The Viral Expansion Loop

Mitch JoelPosted by

What’s the difference between Viral Marketing and something new called the Viral Expansion Loop?

"It’s a type of engineering alchemy that, done right, almost guarantees a self-replicating, borglike growth: One user becomes two, then four, eight, to a million and beyond. It’s not unlike taking a penny and doubling it daily for 30 days. By the end of a week, you’d have 64 cents; within two weeks, $81.92; by day 30, about $5.4 million.

Viral loops have emerged as perhaps the most significant business accelerant to hit Silicon Valley since the search engine. They power many of the icons of Web 2.0, including Google, PayPal, YouTube, eBay, Facebook, MySpace, Digg, LinkedIn, Twitter, and Flickr. But don’t confuse a viral loop with viral advertising or videos such as Saturday Night Live‘s "Lazy Sunday" or the Mentos-Diet Coke Bellagio fountain. Viral advertising can’t be replicated; by definition, a viral loop must be."

Still unclear?

You’ll have to read more in the fascinating cover story of this month’s issue of Fast Company called, Ning’s Infinite Ambition. I talked briefly about the concepts of viral loops yesterday in Toronto at the ACA – Association of Canadian Advertisers – event, Continuing The Conversation (which also featured Joseph Jaffe – author or Life After The 30-Second Spot and Join The Conversation, Peter Kim from Forrester Research, and many others). The article focuses on a company I am quite fond of called, Ning. Ning allows you to build your own niche online social network (for free). They’re the machine behind the new 50-Cent and Radiohead online social networks as well. While it’s not a new idea, there’s constant talk of how the massive online social networks would be much more powerful if they focused on the specific niches of interest that individuals have. NIng fills that void.

Why is the power of the Viral Expansion Loop infinitely more engaging than a typical Viral Marketing campaign? It’s the human element. For me to pass along a video because I find it engaging, and know it will make me look good in someone else’s eyes, is one thing. For me to be a part of something that I am deeply interested in, and know that it will have zero value unless I invite other like-minded individuals to part, is infinitely more powerful.

How powerful?

"Once this phantasmagorical growth kicks in, you can actually predict its rate with astonishing accuracy — something Ning has been doing since the beginning. (Viral loops expand according to what’s known as a Power Law Curve, which, for reasons no one can explain seem to accurately describe a dizzying array of natural and unnatural phenomena, from the size of planets to national income distribution to online commerce.) But another implication of viral expansion is that once a company attracts a certain number of users, it becomes all but unstoppable. After PayPal blossomed as an online transaction power, eBay launched a competing service — and failed miserably (and eventually bought PayPal instead). To combat YouTube, Google and Yahoo launched rival sites, neither of which went anywhere. LinkedIn and Twitter have likewise become unassailable by aggregating huge pools of users. In only one instance, Friendster, has a company fallen apart after achieving this kind of reach, and it was largely done in by technical failures — network meltdowns and outages — that drove users into the embrace of MySpace and Facebook."

Never before has it been more important to be thinking about a corporate strategy surrounding online communities. A good place to start would be reading this article: Fast Company – Ning’s Infinite Ambition.

16 comments

  1. I liked the article myself. Sure it was a little bit of fluff, but the basic concept is sound, and I liek the term, “viral expansion loop”.
    It’s an interesting piece, but it can NOT be boiled down to “create something good, something people really want, need, or enjoy. If you do, people will adopt it and share it—the act of which can make you filthy rich.”
    The beauty of ning (but a better examples are youtube, ebay and craigslist) is that the users create the content! The company doesn’t have to do much of anything except provide the forum. Creativity takes hold after that. Putting it this way, the Internet is one huge viral loop, forums are viral loops and so is email.
    Companies that create content, products, etc. that are to be consumed must constantly create new products and tweak old ones to stay relavent. Their creation machine must never stop. A viral loop company on the otherhand is self marketing, self sustaining, self feeding, and if healthy it grows.

  2. Ditto the last comment. We are a small clothing company. The information I have reviewed to date all relates to web based products and services. I would like to learn how it applies to durables.
    Thanks,

  3. There is a great article over at Techdirt that sums up the the Ning’s Infinate Ambition article beautifully.
    I wish I could comment with education on the whole Power Curve Law and Viral Loop Expansion Concept, but the below mentioned expose explains it better then anything I could rant about here.
    Building A Viral Business Isn’t About Alchemy from the an-insult-to-hard-work dept
    http://techdirt.com/articles/20080421/005622897.shtml
    The one thing I will say, and as the article points out, is that most of the people behind these sites are heavily capitalized and have associations that give them a head start. Quote from the article..
    Quote..
    “And, if you look at the most successful “viral” growth stories, almost all of them kicked off with well-known, well-connected or well-funded founders.”
    End Quote
    It is not that you can’t build a successful site without a lot of money or contacts, but I find it hard to believe that you can build a billion dollar web business without it.
    I think it is a “tad” misleading to believe that you can build a billion dollar business from scratch.

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