Discover more from Consumer Startups
+ how a hard pivot helped Hopper take over the travel industry
Hey hey 👋,
Welcome to the 928 founders and investors who have joined the Consumer Startups family since the last send (been a minute)! If you haven’t subscribed, join thousands of other consumer founders and investors by subscribing here:
I love traveling, but I dread the planning and logistics part of a trip. Since prices of flights and hotels fluctuate so much, I would often spend hours refreshing the pages of Bookings scouring for the best deals. I refuse to pay 50% more than the guy sitting next to me on the same flight.
I was excited to learn about Hopper during the pandemic, an AI-powered app that can help me monitor flight and hotel ticket prices and recommend the best time to purchase them. It gets me good deals, but most importantly, saves me tons of time.
Hopper has quietly become one of the most popular travel apps. It had over $2B in travel sales in 2021 and skyrocketed to the number one most downloaded travel booking app in Q3 of 2021 as travel demand started to recover (as shown in the graph below). It was recently valued at $5B from a secondary share sale, which took place just five months after its $175M Series G round of funding.
Hopper did not have the meteoric rise that we have accustomed to seeing with tech startups in the past few years. Quite the opposite - the Hopper team worked on the wrong product for more than half a decade before pivoting to the Hopper we know today.
For today’s Consumer Startups, we are diving into Hopper and taking a look at:
Hopper’s pivot and journey finding product market fit
Hopper’s growth journey
Hopper’s unique growth drivers - push notifications, contextual recommendations, and custom ads engine
Let’s do it!
Hopper’s founder Frederic Lalonde is no stranger to the travel tech industry. He built Newtrade Technologies in 1997 to help hotels connect their reservation systems with other online distribution channels, such as Expedia. Seeing great potential synergies, Expedia acquired Newtrade in 2002 to accelerate its growth and connectivity within the hotel vertical. Lalonde stayed on to lead Expedia’s hotel and packages business.
At Expedia, Lalonde witnessed the boom of the online travel booking business, which stands at over $350B globally today. However, these online travel products have remained similar, a search engine for consumers to compare prices and purchase travel products online. At the same time, Lalonde also saw the rise of Big Data. There had been a ton of content and data about travel, but there was no product built around it.
This insight gave birth to the initial idea for Hopper, a travel planning tool that helps you discover destinations and travel activities using keywords such as “hikes around the world”. In 2007, Lalonde left Expedia and teamed up with a former Expedia and Newtrade engineer, Joost Ouwerkerk, to start building the V1 of Hopper.
How hard could it be to build a travel discovery tool?
It turned out to be quite a monumental task. Lalonde and his team spent 7 years building the product in stealth, trying to create a proprietary technology that can crawl the web to find travel content (in blog form) and return ones that are the most interesting for consumers.
Over that 7-year time span, Lalonde and his hopper team put their heads down building the travel planning and search product. They had raised $22M up to that point from the likes of OMERS Ventures, Bright Ventures, and Atlas Ventures. After burning through millions of dollars, they finally released their web-based platform to the public in 2014.
After launch, the site started seeing some traffic from Google Search and Facebook. However, growth was slow and somewhat stagnant. It dawned on the team that they still did not have a product-market fit after 7 years of building.
Luckily, they caught a major break when Hopper got featured in a New York Times article. To everyone’s surprise, the article was not about the core travel discovery website they launched, but it was about a small tool they built buried at the bottom of the website. It was a simple tool that could give you tailored advice on what day and time to book the cheapest flight ticket based on the flight route of your choice.
“Take a very popular route, like J.F.K. to Los Angeles International Airport, for which Hopper’s report uses 57 million fares quoted in the last month. Turns out you’d be crazy to book Thursday through Monday, since, according to the graph I got, you would save an average of $45 or so by booking on Wednesday (Tuesday is somewhere in the middle). You’ll also find that returning
Tuesday will save you an average of $35 over returning Thursday through Sunday. ” - NYT
It went viral and Hopper’s future started looking a lot more promising.
However, just as they were seeing substantial growth, Lalonde decided to shut down the website and relaunch Hopper as a mobile app 🤯.
The idea was to double down on that viral tool that had built and create an app that helps travelers to monitor ticket prices and recommend the best time to purchase, based on billions of historical flight price data. At the time, it was a controversial decision because the website product had just started to gain momentum on the back of the NY Times article. In addition, mobile only accounted for 12% of the online travel category in terms of transactions. This pivot also meant killing all the content and SEO they had built throughout the years.
Lalonde made this call because he saw an opportunity to build a truly differentiated product in a fast-growing mobile segment. He worked in India previously and witnessed firsthand how online travel went from 12% mobile to 60% in just one model as cheap Android phones hit the market. They had to move fast to benefit from this tailwind!
Ballsy move but it worked.
Hopper’s growth journey
Phase 1 - Reaching PMF
Despite not having any iOS engineers at the time of the pivot, they still somehow made it work and launched the app in 2015. The app is a more elaborate version of the viral tool they built previously, using data and analysis from billions of historical flight prices to tell travelers when they should buy their flight tickets.
This time, the launch hit it out of the park and the Hopper team could barely handle the growing demand from its users. By September 2016, just a year and a half post-launch, Hopper reached the following milestones:
More than 20M downloads
Sold over $600 million worth the flights in the app
Added one million new users each month
Ranked #1 travel app in over 37 countries
According to Lalonde, the biggest validation for product-market fit is when you can deliver that wow factor - a moment when a user understands the value of your product and tells all their friends about it. Hopper app has that wow factor.
“The wow factor for Hopper is that when we deliver a push notification to your phone for something you asked for and suddenly you saved a ton of money from airfare.
It's not about the savings but it's because at that moment you realize that you never ever have to plan your own airfare again and shop 13 websites until midnight. You know you can just tell Hopper what you want and they will deliver the good.” - Frederic Lalonde at ScaleupFest
Nothing matters in the early stage of a company until you can find that fit and deliver that wow factor.
Phase 2 - Horizontal growth
As Hopper seemingly took over the online flight booking world by storm, it also started eyeing the next big travel segment - hotel bookings. Similar to flight tickets, hotel prices also heavily fluctuate based on real-time demand.
Fortunately for Hopper, the same proprietary price prediction engine they developed for flights works well for hotels as well (with some tweaks). For travelers, the value proposition remains the same - Hopper helps you predict hotel pricing and tell you when to buy or wait to get the best hotel deal. Additionally, unlike airlines, travelers can sometimes get private rates that aren’t easily accessible on the web. Hopper can monitor both public rates and private rates to ensure traveler gets the best price.
In late 2017, Hopper launched this hotel segment in New York City, and in 2019, Hopper rolled out this offering to over 200 countries with over 270,000 hotels.
In recent years, after seeing the success of hotel expansion, Hopper has also expanded to car rentals and short-term home rentals to increase the stickiness of the platform and become the go-to app for all travel needs.
Phase 3 - Building a travel super app
Super apps are quite common in Asia. They help users to fulfill all their needs with just one app. For example, the biggest social app in China, WeChat, not only has social networking features but is also a popular app for payments, grocery shopping, and even investments. Hopper has the opportunity to become the super app for all travel needs.
It has a strong suite of product lines that cater to most travel needs from flights to car rentals, but it has also expanded vertically to offer a thoughtful list of services that make travel less stressful for travelers.
During the peak of the pandemic, travel was extremely stressful. Flights were getting canceled left and right due to staff shortages and covid outbreaks, and it was incredibly frustrating for travelers to deal with immense uncertainty. To address these issues, in 2020, Hopper launched its suite of fintech products to ease those headaches. With a small fee, travelers can get access to:
Refundable Booking - flexibility to cancel and get 100% of booking value back for future bookings
Flexible Dates - Change the date or time of your flight for any reason up to 24 hours prior to departure.
Missed Connection Rebooking - allow travelers to rebook the next flight to their destination no matter the airline
Flight Delay Protection - if your flight is delayed for more than 1 hour, you will immediately receive a credit to book a new flight on any airline to your destination so that you can get on your way sooner.
These options offer travelers peace of mind and help Hopper create additional revenue streams. According to Lalonde, Hopper generates nearly 40 percent of its roughly $1.3 billion annual revenue comes via fintech products.
Hopper’s unique growth drivers
There are many reasons for Hopper’s strong growth today. Besides having a strong product market fit, another huge reason lies in its ability to grow efficiently without throwing away massive amounts of marketing dollars. According to Hopper’s ex-Head of User Acquisition, Simon Lejeune, industry incumbents, such as Bookings and Expedia, spend Hopper’s entire annual marketing budget in just a few hours.
In a conference hosted by Appsflyer, Simon pointed out three killer growth drivers that have contributed significantly to Hopper’s growth engine - push notifications, contextual recommendations, and custom ads engine.
1. Push Notifications
When Hopper first got started, it used to only send push notifications when it was time for users to place a purchase. The team soon realized those notifications were getting lost and people were not sure if the app was even working. To create that trust with users, Hopper started sending a lot more notifications to inform users whenever there is a noticeable price movement. For example, they would say ‘Your flight to SF went down but you should wait longer for a better price.’ This proactive communication approach lets users have peace of mind to know the app is working and increases conversion when the app is pushing the user to make a purchase. Today, Hopper sends out over 1B notifications to users every year.
2. Contextual recommendations
Hopper’s biggest advantage is the amount of data it has on its global user base. It can create accurate cohorts, predict a user’s travel preferences, and use those data to recommend other relevant flight routes or hotels. For example, after noticing a user has been monitoring a flight to Rome for two weeks, the app might send out a notification to the user about a flight deal to Milan based on travel behavior from similar users. This contextual recommendation engine has contributed to 20% of Hopper sales according to Simon. Another surprising fact is that Hopper users convert 2.6x more with trips recommended by the system than the ones they searched for in the app themselves.
3. Custom ads engine
Hopper found that custom ads related to a specific deal perform the best in acquiring the right users. To scale this process, they have built their unique Hopper ads engine to create tailored ads for users. Every day, it pulls the top deals on the platform, generates image assets based on those deals like “Fly to Paris from $448’, and then sends them automatically to ads platforms like Instagram and Snapchat through API integration. Ads budget also gets automatically adjusted based on performance. As a company built on top of big data, Hopper has also leveraged data science to optimize its performance marketing. Quite an impressive feat.
What do you think about Hopper? Please reply directly and let me know what you think. I would love to hear from you :)
See you soon 👋,
Follow me on Twitter @_leoluo