What is virality?
In today’s day and age, people talk about things going viral all the time. We often associate the term with memes or videos that become extremely popular, seemingly overnight. However, there are other definitions; the term “viral growth” has its origins in epidemiology. If each person with a disease infects more than one other person, the rest of the population will quickly become sick too.
Although this is a terrible phenomenon when dealing with illness, viral growth is a wonderful expression in the business world, another usage of the word. Within the context of business models and startups, virality can be considered the holy grail, as feeltheboot puts it.
Viral user growth simply involves current users recruiting new users. The real magic happens when each user brings in more than one new user, creating an exponential growth rate. Three types of virality exist and should be taken into account when one is planning a successful business model and attempting virality. They include incentivized, advocacy, and inherent virality. Feeltheboot provides the following thorough explanations of all three.
First, incentivized virality is essentially where a company bribes its users to recruit their friends. They are encouraged to invite some of their contacts, in return for a discounted or free product or service. You have probably seen it in your own life; any time you receive a free month of service for each referral that signs up, you have encountered an incentivized virality situation.
Unfortunately, this approach can be off-putting to your customers. The customers might feel as though you are trying to exploit them at the expense of their friends. Additionally, the cost of these incentives can become large. However, during the early growth stage of a startup, incentivized virality can often be very effective.
On the other hand, advocacy virality happens when users feel compelled to tell their friends and contacts about a business because they’re such big fans. The users love your solution and want to raise everyone else’s awareness of the great product that they have discovered. For example, Tesla owners often participate in advocacy virality. As one feeltheboot writer says, “We can be downright annoying with the amount we go on about these cars. Tesla does not need to give me anything to get me to endorse them at every opportunity.”
People perform this advertising through their own freedom of choice, so it is much less invasive and more organic than incentivized virality. It will happen when your company has fantastic customer service, a clear vision to share with the users, and a product that serves an important purpose.
Finally, inherent virality is characterized by strong network effects. An example of inherent virality which economists often use is fax machines. The user has to know other people who have a fax machine in order for it to be functional and useful. Otherwise, it’s more of a giant paperweight. More relevant examples in today’s global communication scene are social media platforms such as Facebook and Instagram.
Their user value is inextricably connected to adding your friends on the platform too. Once you join a system like this, chances are that you will start pressuring people you know to join as well, especially if you see value in the service provided. In terms of scaling a business, this is usually a profitable way to grow exponentially.
Regardless of which form teams choose as means to attempt viral hyper-growth, the user’s experience of a solution is critical. People will not invite friends to use a service, even when offered significant incentives, if they think they will be resented for doing so. Nobody wants to look bad by recommending a below-average product. Furthermore, incentives are not necessary if people feel motivated to recruit friends on their own accord.
Why is virality important for a business/startup?
As the growth gears are now turning, you might be scheming about how you can incorporate this information into your startup’s annual growth strategy. But why is it important in the first place? It might be beneficial to remember that viral hyper growth isn’t the only path to success, it’s the only one that has been highly popularized in recent years.
Still, virality can bStill, virality can be the shooting-off point for a startup to see positive long-term results. Virality is a scaling mechanism generated by the users. It is a newly popularized tool which relies on networking. In a viral system, more users coming on board signifies the faster the startup’s user base will grow, furthering its ability to grow.
As platformthinkinglabs says, “The slope of the growth curve constantly increases while an offering is finding viral adoption. The ability to scale becomes a function of the current user base, and hence keeps accelerating of its own accord, as the user base scales.” All of this can theoretically continue until market saturation.
One important distinction to consider is the difference between network effects and virality, defined by platformthinkinglabs:
- Network Effects: Network Effects: A product with network effects gets more valuable as more users use it. They are achieved only after a certain critical mass is reached but can prove to be a very strong source of value and competitive advantage beyond that point.
- Virality: A viral product is one whose rate of adoption increases with adoption. Within a certain limit, the product grows faster as more users adopt it. There are many products that exhibit virality without exhibiting network effects.
Overall, virality is the relatively easier, more attainable goal when building hypergrowth companies. Remember, virality can be incentivized, advocacy, or inherent. If you are a CEO, keep these three viral growth approaches in mind when designing a new product.
They could make the difference between your startup having slow vs exponentially fruitful development. If the correct viral growth strategies are implemented with tact, your future customers will be happy doing the work of growing your business for you!
What is the K Factor?
Viral growth is defined with the letter “K”. The K factor actually originated in the medical realm, but has been converted to use in business virality measurement as well. The basic assumption for viral growth in business is that every new user becomes a recruiter and a huge fan of the product, ushering other people into using the product as well. According to guides:
K = invites * conversion rate
Two variables allow you to create a model for viral growth:
- Viral Coefficient: the total number of new users generated by an existing user
- Viral Cycle Time: the amount of time it takes before all these new users have been generated (time for the viral coefficient to repeat itself)
Let’s break it down in a way that’s easier to visualize. Medium uses a great analogy involving zombies, which is fitting considering that we’re talking about viral growth:
K consists of two parts:
Invitations – How many people are invited to use a service
Conversion – Of those people who are invited, how many people sign up?
Simple, right? It’s not hard to comprehend that this viral stuff actually comes from epidemiology (spread of diseases).
So let’s think about a zombie land app game. You’re a zombie, and you have one way to win the game which is… how do you infect everyone really fast by biting? Well, you need to bite people and they need to catch the virus as you tear off their flesh, right? Then the people that become zombies start getting the munchies too.
But your virus might be kind of lame since you didn’t pay the app developers in this freemium game any $ to buy upgrades. So each person you have chomped may not get infected, they could just die. Your invitation rate is how many people you bite and the conversion is how many get infected (and don’t die).
Therefore, K Factor is simply the users’ invitation rate multiplied by the conversion rate. If you can raise your service’s K Factor, the more overall success it will experience. Simple!
How do you calculate your virality?
In math terms, as presented by medium, the formula is K= I x C
Where:
- I = invitations (Distribution- you buy more people to run around the game to grab)
- C = conversion rate (Infection- your bite has better venom points)
Moreover, calculating virality has everything to do with the two dominant factors in the virality of your business: the number of invitations each user sends (i), and the fraction of invited users who convert to active users (c). The virality coefficient (k) is simply the product of these two, k = i * c (feeltheboot).
The significance of k=1 is sustained feedback. Each new user brings one more, who brings another one, and so on. By those means, an initial population of users would, theoretically, grow at a constant rate forever.
With a virality coefficient lower than one, each new user’s impact is limited. As feeltheboot puts it: if k=0.5, on average each new user will lead to one additional user. Once k reaches higher than 1, you have exponential growth. Each initial user brings an ever growing pyramid of new users. At k=4 we see implausible numbers of users, quickly exceeding the actual population of this planet, as.
Entrepreneurs and founders have two levers at their disposal to control project virality. First, you can send an increased number of invitations sent and subsequently improve the conversion rate from those invitations. Alternatively, the number of invitations that people are sending out can increase through incentives or making your solution even more impressive and problem-solving.
The conversion rate depends on the clarity of your communications and the ease of on-boarding for new users. As in any business venture, customer support and satisfaction are key (feeltheboot).
Another important factor to calculating and understanding virality is the idea of viral cycle time. The shorter the “referrer” period, the faster the virality will take effect. For example, if a user only invites one new user per year, it’s not nearly as useful as if they invite one new user every month.
As TechCrunch discusses, social games such as Zynga historically- and understandably- have very short viral cycles. Successful game-makers have had to adapt to the fact that users often get bored with games and abandon them quickly. Since the churn is so high, user lifetime is often measured in hours or days, shortening the viral cycle and the necessary time for virality.
What are mistakes companies make when trying to go viral?
There seems to be a lot of confusion around virality. The reality is that you can build a sustainable business without “going viral”, a point that investors and tech-savvy people don’t always fully grasp (TechCrunch). Some companies that achieve hypergrowth, especially at the beginning, don’t retain that upward trend in a sustainable way.
Contrastingly, many companies have huge success without ever aiming for viral growth and networking. Either way, if you are the founder or even an employee of a startup, it is beneficial to be knowledgeable of this mechanism. Virality is a possible game-changer for growth startups and increasing sales in any industry.
Typically, the term “going viral” means that something has a viral growth coefficient of more than one. This means that every user that comes on your platform or uses your service incorporates at least one extra user. Subsequently, the service will “hockey stick” (see a sharp and dramatic increase in sales), as TechCrunch says. Viral growth situations have proven to be a very effective way to get a business’s gears moving in an upward direction.
You might be asking yourself, but what happens if each new user only refers, say, 0.2 new users? Although it may seem contrary to popular belief, this too can lead to a sustainable, high-achieving business. However, the lack of virality necessitates that retaining existing users is key to grow. Therefore, the number of daily active and monthly active users are such important data- ones that CEOs and investors fervently track.
Turnover is the ultimate enemy if your business model looks like this. Undoubtedly, it will take a longer time for your startup to grow if each user brings in a fewer total number of people, but it’s no problem as long as the majority of users don’t end up leaving (TechCrunch). So, one mistake to avoid is believing that virality is the only or best way to have lasting success.
“Obviously, the more viral a service, the more sustainable it is, but it’s really in the details. And overnight success is not a guarantee for sustainability,” says one TechCrunch writer. When discussing vanity metrics, he says, “I see this all the time.” Vanity metrics are statistics that look amazing at first glance but don’t necessarily translate to any significant business results. Retention is also very important, even if you go viral, that does not necessarily mean that your prospective target marker remember you.
Many startups put far too much premature effort into press or marketing content and campaigns to large populations of their investment before they have even demonstrated tangible sustainability. If your startup has no projected valuation yet, don’t worry so much about virality yet, focus on revenue first. This factor is one danger of the viral growth trend to be acutely aware of.
One way to counteract this is viral sharing; it is typically emphasized in products or services where the cost to acquire a customer needs to be low, and the business can’t afford to spend money on paid channels, such as Groupon. Remember the importance of market fit when you are searching for answers. Moreover, the use of a free, ideally a user-driven method, can be critical to consumer web startups (TechCrunch).
According to feeltheboot, another big mistake that startups make in the beginning is to zoom in on large populations instead of concentrating on roping in small closed populations (at least at first). For example, when you are launching a new online platform, go phase by phase; channeling your resources towards a specific, limited group will allow you to quickly reach a high user connection density.
This ensures that most new users will find many connections and friends already engaged on your platform. Back in the day, Facebook did exactly this. They launched exclusively to current college students and focused their rollout on a school by school basis.
All in all, just keep your cool and try out a viral growth plan if it seems right for your startup, but remember that it’s not necessary or the right fit for every company. Don’t feel pressured to become viral or achieve unicorn status right away, just because so many other people are raving about it; success comes through many channels! If you have an incredible, useful product or service, startup physics are in your favor.
