Viral Loop

by ADAM L PENENBERG

  Successful viral expansion loop businesses share 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 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.

  The result is a business that spreads rapidly, scales quickly, and has the potential to create staggering wealth in a relatively short amount of time. “When your currency is ideas, people become emotionally attached,” Bianchini says. “Then you become a public utility like Blogger, YouTube, or Facebook.” Except that Ning doesn’t want to create one gargantuan audience. (Indeed, nearly a third of its networks don’t take off, but this mortality doesn’t cost the company a cent, unlike unsold blenders at a Walmart.) It wants to foster millions of viral networks with narrow channels, each delivering the kind of targeted advertising that Google rode to vast riches.

  [ VIRAL PLAIN ]

  As with the microwave oven, Post-It notes, cellophane, Wheaties, the Frisbee, and aspartame, the Internet was originally conceived to fill one need, only to end up addressing another. Rand Corporation researcher Paul Baran first pitched the idea in 1959 so military commanders could communicate in the event of a nuclear strike on American soil, not so it would become the backbone of communication, commerce, information, and entertainment. What Andreessen learned from Mosaic was that built into the Internet is the cyberlogical ability to spawn almost infinitely replicable applications, which makes it a vast viral plain, pouring the foundation for another massive viral platform—the World Wide Web. Thriving in this virtual hothouse would later come other self-replicating landscapes: email, webmail, instant messaging, peer-to-peer networks, photo and video share sites, tagging and Digg-like ratings services, social networks, and VoIP (Internet telephony).

  All have inherent growth traits and, when combined, unleash spectacular multiplier effects. Each not only spreads; it helps the others to spread. Email points users to photo share sites, which end up on social network pages to accompany videos, their existence shared via instant messages and disseminated via peer-to-peer networks, and so on. Virality is as much a digital imperative as propagating the species is a biological imperative in nature. It also takes advantage of our very human need to connect with one another.

  Online or offline, everything begins with our concept of identity. As sociologist Craig Calhoun wrote: “We know of no people without names, no languages or cultures in which some manner of distinctions between self and other, we and they, are not made.” He cites Hannah Arendt to emphasize, “We are distinct from each other and often strive to distinguish ourselves further. Yet each dimension of distinction is apt at least to establish commonality with a set of others similarly distinguished. There is no simple sameness unmarked by difference, but likewise no distinction not dependent on some background of common recognition.”

  Where does this basis of commonality originate? From one’s culture. We are all a product of influences far too complex to decode, a tapestry of experiences from infancy to adulthood arising from our interactions with family, friends, community, and consumption of media and entertainment. It shapes who we are, how we act, what we fear and desire—and not always for the betterment of mankind. “Culture jammers,” a loose coalition of media activists led by Marshall McLuhan disciple Kalle Lasn, believe that the United States has essentially become “a multitrillion-dollar brand” that is “no different than McDonald’s, Marlboro or General Motors.” People no longer create culture. Instead, corporations with a message to spread and something to sell have co-opted it. “Brands, products, fashions, celebrities, entertainments—the spectacles that surround the production of culture—are our culture now.”

  Brainwashed or not, “as human beings we are social creatures and we want to interact with other humans,” says John Manzo, a professor at the University of Calgary in Alberta. Language, he points out, would be useless without someone to talk to. This need to communicate has been transferred to the Web. Today’s almost ubiquitous interconnectivity doesn’t replace real relationships with real people, the so-called meatspace (the yang of cyberspace), as defined by the cyberpunk movement of the 1990s. Instead, email, instant messaging, Twitter, and social networks like Facebook, MySpace, and Ning “allow us to have a richer life in totality than what we’d have before that.”

  Andy Warhol famously remarked, “In the future, everyone will be world-famous for 15 minutes.” Really, though, in the future everyone will have his own TV show. For what is a profile on Facebook, MySpace, Bebo, or Tagged but a kind of reality show starring…you. Instead of fifteen minutes of fame, however, you get fifteen seconds over and over again (until the next update). As video and other multimedia transform our Web experience, these shows take on more complex modes of self-expression. Within the skein of networks unfurling through digital time and space, the sum parts of these disparate ego blasts—a tweet or blog post here, a Facebook Wall comment there, a video or photo, the results of a pop quiz that claim to tell you what kind of children’s book you are or what your inner nationality is, become a documentary of your soul. “Image is everything,” Andre Agassi chirped in a Canon camera commercial nearly twenty years ago. Today your reputation precedes you.

  Increasingly there is your public self—the person you present to the physical world—your personal self (who you are when you are alone) and your digital self, which reaches far beyond the other two. If yo
u spend time online, many more people know you—or think they know you—through your digital self, which can be as (or more) real to them than your real self. Indeed, people’s perceptions of you can be quite vivid. Two Washington University in St. Louis researchers scanned the brains of fiction readers and concluded that they create intense, graphic mental simulations of sights, sounds, movements, and tastes they encounter in the narrative by activating the same brain regions used in processing similar real-life experiences.

  These Web lurkers, people who know you exclusively through your digital deeds, base their judgments on the ideas and observations you share with the world, the photos and videos you post, the widgets you employ on your personal Web spaces, and the words others use to describe you. The memes you create spread virally, far beyond your network of friends, relatives, acquaintances, and colleagues. Once they leave your brain and hit the viral plain, they are out of your control and can take on a life of their own. Then you become more than just a guy trying to hold on to a job and pay down your mortgage. You are a brand that must be managed. With apologies to Marshall McLuhan, the medium is not the message. You are.

  Why do we do it? What explains our BlackBerry-bearing, Twitter-tweeting, Facebook friend with the need for constant connectivity? As facile as it sounds, we do it because we are hard-wired to socialize. It’s in our best interests. One reason we gravitate toward communities is because they multiply the impact of each individual to bring greater prosperity, security, and fulfillment to all. Aristotle believed that “man is a political animal” and we achieve noble actions by living as citizens together. What is politics, however, but the expression of personal interest manifested in the body politic? Two thousand years later Benedictus de Spinoza, a seventeenth-century Dutch philosopher of Portuguese-Jewish descent, expressed the view that men “are scarcely able to lead a solitary life so that the definition of man as a social animal has met with general assent; in fact, men do derive from social life much more convenience than injury.”

  Perhaps the answer is even more fundamental than Aristotle, Spinoza, or other philosophers ever imagined. Social networking makes us happy and, online or off, all of this congregating is merely a product of biological necessity. Research indicates that engaging with friends helps us live longer and better lives, with those with strong friendship bonds having lower incidents of heart disease. They even get fewer colds and flu. A decade-long Australian study found that for the duration of the study subjects with a sizable network of friends were 22 percent less likely to pass away than those with a small circle of friends—and the distance separating two friends and the amount of contact made no difference. It didn’t matter if the friends stayed in contact via phone, letter, or email. Just the fact that they had a social network of friends acted as a protective barrier.

  A research project by Paul J. Zak, a professor of economics and the founding director of the Center for Neuroeconomics Studies at Claremont Graduate University, found that when a test subject learns that another person trusts him, the level of oxytocin, a hormone that circulates in his brain, rises. “The stronger the signal of trust, the more oxytocin increases,” wrote Zak, whose primary interest is neuroeconomics, a discipline that attempts to gauge how the brain’s neurologic functions process decisions involving money. And trust, Zak learned, begets trust: the more oxytocin swimming around your brain, the more other people trust you. Notably, his test subjects had no direct contact with one another. All of their interactions took place by computer and with people whose identity they didn’t know. “Trust works as an ‘economic lubricant’ that affects everything from personal relationships to global economic development,” Zak says. Although he didn’t explicitly state it, trust is also an integral part of social networking.

  Another trust study discovered that when an investor in an experimental game was given a dose of oxytocin, he was more likely to allow someone else to control his money, no questions asked. The substance, which is sometimes referred to as the “cuddle hormone,” has also been found to increase generosity and decrease fear and been associated with maintaining healthy interpersonal relationships and is a key to bonding. When virgin female rats are injected with oxytocin, they are transformed into protective mothers, taking over other females’ offspring and nuzzling them as if they were their own.

  Taken together, all this research strongly indicates that we are biologically driven to commingle online and off. Fortunately, as big as the world is, we are never far from one another. We are not, as the saying goes, six degrees of separation from anyone. It’s actually closer to 6.6—at least that’s what a Microsoft researcher estimated after combing through 30 billion electronic conversations over the company’s instant-messaging network in June 2006.

  [ MAD ABOUT ME ]

  Since we live our lives through the prism of our minds, these online relationships, such as the ones that users on Ning share with one another, have the potential to become more real to us than real relationships. This isn’t just true online. Have you ever attended a concert only to be disappointed it wasn’t as good as the recording—the band not as sharp, the singer’s voice croaky on high notes, the arrangements not as full? But that’s the real music; it’s the recorded music that wasn’t. Yet your expectations have been shaped by the “perfection” of the sound studio, and this representation of music has become more real than the actual performance. It’s true with media, too. Coverage of events is often more real to people than the actual events. Unless you have experienced Iraq firsthand, your perception is largely filtered through the interpretations of reporters, which, melded together with the braying of the American punditry, influence your own views. With children, artificial “grape”- or “strawberry”-flavored candy can seem more real than actual grapes and strawberries. In all these examples, perception trumps reality.

  This is particularly true of online relationships, with many of us leading dual lives that calibrate between the physical space in front of us and the virtual space that occupies our minds. Mary Hodder is a forty-year-old Web consultant and entrepreneur whose life is spent on-screen. Survivalists live off the grid, but Hodder hates not being on it—even for a few minutes. She’s more of an interface grrl. “I will go far out of my way to get my next connection to the Internet, via phone or my laptop,” she says. “It’s everything.” Toting a laptop almost everywhere she goes, she traipses from café to café looking for Wi-Fi to hook into, and hacks her phone to connect to her computer. She downloads pirated movies and even television shows off the Net, shops there and pays all her bills, too. Her blog, Napsterization.org, explores how technology alters the media landscape. She spends much of her time on Twitter, microblogging the banal and not-so-banal nuances of her existence. Almost everything she reads, every video she watches and website link she clicks to, comes via the posse of people who follow her—and whom she follows—on Twitter. They have become her filter for the world.

  Although technically based in the San Francisco Bay area, she lives, works, and plays on the Web. Even in a car, on a train, or sidewalk, she carries on simultaneous conversations with friends, associates, clients, and business contacts via email, instant messaging, and talking on her cell phone. She checks friends’ blogs, scans their comments, follows the same links, mulls the same information, shares her thoughts via discussion threads or by posting comments on napsterization.org—and it’s all hyperlinked, searchable, and browsable, depending on the tools available. Although Hodder may be physically disconnected from her friends, they are never far away, represented by the digital word sculptures they mold together. “They create content, I read or point to it in my blog or modify it, and they do the same,” Hodder says. She refers to the material world as old-style “analog,” while the Internet is strictly “digital.”

  Every day, Hodder becomes less of an aberration. Most of her friends and colleagues live this way, too, with the Web at the center of their relationships. The online Mary Hodder is much more widely known and admired than th
e real-life Mary Hodder. This is also the case for computer hackers, who identify more closely with their online “nicks” (nicknames) than their real names. Online they are powerful nemeses of corporations and governments. In real life, perhaps they are antisocial teenagers battling authority. It may also hold true for the haters, who under assumed names spray vitriolic commentary through the comments sections of blogs like graffiti. Like Hodder, they are part of a large and growing number of technophiles whose lives are one big Wikipedia. And the life Hodder et al. lead foreshadows ours. Indeed, it may mirror yours, since you are reading this book (and ostensibly have similar interests).

  [ HOOKED ON SPEED ]

  Like Hodder, we exist in multiple worlds of our own creation: the physical realm and the intellectual sphere joined. We are not only driven to connect to others, we are also hooked on speed. That’s because as a society we suffer from attention deficit disorder. Work, play, family, friends, media, and marketers clamor for our attention. The more there is to do, the less time we have to do it. To adapt we have perfected the art of multitasking. At work, we surf the Web on company time and instant-message friends during staff meetings; at home we order books from Amazon while we watch CNN, prepare dinner, and help our kids with their homework. We pay bills online in darkened movie theaters and post blog entries at the beach. We text friends as we chase taxis and cruise social networks while waiting to board airplanes. Whoever said “Time is nature’s way of keeping everything from happening at once” never owned a BlackBerry.

  Of course, it’s not just our lives that are set on fast forward. Entertainment on demand means never having to wait for summer reruns. Portable MP3 players enable consumers to hear their favorite songs wherever and whenever they want; at least one record label—Atlantic—sells more music through digital downloads than as compact disks, a trend that will eventually overtake the entire industry. You’re more likely to store photos on Flickr than tote spent rolls of film in to be developed. Snail mail has become a quaint anachronism. Even Earth is spinning faster, by a second a year, according to scientists.