Achieving Virality Is Hard

by Krzysztof Jedrzejek

When I think about consumer internet businesses in the context of virality, I split them into 3 main categories:
-      Fundamentally viral – usually multi-sided platforms that require a large user base to deliver value to the customer (like Facebook, eBay or Skype)
-     Potentially viral – where the user has to be motivated/incented to create a viral loop, but there are little network effects (Gmail or Gilt)
-     Lost causes – products that seem ‘anti-viral’ by nature (from our class - Cake, that soon realized large part of their customers do not want to share their investment ideas).

I believe achieving virality even in the first 2 categories is a complex task.

Although social networks have the best shot at exponential growth, they face the ‘chicken and egg’ problem – if the product does not work ‘standalone’ (without my friends on it), and they are not excited enough to join quickly after I invite them, I might abandon the product altogether.

What can you do to boost viral growth?

Build virality into the product
Expanding on David Skok’s viral coefficient equation (K):
K = (% of users that send invites) * avg. # of invites per user * click-through rate * (% of new users that will register)

Each element of the above funnel is measurable, and the product manager’s role is to make data-driven decisions on where to invest most resources.

I can see optimization techniques with different level of complexity.

For example, average number of user can be improved through a plug-in importing the Outlook address book or Facebook friends list. At an average of 130 friends that’s a good start to fill the top of the funnel.

In my understanding click-through aggregates delivering an email, opening it and actually clicking on the link. First is driven by navigating around spam filters, second by a catchy subject, and third by great design of the email body. A/B testing could be used to measure which block requires tweaking. Same for the registration part, which could be optimized with a simple and clean U/I with as few steps as possible.

Provide incentives
I immediately think of Gilt with their 25$ credit for every active user that you recommend. That’s a substantial amount directly adding to their CAC, but has worked great to dynamically grow user base. However, with significant profit margins Gilt can afford it, many of the consumer internet startups that haven’t figured out monetization yet don’t have that luxury.

Use platforms/ word of mouth
For the 2nd category of products (no network effects), virality can be supported by leveraging ‘streaming’ platforms, such as Facebook or Twitter. If the application posts something interesting on my Wall, it immediately gets view by hundreds of my friends.

Word of mouth can be a powerful and cost-effective technique to grow the user base, sometimes even in a counterintuitive way. Here, again Gilt comes to mind – by starting out as an exclusive/’invitation only’ site they managed to create a lot of buzz and motivate early adopters to ‘seek’ invitations and provide initial traction to the website.

Can those factors lift the K coefficient above 1 (ensuring exponential growth)? Looking at compounded percentages in the equation, it still seems very difficult to achieve that sustainably. Even then, it could lead to saturation and further churn issues.

The key strategy could be to focus on controlled high growth phases (K>>1) interrupted by refining the product along the way.


Popular posts from this blog

Quiz Time 129

TCS IT Wiz 2013 Bhubaneswar Prelims

The 5 hour start-up: BrownBagBrain