For years the conventional wisdom has been that people won't research and buy a complex product like airfare on smartphones. But that assumption may no longer be true.
Hopper, the airfare prediction app, says it is now processing $1 million in flights a day.
That's a rapid rise for the mobile-only company, based in Montréal and Cambridge, Mass., given that it only started selling flights in September 2015.
Airlines compensate Hopper for sales. Since January 2016, the startup's sales and revenue volume grew about 2,300%, it says.
That gives context to the news on Thursday that the company has raised about $82 million (CAN) of equity financing in a Series C round. That total includes a convertible note worth about $16 million (CAN) that was publicized earlier this year and that has now has converted to equity. Tnooz is estimating this at about $50 million (USD) in fresh funding.
The investment round is led by Caisse de dépôt et placement du Québec (CDPQ), a pension fund manager. Also participating are existing investors Accomplice, BDC Capital IT Venture Fund, Brightspark Ventures, Investissement Québec, and OMERS.
Hopper is a mobile-only company that offers predictions on plane ticket prices on itineraries worldwide up to a year ahead of departure. The app recommends if a customer should book now or wait, and says that more than half of its recommendations to customers are to wait.
Are the kind of customers attracted by such an offer low-yield, discount-seeking leisure customers? Not so, co-founder Fred Lalonde tells Tnooz.* He says 56% of his company's sales in the past year have been for international travel, meaning into the US or out of the US and that the average ticket price has been $1,700.
Lalonde says his surveys find that 52% of his customers are millennials, a group that's much-coveted by brands, and that a majority are university-educated.
Lalonde's two goals with the funding are to triple his staff -- including a doubling of his engineering team -- within the next year and to open licensed travel agencies in 20 of its largest markets by April 2017.
He says about one in four of the tickets it has been selling has been for travel not involving a US origin or destination. But the company is only registered as a ticket agent in the US and Canada which means it can only price tickets in those countries' currencies.
Having a presence in local markets will enable it to better serve its customers elsewhere, including Australia, Argentina, Colombia, India, Japan and the Philippines.
"Even the big guys with large public companies built their global expansion by acquisition. We're having sensational word-of-mouth across the globe at an unheard-of speed."
Hopper is sending more than 20 million push notifications a month to Apple and Android device users, and it says that 90% of its sales "come directly from push notifications."
But are push notifications something that has a temporary novelty factor that will lose its conversion power as other travel apps rev up their own volume of notifications? Lalonde says no.
"Sending a push notification isn’t a product or a strategy, it's just a tool. Depending on cohort, up to 80% of our users turn on notifications, where the other travel guys get only maybe 15%....
"That's because our notifications are effectively a conversation. On average, our users begin watching fares 92 days before departure. We will offer alternative destinations that are affordable and see very high conversion rates with those."
The airfare predictor's total funding to date to $78 million (USD).
Google just named Hopper the best Android travel app of 2016. The company's mobile app for Apple and Android devices is downloaded about a million times a month on average, the company says.
Hopper is ranked the number-one most downloaded travel app in 37 countries. According to App Annie's Travel Aggregator Index (a benchmarking service), Hopper only lagged behind TripAdvisor in US downloads in November 2016 (iOS and Android combined, in the travel subcategory of “aggregator").
Other future potential business products is to offer airlines insight into traveler search intent. The company estimates that in the past year about about $7.4 billion of ticket-buying intent was tracked through Hopper by about 10 million users.
That equates to about 1.5% of the roughly $500 billion of global air sold last year, Lalonde says.
* Disclosure: Hopper CEO Fred Lalonde is also Chairman of Tnooz.
NB: Image of co-founders Joost Ouwerkerk & Frederic Lalonde (right) courtesy of Hopper.