basically 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 have to make some huge cuts, including probably including layoffs, including
salary cuts. And so when you are the type of company that has that more kind of slow
sustainable growth, you don't necessarily see as much volatility. Like you're not going
to have the high highs of just like rocket ship, you know, 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 soon as something goes wrong, you have to say goodbye to dozens
of coworkers or you have to, you know, tell them that like, Hey, sorry, we need to cut
your salary by 25%. Like it's hard to put a price. I'm not having to have that conversation.
And I feel really lucky to not, you know, to be able to continue to provide for so many
employees. I mean, 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 for in such a tough, like economically perilous
time, like the fact that of having let it being able to prevent them from having to
feel even worse during this pandemic is a really valuable thing to me that doesn't show
up as much in this sort of balance sheet or in the discussion of, of margins and growth.
But you know, that's also just the kind of bleeding heart liberal in me and just like,
Oh, you know, I just want everybody to be happy and good. So take it with a grain of
salt for 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 just increase the variance. It's basically much more extreme. We're like,
Okay, you can reach these higher highs, but the risks are much greater. And if something
bad happens, you're not necessarily going to have the cash in the bank to weather this
kind of storm. And 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 know, you're
not going to be a unicorn company, that's just fine. And 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 sort of 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 because 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've 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 sort of nitty gritty.
How do you make money? And how do you generate profit as a newsletter?
Absolutely. So the way it works is essentially airfare is such a bizarre thing that we all
buy. 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 costs yesterday
is about what it costs today and about what it costs tomorrow. And airfare is nothing
like that.
The exact same flight we'll see from Atlanta to Amsterdam will be literally, and this is
a true example, $800 on Monday, $300 round trip on Tuesday, and $1,300 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 $1,300, gosh, gnashing of teeth, it's horrible. It's
just awful. So because it's such a confusing, just horrendous purchase that people have
to make. But if you know that it's something, 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. And so 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. And 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 or 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. So rather
than either having to be chained to your computer 24 seven 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, you know,
the full extent of it. We're just going to send you a little alert. And that way you
know, Oh wow, that $300 round trip flight to Amsterdam just popped up. Do I want to
take that or not? Oh, that $250 round trip flight to Hawaii just popped up. Are there
dates in there that work for me? You can kind of decide for yourself, but be in the know
for when those cheap flights pop up. So that's the way scholarship flights works. We just
find we were constantly searching all day, every day for those cheap flights. And we let
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. You know, it started out just as a hobby for my friends.
This is about five years ago. No, no, I took that back. That was seven years ago. 2013
was 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, you
know, it started out as a hobby, just something I did for fun, for the love of the game. And
then in 2015, it became an actual business where folks could there's both a free list
that you could sign up and 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. So 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 bucks a year. I think you still had monthly plans to you
had something like, you know, sign up for three months or sign up for six months or
something like that. Yeah, it was a little confusing. Like we had where you could kind
of like pay, you know, by quarter or biannually or we decided to scrap all that, you know,
since the last time we talked and just went for a simple, you can sign up for the premium
annual plan right now it costs 49 bucks a year. So it works out to about four bucks
a month or so, or you can be on the limited list and the difference, you know, 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 has a two week free
trial. You get a bunch of extra perks. So 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.
So these are the like the holy grail of cheap flights. You know, when an airline makes a
mistake and accidentally sells a ticket for way less than they meant to sassy 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 bucks
round trip, man. And like, I didn't even know I wanted to go to Milan. I woke up that morning.
I had no idea. No, Milan was not on my radar. But when that $130 round trip flight to Milan
pops up, it's not a question.
And this is just like an airline employee, like, like fat fingering something type in
the wrong number n. Exactly. Exactly. Like they're probably meant to sell it for $1,300
and they forgot a zero out of zero tragic, but great for you. I know it should happen.
But it's like, they only last for a few hours those mistake fares. And so you got to find
out about it early so that you have enough time to book it before it disappears. So this
is powered by just so everybody knows like you and a team of flight searchers who are
experts at finding cheap fares doing this by hand.
That's right. 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 is literally just
searching 16, 18, 20 hours a day. You know, 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 round trip 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. And so fortunately me and who knows
how ever many other people were able to buy that flight before they pulled it and got
a $130 flight to Milan.
So mistake fares, we reserved for just the premium members deals to Hawaii and Alaska.
And then the sort of peak season deals. So middle of summer, Christmas, new year, those
kind of peak travel periods when airfare is especially expensive, but cheap flights can
be especially valuable because 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 other perks, you know, there's no
ads in the premium emails. They get them about 45 minutes or so before folks on the free
list because we want to make sure, you know, 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.
So your business is technically just like a paid newsletter, paid content business. And
this is like 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 kind of sleeping on it and general technology companies
technology is becoming kind of a commodity. It's very easy for people to code. It's not
really the differentiator moving forward. If you build a feature, your competitors can
build a feature. And I think that makes code pretty similar to media and content, to be
honest, like 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.
And so it's a little bit hard to defend in some ways. But I think it also means that
code and media are kind of on a level playing field. And if you're sort of a fledgling indie
hacker just getting started, and you don't really have that much money in the bank, you
don't have a big team, do you want to start, you know, 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?
So I think this is a big part of the reason why it's kind of blowing up. People are figuring
out that people will pay for content, as long as that content is actually useful. You know,
it's not just something that's fun. It's something that's making the money or saving
the money. And that's very clearly what you're doing with Scott's Cheap Flights.
And it's also a way to really easy, lightweight way to test the market to see if you've got
product market fit. Because people tell you right away if they're willing, you'll just
see it. Are people willing to pull out their credit card and pay for the information that
you're gathering and sending out? And, you know, I see this as a problem, I think, in
a lot of budding entrepreneurs is that they'll get very kind of hung up in their own head
gaming out various scenarios, all very theoretical, all very, you know, business plan for X, Y,
or Z. And they'll spend so much time on the theoretical plan without realizing, why don't
we just test a few of these things out? Like, why don't we actually just stress test it
in the real world and start to see what people say? Because that's the, you know, in the
end, that's the most important metric. Are people willing to buy what you're selling?
And so many, I think, business plans treat that as a sort of, 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. And, you know, the people who stick
with you, those are going to be your early evangelists. But trying, this is one of the
reason why I think newsletters picking off places like like sub sec, you know, it's interesting,
I can count at least three of the top 20 sub stack writers, you know, this paid monthly,
or paid newsletter service, at least three of the folks who are in the top 20 list there
are former co workers of mine when I was a journalist, like literally people who I could
just call up on the phone right now, hey, how's it going? And so there was something
we, you know, had all worked together as political journalists in DC. And so I think we learned
a lot of lessons early on, not just about like, how to frame content, 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. And right, you know, I mean, it's horrible,
but seeing what's happening with so many news outlets right now in the media business, and
just the revenue plummeting, even as the readership is going through the roof, because no advertisers
are wanting to put their ads in a, you know, on a coronavirus story, or on, you know, something
about, and that's the only news out there right now is coronavirus news. So it's you're
seeing people just getting laid off left and right. And that I think is really indicative
of a broken, like a broken media model. And 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 being this
sort of 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 be have a much
more direct financial relationship.
Yeah, and that's what you guys have always had at Scott's Shoe Flights. It's always been
sort of a freemium model where people are either on the list for free, or they're paying
you directly, there is no third party, there's no middleman, and 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? And also, do you think you can start sort
of a paid newsletter today, and just charge right out of the gate? Or do you think you
need to spend time building up some goodwill among free subscribers before you can put
a price on it?
That is a really good question. I will confess. So let's rewind to the beginning of Scott
Shoe Flights. I found this $130 trip to Milan. I get back, all my co-workers and friends
heard about it, I guess. Where did spread? And 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 fair like that
so I can get in on it too?
And so rather than trying to remember every single person I needed to let know about this
deal, I was like, why don't I just start a simple little email list? That way I can let
everybody know at once. And so that's how Scott Shoe Flights began. It was literally
just the simplest way to be able to broadcast out information to everybody who wanted to
get it.
And I did it for like 18 months just as a hobby, just for fun. When it had grown enough
to the point where I graduated out of the free tier of MailChimp and started having
to pay $50 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. And so
I started throwing around different models in my mind. We talked about advertising supporting
business and 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.
Don't tell an advertiser that you have 5,000 people listening to what I have to say. They
will laugh you out of the room. They're like, okay, we'll give you like 50 cents to advertise
against that. So it's problematic for a number of reasons. Consider the affiliate route.
What about having affiliate links where somebody buys something through a link in there, 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 in all instances, I don't think in affiliate fees inherently
are always going to erode trust, but I think it can for a certain segment of the audience.
And you really 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 still is going
to be a lot of folks in the audience who have to question, who have to run through that
question in their mind, interviewing what you have to say through that credibility lens.
And so I didn't like that as a sort of model where they have to be thinking about. I set
that aside with the freemium model. Spotify was the one that really kind of 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.
Reason why I went with that freemium rather than just an all premium tier was twofold.
One, first and foremost, I just didn't want to kick anybody off. Again, I mentioned like
soft, squishy, liberal. I didn't want, I just like, I like people. I've been doing this
for a year and a half just for my friends. Like I didn't want to have to tell any of
those 5,000 people who'd 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 if you, you
know, a month, if you want to listen to what I have to say. Like 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 make it a, you know, to take things to
the next level, if you will. So I figured, look, why I don't have to kick anybody off.
It's not costing me anything to have these folks on the free list. And so it's just a
matter of trying to create the structures in place in the business where I can have,
you know, 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 kind of self sort
in terms of what they want.
And what's interesting going back to your earlier question about what's changed is that's
actually been a big sort of ongoing 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 kind of obvious when I say in retrospect, but it is incredibly
important to try to make it, you might say, oh, well, just make the free list terrible.
And that way the premium list is way better. The folks on the free list have a huge incentive
to upgrade. Well, they could also just leave. They could also just never sign up. So you
need to, there really does need to be a really kind of well thought out and constantly adjusted
balance between giving enough of a taste, enough of an appetizer on the limited list
while also not kind of kneecapping yourself and preventing those folks from upgrading.
And frankly, early on, I think we probably, we've done some studies or stuff. We found
out we actually made the free list too generous early on. God, it sounds so like pat yourself
on the back, but we're providing too much value to folks on the free list in a way that
was actually preventing folks from upgrading. And they're like, you know, 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're not, you don't need to sign up for premium. You already get what
you need. And I was like, ah, I mean, like, I like being able to help people. I want,
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.
What have you changed since then to make it sort of more evenly balanced so you actually
get people upgrading to the paid list? Yeah. So we changed a few things. I mean, so we
had a much more kind of convoluted structure early on where folks who are on the free list
could only sign up by region rather than by airports. So you would sign up for like the
Northeast. So maybe you lived in New York, you couldn't sign up just for New York airport.
You'd sign up for the Northeast. So you might get a deal out of Boston or you might get
deal out of like DC or Philly, not New York. It just sort of depended. But 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 kind of convoluted and ended up creating a bit of a tech nightmare
behind the scenes. Fortunately, we decided as a company tipped 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. So 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. And so a mistake fair, you know, highly sought after
hugely valuable deal, you know, we, there was a mistake for the other day, Boston and
Puerto Rico for $23 round trip, including Christmas and New Year's.
Ridiculous. So 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. And so those deals, you know, the ones over Christmas, New Year's,
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, you know, 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 you're a particular
company. And this is not true for every company. In fact, it's not true for probably 90% of
the people I talked to you. Your company grows a lot through word of mouth. If somebody
saves a lot on a flight, they naturally just want to brag to their friends and tell people,
hey, look how much money I saved on this flight. I'm going so and so I'm going to this place.
And nobody has ever bought a $300 flight to Paris and just quietly went about that day.
It doesn't happen. People brag about it and talk about it. And it's a lot of people talk
about word of mouth growth is something you can engineer. And 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 just sort of inherently baked into what you do. And so if you have
a ton of free users, they kind of act as evangelists for scotchy flights and they tell their friends
and they sort of grow the product for you. So 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? And how else do you acquire customers besides your users recommending
it?
I think it might have been even higher than that, because it's still to this day, the
far and away the number one source of new signups. We've basically done almost no paid
marketing up till 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 scotchy flights ads out there. And then the pandemic
hit and we're like, well, so much for that plan. And that's why it's been so, I think,
we've been so fortunate to have been a company that's grown through that organic word of
mouth because it just doesn't cost anything. A, and B, 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 just to come into this situation with a charitable
lens. Imagine you've got two people who come to your product, one person who came there
because they clicked a Facebook ad and another person who came there because their best friend
told them, Hey, I used this service and I love it. I mean, it's not, 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 was 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. So, I mean, I don't know the exact
numbers off the top of my head where organic word of mouth signups, but I mean, it's been
majority of our signups for basically since day one. And it's not to say that the rest
of it is not paid marketing. Again, we've done basically no paid marketing. It's basically
like 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 Scotty 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, a source of 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 Scotty Flights to being a premium member than it is to being somebody
who's never heard of Scotty Flights to becoming a premium member. This is why free trials
exist. This is why premium models exist. You want to ease folks into it so you can have
a chance to be able to demonstrate value in that time. And so for us, even though I would
love for every single person who's on that limited tier to become a paying member of
Scotty Flights, we know we have work to do with them. There are a lot of folks that we
haven't convinced yet, but they're still so revaluing enough that we want to get your
emails. It's incumbent on us to continue providing that and looking for opportunities where we
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. And 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.
Listen, Scott, I want to respect your time. We've been going for about an hour. I probably
have like four or five more questions. I want to ask. Okay, great. Because I want to dig
into this stuff. It's so fascinating. First, you mentioned kind of growing through press.
And I've noticed this. I just like incidentally saw a quote from you in the New York Times.
It's just reading about airlines and flight cancellations. And it was kind of like flights
expert Scott keys, Scott sheep flights, and they even put it like a direct link to Scott's
cheap flights in this New York Times article on multiple quotes and links to your Twitter.
What's your press strategy? How are you so successful to get into these sort of top tier
publications? And also, what are the results? Do they drive meaningful traffic? Is it worth
the effort?
Yeah, awesome question. Early on, you would see it very much. Anytime there's a press
mention, you'd see spikes in new signups. And I'm sure those still exist today. They
probably exist as much or more as they used to. But because we have a much bigger company
than we were three or four years ago, you don't necessarily see any given day having
a huge spike. Now, every once in a while there might be. The press strategy has been one
of a couple of different things. I mean, one, we've got a really shrewd, savvy guy on the
team PR guy named Andrew, who's just amazing at getting, you know, we'll have different
sorts of studies or points we're going to make, you know, or different kind of how to
shoot guides for members about like, 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, you know, bans on outside visitors. And 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, you know, nor should they. Like, 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 on this. Nobody, nobody's
got time for that. Except Bruce got cheap flights. Yeah, I mean, that's what we view
our service as is helping people kind of demystify the sort of weird minutia of this world so
that they can be able to use it to their benefit, knowing that like, look, it's not important
for people to be able to quote chapter and verse of the Department of Transportation
regulations, but it is important for them to know at a high level what their rights
are so that they can say, you know, the airline isn't going to be forthcoming with providing
a refund. They don't prefer you take a voucher. It's in their financial interest for that
for you to do so. And 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 like really tough economic times.
So even something like that, you know, going rants on this about Twitter on Twitter and
helping kind of break down section by section of the Department of Transportation, you know,
calling out when airlines are doing a crap job of treating their customers right in instances
where the airlines are doing a good job, all trying to sort of not only educate members,
but knowing like, look, there are a lot of reporters that are interested in this, especially
there's a lot of local TV that is trying to stick up for consumers, consumers, right?
Looking for instances where folks have been mistreated. And so between trying to kind
of get information out there through various social media, through our emails, through
doing kind of PR pitches that's been really lucky to be able to get a bunch of press that
way. And then once you start to develop those relationships and they can tell through discussion
with you that you know what you're talking about, that you're not some flim flam man
that you can actually make interesting points that you're conversant in that the material,
you know, you're not just like flying off at the hip, but you actually are an expert
in this matters. It's a rare and interesting niche where so few people are experts at airfare.
You know, there are a lot of industry experts who might talk about the sort of financials
of airlines or the sort of science on airplanes, or even the sort of economics of airline routes
or stuff like that. But that's not exactly directly applicable to you as a traveler who
wants to buy a flight, or you as a child who wants to get a refund for your flight. There
are very few people that are actually experts in that specific domain. So being able to
own that domain and being able to say, yeah, we are the like we're getting without sending
to braggadocious like, 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 anytime a reporter or journalist, somebody is working on a story that might involve a
flight very fun might involve just go to you. Exactly. There's not no silver bullet to be
able to say like, Oh, you know, do this one weird trick and then you'll get a bunch of
press like it literally involves years of developing your credibility developing your
authority showing that you are have integrity have our men of your word and you can speak
authoritatively on these subjects and then it'll start to really kind of reinforce itself.
And this is something I think founders, it's not an option enough people consider, you know,
if you're working on some sort of 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. And the average
person like Scott was just saying doesn't, you know, they're going on about their day.
So that's an opportunity for you to become an expert and share your expertise with your
audience with other people and just be genuinely helpful. Even if a lot of the help doesn't
translate into dollars and directly, you know, establishes a reputation among the press and the
media and it establishes trust among your readers and your subscribers. And so 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. And especially doing it in a way that is
immediately accessible and valuable from the user's perspective. You know, I mean, there's a,
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 like random traveler, like my wife who's not interested in
the travel, like she loves to travel. She doesn't give two shots about like random airline, you know,
airplane that is being retired or random like, like I was, I went down a rabbit hole the other
day about, have you heard of a crystal hamburgers, like the White Castle slider? You know, they had
like an airline company in the mid late seventies, early eighties. I found this out randomly because
I was like reading about airline bankruptcies. And because I wanted to do a Twitter thread about,
you know, a lot of questions that folks have early, should I book a flight if I'm worried
that airline is going to go out of business? And so I did this whole big Twitter thread about
how bankrupt airlines to claim bankruptcy is very different from an airline going bust.
Airlines declared bankruptcy all the time. American has declared bankruptcy. United has,
Delta has, they all keep flying through it. It doesn't, like the point of it, the Twitter thread
was it doesn't really impact you if an airline declared bankruptcy as a traveler. Like you're,
even if you have existing reservations, your mile, 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 love going down this rabbit hole when I found out it would look through a
list of airline bankruptcies that crystal hamburgers had an airline in the seventies
and eighties and like going through, I literally spent an entire afternoon like reading through
the Chris is called the crystal Glazer. It was like a corporate internal corporate publication
where you're, I was just reading every random ass thing about this airline. Totally uninteresting
probably to most people, but I was obsessed and being able to really 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 what, uh, where to espousing
information and where to bite your tongue. Well, I'll tell you, it's interesting to me
from a business perspective, what the, uh, the synergy was between having an airline and like a
hamburger fast food restaurant. There's no pretzels, there's no peanuts. It's only crystal
hamburgers on the plane or something like that. Funny. You should mention it was based out of
Chattanooga, I believe. And they actually, uh, have, there were no like crystals nearby,
so they actually would put a freezer in with frozen. You could buy like frozen crystal hamburgers
in fun. Very disgusting, but you know, very kind of like seventies, eighties TV dinner.
Not surprising. They went out of business. Yeah, exactly. They actually, well, that's
part of it. They just declared bankruptcy a few months ago, but yeah, I guess the purpose was so
the managers and the corporate executives could fly to crystal locations that were in random places
around the country, not near as sort of like major commercial airport that are that you place that
like Delta or United flu. But yeah, apparently it's like a big thing in the eighties. Like,
like president Reagan held a rally there, like George Bush and Bob Dole both campaigned there,
like this whole, I was like reading this bizarre back on here. They also bragged about having a
94 year old pilot, which I was like, that's something you want to brag about. Like that seems
like I'm not very, I think you want to hide that. I don't think simpler times saying the quiet part
out loud there. So we're talking about, you know, providing actual value to people, not just telling
them everything that you're interested in. And before we started recording you and I were talking
about Sam Parr from the hustle who just started his newsletter trends. And I asked him for his
tips on how he would start a paid newsletter today. And 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. And in his case, that was helping people make money. So the hustle trends is kind
of like spotting gaps in the market and helping, you know, aspiring founders and entrepreneurs
start businesses and make more money with their businesses. Whereas you're providing value in
almost the opposite way. Your home people save money with gosh, shoot flights. So for probably
the vast majority of subscribers, if I'm a premium member, I'm paying you what is it $50 a year for
a membership? Yeah, I'm gonna make $49. I'm gonna make more than that just 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, you know, $100, $200, $300 a year, like something like the trends which hustle
trends would charge? A couple thoughts there. We've had folks tell us, Scott, why aren't you
charging like $500 a year? I mean, you know, with the average savings from any, like we only focus
on the best of the best deals, the average flight that we send out is $550 off of normal prices.
And so if you think about that, you know, if you buy one ticket in the next 11 years,
so you might ask me, why don't you charge, you know, $500? And the reason why is A, we want to
make sure that it is important to us as a company that we have a broad appeal that it's not just at
the total, you know, top tippity top, like it's still a driving factor for us to be able to share
a lot 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. And frankly, if you have a $500 sticker price,
there are a lot of people that just aren't going to ever sign up for that are not going to be able
to necessarily afford that in the first place. And the $550 savings that they had is not just
a matter of me trying to be like a rent extractor and take as much of that. It can be the difference
between John Doe down the street being able to take his family on a vacation next year or not,
like that doesn't just have to be a sort of vanity metric of, oh, I saved $500 on my flight.
It can literally be the difference for a lot of people and whether or not they can take a trip
to somewhere that they've always wanted to see or not. So that's always been a very top of mind
thing for me. You know, again, coming at this as someone who didn't come at this as a businessman,
didn't, yeah, I never took business class in college. I didn't have, don't have an MBA,
never had a business plan, never even really frankly, was an aspiring entrepreneur.
It was all very serendipitous coming, falling into this life as a cheap flight expert and
entrepreneur. But I came at it as somebody who just loved to travel and loved to be able to help
other people be able to travel and not over have to overpay for their flights. And so that, because
that was sort of the North Star for me, that helps kind of guide those decisions.
The other thing too, though, that occurred to me when you're talking about, you know,
providing valuable information and the hustle trends, do you listen to jazz ever?
Yeah, a little bit. I actually played alto sax in high school in this part of the jazz band.
I played the trumpet, not well, but I played it. So, you know, one of the things that they,
they always say about jazz is it's not just the notes you play, but it's the notes that you don't
play. Like, like the space in between the notes, the ones that go and said, 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, you know, on Twitter or when we're sending out, you know, send out this big
thing about flight refunds to all our members this past weekend to make sure that they're
educated on it. And even in the way I structured that, I wanted to make sure that it was as kind
of cut to the bone with no excess fat on it, no wasted words, because recognizing that
people, there's a real attention economy out there where people have so many things
asking, you know, asking for their time. And you're lucky if somebody gives you 30 seconds,
gives you 45 seconds. And so 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 there actually
would be important to them. And I don't spend tons of time on fluff, you know, talking about
the weather, talking about my sort of like dream, you know, childhood memories of visiting Puerto
Rico or something. I want to get things that are actually important to them. And on the deals front,
it's as important to me that not only the deals that we do send, but the deals that we don't send,
because it's not like, I'll see some places out there. Oh, we have thousands of deals a day. And
it's like, well, that's great. But people aren't booking 1000s of deals a day, people are, you know,
booking one, maybe two trips a year. Could you imagine signing up for a company, like Sesame
Fights, and they sent you 1000 emails every day of places that you could go, I wouldn't get past
10 before I clicked on subscribe. I mean, the value you're providing is curation. You do the
work of looking through the 1000s and figure out what's good for me. And I don't want to do that
work. That's exactly right. So many 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 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, you know, the notes that are played
and the notes that are unplayed are as equally important with one another.
You know, you said people have a million things to do. And it reminds me of something I tell
founders all the time, which is that there's 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 blogs they can read. So it's always
kind of a minor miracle if someone has basically chosen you over all these other options where
they could be doing in this particular moment. And 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, right? Someone else can write something,
and there's so much information online. Why is anyone ever going to pay for what I'm doing?
I know just through even just my interactions with you, like we did an interview with you on
Andy hackers, like 2016. And then we interviewed someone who turned out to be like a clone of
scotch cheap flights. And we exchanged emails about it. How do you think about the competition?
How do you ensure that you know, customers stick with you and it's not sort of a race to the bottom
and your price has dropped to zero because other people are offering cheap flights as well.
Yeah, 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 competition. I think it can be useful and helpful as a way to make sure you
don't get complacent and make sure you know, a little kind of like spur in your butt type of
thing to make sure you don't just rest on your laurel. 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 this service or not? We're
much more judged against a quality metric of in and of ourselves than against somebody else. And
so for us, you know, it's been the biggest competition in our mind has always been apathy.
Yeah, well, it's also just the fact that like, look, I cannot believe the fact that there are
2 million members of Scott's Cheap Flights, like 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 like, Hey, yeah, stop overpaying for flights, come get, you know, find
out about cheap flights here. And so that sort of reminder is always kind of helpful, but also trying
to remember that like 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,
and part of that is making sure that you know, we're only sending them the good ones and not
sending them the fluff that we're, you know, building that trust by not taking affiliate fees
and that they can know that every deal we send 100% believe this is an amazing fare that, you know,
might not last very long. So it's partly building that trust, but then also just being evidence
through your work over the years that people see if they've been on it for a while, they're like,
Yeah, you know, these are just it's a higher quality. It's the types of deals I get the speed
that I get it the knowing that you know, 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. And so if you find
out about two hours later, it might be too late. Those are the types of things that we've been
in doing everything we can to try to continue to kind of, it's almost like a Michael Phelps thing
where you have already set the Olympic record, you're already set the world record, and then
you're just trying to beat that like, like you're not you're just continually trying to challenge
yourself to get better and do more. And that I think has been really helpful for us. But
always with the North Star of trying to kind of put ourselves in our members shoes of like,
only if it's providing value and only if it's making members happy, or is it something that
we're interested in, on the topic of competition, you mentioned substack earlier. And this is
something I've been thinking about a lot where, yeah, you know, there's so many more platforms
now. And like, 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 actually do because they have the viewership numbers to actually be
able to do that. And now we're seeing kind of the same thing emerge with paid newsletters and paid
blogs. So substack is kind of a platform that I guess helps with distribution, etc. And you
mentioned you've got some journalist friends who are doing very well on substack. There are also
platforms like medium, which you know, sort of help you get paid for your writing. And then there
are also tools that aren't really platforms, but they just sort of make it easier to get it set up,
but they don't take any of your revenues. And I don't know if you've seen ghost, it's kind of like
a slicker version of WordPress, but they have a direct integration with stripe. Now where you can
set up a blog and a newsletter and basically start accepting payments from your readers from day one.
If you were to start scotch cheap flights from scratch today, you know, would you use any of
these platforms or any of these tools? And you know, if you did, how would you differentiate
and sort of set yourself apart? Because I know you've been a lot of time optimizing your homepage,
and it's kind of a work of art and getting people to subscribe and differentiate your brand. So what
are your thoughts on the kind of ecosystem facing writers today? Man, that is a great question. I
think it would depend what my goals are. If my goal is like, 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 just like myself or maybe, you know, an assistant or something like that,
then yeah, I would absolutely be like going with a sub-stack model or something like that. And
frankly, that appeals to me as somebody who, you know, as a former journalist who loves to write,
I 100% like see the appeal to it. And in an alternate reality where I'm not wearing
scotch cheap flights, I might be on the sub-stack 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 sort of model like that is very helpful for the
early days for getting started, taking care of the logistics of, you know, all of the sort of
behind the scenes framework, the unsexy stuff of like sending emails and IP reputations weren't
like just stuff that even today makes me doze off. But is that 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, you know, promotions tab or things like that. I think places like sub-stack are amazing
for being able to sort of get up and running. And especially if you're writing for yourself,
still able to retain most of the revenue. But I think if you're talking about building a business
and especially if ambitions to grow it to a medium sized business or larger, the hurdles would
probably start to become untenable pretty quickly. And so a couple hurdles in my stand out for me,
one is obviously the revenue cut. There's already revenue cut when anytime you're processing
credit cards, you know, whether it's Stripe or Square or whoever, they're always, you know,
taking some kind of the transaction that's unavoidable. But then the more kind of services
you layer on top of that, the more mouths there are to feed before the money starts to get to you.
And so, you know, when you're talking about you're making $100, and I don't know exactly what
sub-stacks fees are, let's say it's 10%. And then you've got like 3% for the credit card. Well,
you know, you've made $87 rather than 100. That's still pretty good. But what let's say you're
talking about 10 million, all of a sudden, you're paying a million point three to the credit card,
you know, million dollars to sub-stack and $300,000 to the credit card company. You can see how it
starts to become like a huge expense really, really quickly as you start to scale up. So there's
questions about that. And the question about you and your relationship with your audience,
you know, your email list is incredibly important, incredibly valuable if you're building
that sort of structure. And I'll be honest, I don't know exactly how it works with sub-stack.
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 sell that connection with your audience or not. And 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 basically locked in to being on sub-stack in perpetuity. I could never,
never leave if the circumstances change. You don't happen to know, do you, how it works?
No, I'm not not quite sure. I should sign up and check it out. I mean, but there are other models
too like Patreon, for example, which I'm pretty sure doesn't give you direct access to like your
subscribers' email addresses and contact information. And it's a tough balance for
those platforms, I think, because on one hand, they want you to sign up. So they want to offer
you perks like that, but they don't want it to be that easy for you to leave and just graduate.
And they don't want to have a business model where literally everyone who's successful leaves
their platform. So I agree with you. And I like that you framed it in terms of kind of, you know,
what are you doing this for? Are you just a writer who loves to write? Are you more, you know, trying
to wear the business hat, in which case you probably want to be responsible for all areas
of your business. And it's almost like being an artist or a musician, you know, like you go to
the record label because you love to sing. Well, guess what? Like you've just outsourced like
three quarters of your business to them, like their charge for distribution now and the business
model and the marketing and 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. So it's kind of the same for writers, I think.
Yes, couldn't have said it better myself.
So the last thing I want to ask you about, and then I finally let you get out of here
and go about your life, is scalability. I mentioned earlier that one of the advantages
that code has, that it's always been kind of a rare thing. There are much fewer, you know,
coders in the world and there are writers is slowly disappearing. And so technology is sort of
no longer becoming, unless you're Google or something, you can afford to invest in
all sorts of technology that others can't, it's no longer really a moat, whatever you build,
others can build. But one of the advantages I think code has over media, it is just 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 actually have to keep
doing that every day, week after week, month after month on end. And if you want to scale up your
team and do it even bigger, then you have to actually hire people rather than just writing
more code. So how do you think about scaling your team? And what's your advice for someone out there
who's sort of like stymied by this stumbling block and they're not sure that they can really
build and scale a team and they're worried that it's going to be a lot of hassle to do that?
Yeah, 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. And 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 sort of man with a hammer, everything looks like a nail.
So you take something like content curation, finding cheap flights, even something like writing
articles, there is certain things that humans do well, that computers are not especially designed
to do well. A computer, it'd 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 they are X, Y, and Z technological
reasons. And so 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,
to every single little thing that can be, you know, eminently repeatable. Yeah, look for scalable
tech solutions on those, but also making 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 that's what that's telling your audience. If you're a subscriber, you're a reader,
people aren't stupid. Like they can realize when something, even take something like customer
support, they can tell when that email that they've gotten in return is written by a computer or
person. You know, they can tell when that Twitter account is, is a bot or person a lot of the time,
and especially in the, in the world of companies, business tech. So why 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 sort of two way relationship with them. Where 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, you know,
like they're just, they talk to some chat bot that's talking to them and has decoded what they
said and gives you X, Y, and Z option. I mean, I'm not saying like, Oh, self-help FAQs are a
terrible thing. Like they can be important in some context, but I 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 actually grow to like your brand
more. It's not always just 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 like a company like Google, for example, where
primarily people say pretty 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 can take down your Chrome extension,
and it's just all automated. That's just a tremendous source of frustration.
To your point earlier that it's kind of man with a hammer, the full saying is to a man with a hammer,
pretty much every problem looks like a nail. If you're a developer and you think your company is
going to be 100% 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. It's just if you grow your
business, you're going to have to hire no matter how much code your company depends on.
So it's really not a disadvantage sort of company where you get practice hiring
from the beginning. Because even if you have a SaaS business, you're going to do that eventually.
And 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 really fun. I appreciate your having me on,
getting to chat about this stuff. It's been really 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 out about what you share?
Come to scottscheapflights.com. No apostrophes, no underscores, no spaces,
just scottscheapflights.com. We'd love to, 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 at your home airport.
All right. Thanks so much, Scott.
Awesome. That's cool. Take care now.
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