Over the next few blog posts, we're going to dive in and break down some of the concepts Penenberg talks about, so you can harness this for your own site.
What's a Viral Loop?
For starters, we need to define what's a "viral loop" as it relates to marketing your website. And no, we're not talking about spreading the latest H1N1 flu virus. Quite simply, to have a viral loop, your users need to spread the word to realize the full benefit of your site. Social networks are a great example, as there's no point to being a member if none of your friends or contacts are members too. Viral loops have become the cheapest way to grow a user base in a relatively short amount of time. And, surprisingly, it is quite possible to accurately predict your growth rate to the point of nondisplacement (we'll cover this in a later post).Throughout the book, Penenberg uses case studies to illustrate how companies have been successful in harnessing the power of the viral loop:
- Offline: Tupperware, Amway, Ponzi schemes
- Dotcom bubble era: Mosaic/Netscape, Hotmail, eBay, PayPal, HotorNot
- Web 2.0: Facebook, MySpace, Flickr, YouTube, Bebo, Tribe, Tagged
- Widgets: Slide, RockYou, Zynga
He goes on to further explain how these successful viral loop companies share many, if not all, the following characteristics:
- Web-based: They are far better suited to the frictionless world of the Internet.
- Free: Users consume the product at no charge; after aggregating a mass audience, it may be possible to overlay various revenue streams (offer premium services, for example).
- Organizational technology: They don't create content - their users do. They simply organize it. But facilitating can lead to a mass audience. Just ask Google.
- Simple concept: Easy and intuitive to use.
- Built-in virality: Users spread the product purely out of their own self-interest and, in the process, offer a powerful word-of-mouth endorsement to each subsequent user. (And word of mouth is widely viewed as the best form of advertising.) This means that viral loop products have within themselves the seeds to grow on their own.
- Extremely fast adoption: Within a month of Facebook's launch, half of Harvard's student body had joined. Within thirteen months, 12 million people had downloaded Skype. Hotmail had 30 million users within thirty months. Yet none of them required a dime for marketing or a sales force.
- Exponential growth: Because each user attracts more users, there is a tandem growth model. This is in sharp contrast to a "normal" business, which more typically grows linearly (and far more slowly), at a rate usually corresponding to its marketing spend.
- Virality index: For the user base to grow exponentially, virality must equal or exceed 1.0. In the aggregate, one user becomes two, turns into four, eight, and so on. Anything less than 1 and the virality cannot be self-sustaining.
- Predictable growth rates: If a product is properly designed with viral hooks, it spreads at a constant rate - assuming there are sufficient numbers of people - and can be accurately forecast, in the same way epidemiologists can predict with some certainty how quickly a virus will spread through a city.
- Network effects: The more who join, the more who have an incentive to join. A telephone, for example, becomes continually more useful to those who already have one as more people are added to the network.
- Stackability: A viral network can be laid over the top of another, each fostering the other's growth (PayPal and eBay; YouTube and MySpace).
- Point of nondisplacement: A tipping point, when a company attracts so many users it continues to grow; it becomes nearly impossible for a competitor to take it down.
- Ultimate saturation: After a network has spread far and wide, it can reach a point of maturity when growth slows. This happened to both MySpace and Facebook, both of which saw their growth rates slow from 3 percent a month to about 1 percent - and in MySpace's case even decline slightly. Nevertheless, they had already amassed substantial user bases, with a full 20 percent of users considered "addicts" who made up almost 75 percent of visits.
So there you have it - the answer to your question: what's a viral loop? As we work through this series, it will become clearer how you can build a viral loop for you own site.
Stay tuned...