Viral Loop – The power of pass it on

I was recently recommended a book by Adam Penenberg called ‘Viral Loop’ by an old colleague of mine Marty Carrol who has just set up a cracking start-up called PowNum.

In essence the take-aways from the book are:

  • Some traditional companies, such as Tupperware, achieved “viral”-type success decades before popular use of the Internet.
  • Online firms grow virally when members of a Web site invite their friends to join.
  • When this pattern generates exponential growth, it becomes a “viral expansion loop,” which has three categories:
  • A “viral loop” expands based on referrals from members to their friends.
  • A “viral network” is made up of numerous connected viral loops, such as Facebook.
  • A “double viral loop” is a combination of a viral loop and a viral network.
  • With quality online offerings, sites don’t need salespeople or advertising to go viral.
  • Viral companies, such as Hotmail, YouTube, Facebook, LinkedIn, Twitter and eBay, share certain traits, like clear concepts, ease of use and rapid adoption.
  • A Web offering’s “viral coefficient” is measurable; a score of 1.0 – indicating that each member generates one new member – leads to exponential growth.
  • Viral growth is an integral component of great products and services, and is suited for smart phones, which will soon outsell PCs as Internet access machines.

The Web can make a business hugely profitable if the entrepreneurs have the right design and offer something the audience really wants. This formula worked for Hotmail, eBay, PayPal, MySpace, YouTube, Facebook, Digg, LinkedIn, Twitter and Flickr, as well as Hot or Not. Such sites offer services to which people come to feel so deeply attached that they become fervent evangelists. Then their contacts do the same, in a “positive-feedback loop.” That’s how viral lightning hits. Companies become Internet juggernauts when they can ride the three-part “viral expansion loop,” wherein Web visitors reliably beget additional guests:

  1. “Viral loop” – This referral-multiplying mechanism grows member-to-member.
  2. “Viral Network” – Members form groups that intersect as they expand.
  3. “Double Viral Loop” – This hybrid of viral networks and viral loops is built on ever-increasing user content. A double viral loop grows more quickly as it adds users, often with little marketing effort (though increasing technical concerns).

The expansion of a viral loop depends both on users who promote a site’s goods or services, and on designers who build virality into their offerings. The Web is the ultimate, exponential connectivity medium, in that it enables people to share blogs, links, photos, videos and other Internet services. This creates a “virtuous circle,” the most efficacious form of direct marketing, based on the understanding that people will share things they like. The trick is figuring out what they like and including it, intrinsically, from the very beginning.

Big-time viral winners like Ning share certain characteristics:

  • “Web-based” service – The firm is designed to function and grow on the Internet.
  • “Free” offering – The service is complimentary but may be monetized in the future.
  • “Organizational technology” – Users, not employees, develop the content.
  • “Simple concept” – Straightforward and easy is always best.
  • “Built-in virality” – Users spur growth through sharing and positive word-of-mouth. “Extremely fast adoption” – Some 50% of Harvard students joined Facebook a month after the social network started, although the site spent no money on promotion.
  • “Exponential growth” – Users bring in more users, who bring in more users.
  • “Viral” characteristics – The “Virality index” must read greater than 1.0 for exponential growth.
  • “Predictable growth rates” – Just as “epidemiologists can predict with some certainty how quickly a virus will spread through a city,” you can foretell the birth of a viral loop.
  • “Network effects” – The more users there are, the more attractive joining becomes. “Stackability” – PayPal’s relationship with eBay offers stackable, synergistic growth. A “point of nondisplacement” – Viral companies eventually hit a “tipping point,” an unbeatable mass of users.
  • “Ultimate saturation” – Growth can slow once a site becomes immense.

Get the book:

4 Comments

  1. July 19, 2010 at 12:16 am ·

    Great site. A lot of useful information here. I’m sending it to some friends!

  2. July 19, 2010 at 1:26 am ·

    Wow this is a great resource.. I’m enjoying it.. good article

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  4. Anonymous
    January 6, 2015 at 9:44 am ·

    Hi there, I read your blog. Your story-telling style is great, keep doing what you’re doing! Thank you very very much.

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