"How PayByPhone sold for $45M by first doing things that don't scale" with David Spittel

I took the above photo in a random street parking after my interview with the founder, David Spittel. The stuff is all over the city. I thought it was super cool.

David Spittel founded, developed, and recently sold a $45M mobile payment business. Pay by Phone provides an easy to use means for people to pay for parking. It now has more than 5 million users in 200+ cities located in 5 countries around the world.


I confess.

I thought doing tedious things like calling every one of your customers is only necessary if you’re not willing to spend money. In my mind, if you had the money, you could make almost any problem go away.

Which is why this story by Dave Spittel of Pay by Phone -- a mobile payment company that eventually sold for $45 million -- is so fascinating to me. They had the money to do anything they wanted… But without truly understanding their users, which only doing ‘primitive stuff’ could accomplish, it was useless.

This is a brief, but insightful one.

"How PayByPhone sold for $45M by first doing things that don't scale" with David Spittel

We started Pay by Phone, a mobile payments company in 2000.

It was way too early. It was very difficult because it was so new and people didn’t yet understand what it could do for them.

When we first started

We were so small we had a banjo play every time someone pays for their parking by phone and we earned $0.35.

We tried SEO, AdWords, and stuff like that. They weren’t very meaningful.

We tried PR campaigns, invite only trials, giving money away through discounted parking programs…

Things we expected to go big? Ads. Radio ads. Bus ads. None of that worked. They were useless and way too expensive. We spent $40,000-$50,000 and got minor signs ups.

We did all these hard things to get users to use Pay by Phone... But they definitely cost more than what they’re worth.

Taking our customers out to lunch

We decided to try and find out who our heavy users are.

We started by tracking them without actually talking to them. Sure, we found out their behavior and how they were using the app…

But the data wasn’t useful because we still didn’t know who they are.

So we emailed, texted, and called them. We expected them to go, “Who are you???” That we’re breaking a wall of privacy here… We feared they’d be angry. But you know what? They were actually happy to talk to us.

So we took our top 10% users -- some of them, like the photocopier repair guy who parks 1,000x/year -- to lunch and asked them, “Who are you?” We wanted to understand.

One example of a change we made after understanding our customers was our message.

Before, our messaging explained the benefits and the steps, which seemed like the right thing to do. It was terribly ineffective.

After understanding our users, we changed them to simple calls to action. Rather than steps, we said, “Call this number to park.”

That worked.

What finally worked?

The not so sexy stuff.

We did a lot of things by brute force -- fliers on car windows, doing mass mailings to parking violators, contests, giveaways.

Hard to track what worked. But combining all of them made enough users to start using the app. And the value to cities -- those using Pay by Phone make more money -- became clear.

Then it all came down to contracting with cities and private parking facilities.

The city then improved the signage, the media, and hired customer service agents to help users sign up.

We dropped the convenience fee charged on the users and let the city pay for the service.

Once the service is at no cost to users, we experienced a dramatic growth.

So there is definitely a place for actually getting out there and talking to people you don’t usually talk to.

I’d love to build a business with no cold calling. It would be less painful.

But we couldn’t have gotten to where we are if we didn’t do the primitive stuff.

What is Concierge Onboarding? Read about All Aboard!

Photo credit: Chiara Cokieng