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What’s going on? Does LTV have a skewed sample, or is it hard to harness viral growth? by Jeanne Hwang After three afternoons of work, we got an abysmal 10 sign-ups. The challenge was to create a viral campaign to get as many new members as possible for Gilt’s JetSetter website. Our campaign was to draw travelers into a contest to match photos with a destination, share their own photos and enter a raffle for becoming a member. We knew virality wouldn’t be high, but we thought, “boy, don’t you want others to see your awesome travel photos and share this great opportunity with your best friends?” The answer was NO. Our viral coefficient was effectively zero (virality (K) = number of invitations sent (i) * conversion %), as new members had no incentive to increase the number of raffle participants, which decreased their chances of winning. It seems obvious now, but we hoped that we could attract most of the new members through our own outbound marketing (Twitter, Facebook, blogs) supple...

by Katherine Nadler For an entrepreneur, one of the most consuming decisions is determining when to launch. Arguably, a product is never complete; therefore, it is up to founders to determine what level of incomplete is acceptable. To do so they must allow their business model and market context to drive their decision making. Asking the right questions is very important. Does the business model rely on virality? When a product anticipates customer acquisition through virality it makes sense to launch early, sacrificing some of the quality that extra time would afford. As much as entrepreneurs may convince themselves that their product is perfectly positioned to generate “word-of-mouth” or network effects, the best way to know for sure is to test that hypothesis in practice (often first through a beta launch). While the world’s become inherently social as a result of game changers like Facebook, Zynga, Twitter and Foursquare, it does not mean that products will effortlessly gen...

by Jesse Garcia While generating viral growth may be hard, it is not difficult to understand ways to increase the likeliness of a product going viral. Some of the companies discussed in Launching Technology Ventures, including Triangulate and Cake Financial, struggled with the challenge of generating viral growth. For these companies, virality became a priority after having developed a business model and begun product development. However, there are opportunities to increase the likeliness of viral growth when developing the company’s value proposition, and so entrepreneurs should think about designing for virality from day one. The first consideration in determining the virality of a product is the potential benefit from sharing it. Very simply, sharing occurs between the sender and the recipient. These benefits can include social currency, enhancement of social status, entertainment, education, and potentially economic rewards, and must be experienced by both sides. Social curr...

by Kara Yu We’ve seen a lot of companies struggle to achieve viral growth: Aardvark, Triangulate, Cake. What’s going on? Does LTV have a skewed sample, or is it hard to harness viral growth? It’s rare at HBS for us to see failures, but in LTV, we were fortunate to see not only one but several cases where a little bit of founder exuberance and false positives resulted in a lot of work on a product was not inherently viral. In all these cases, the founders created a product that they thought they would Aardvark had issues with its product/market fit. While I was always a fan of Aardvark and thought it was a great idea to connect users with experts in their social group, it seems like most people thought otherwise. Even though it was popular with initial users, it was never able to cross the chasm. Ultimately, Aardvark solved a problem that users did not have. Some people found it helpful, but no one found it crucial to their lives. Aardvard also made assumptions about people’s tendencies...

by Jonathan Krieger In startup circles Viral Marketing is often discussed as a low cost way to acquire new customers and rapidly scale a business. David Skok of Matrix Partners uses this blog post to break viral marketing into two components: Viral coefficient – Number of new customers acquired for each existing customer Viral cycle-time – Length of time required to acquire a new customer  The higher the viral coefficient and lower the cycle time, the more “viral” the company and the faster it will grow. One way that companies can impact their viral coefficient is through referral marketing. Referral marketing uses incentives to encourage specific customer behavior- in this case new customer acquisition. Referrals occur when an advocate recommends your product or service to a friend who becomes a new customer. A 2010 study found that 83% of satisfied customers reported a willingness to recommend services to others, however only 29% of customers actually do so. Referral mark...

by Ernesto Humpierres Achieving viral growth is probably one of the hardest things to do by a new venture. In my view the problem lies in the fact that there is so much choice for every conceivable functionality or solution that users are looking for. The day has only 24 hours and there is literally no time for users to try out all the apps they want, and pick up yours out of a haystack. Given this context, I want to discuss three elements (or dimensions) related to what could be impacting viral growth. These elements are: the degree of social validation, the advantages of the “stickiness” of a particular solution, and finally the ease of transmission of the solution. At first it seems counterintuitive that social validation is important to something that is “viral”. The first perception I get from the concept of virality is that is something brewed from the ground up, without the need of hierarchies or leadership; it’s about the “people’s” choice, right? Well no, in an era of choice a...

by Natasha Prasad In the summer of 2009, Zynga launched Farmville, an unglamorous, copycat game that no one could have predicted would one day become the most popular application on Facebook.  Today, Farmville has 80 million monthly users and yet, for all its successes, Zynga games continue to be called everything from “ludicrous” and “mind-numbing” to “spammy” and “exploitative”.  Love them or hate them, Zynga has exploded and the lean startup philosophy, it seems, is plastered all over it: customer-centric design, split-testing, rapid iteration, data driven decision-making and, perhaps most impressively, viral engineering. As startups grapple with that fundamental challenge of generating long term value in excess of customer acquisition costs, Zynga, it appears, has found the Holy Grail.  Campaigns, SEO, partnerships, Facebook ads, CRM – none of these buzzwords come cheap and, with a non-zero churn rate, it is tough to extract sufficient value from a user before he/sh...

by  Krzysztof Jedrzeje k 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 n...

by Andrew Perlmutter Lean startup theory makes viral growth seem like the simplest piece of building a large-scale business from scratch. At the very beginning of the process, the entrepreneur avoids wasting money while rapidly and iteratively testing hypotheses about a new venture based on customer feedback. By consistently refining the product and pivoting the business model, the entrepreneur eventually achieves product-market fit. As Marc Andreessen describes it, PMF is defined as “being in a good market with a product that can satisfy that market.” The telltale signs of PMF are always obvious to the entrepreneur: “customers are buying the product as fast as the entrepreneur can make it and the entrepreneur is hiring sales and customer support staff as fast as he can.” It is in this moment, with the business model validated, that the entrepreneur is supposed to step on the accelerator, open up the engine and scale the business as quickly as humanly possible. The result? Viral growth...