Viral Loops

This month’s Fast Company cover story is Ning’s Infinite Ambition. Ning is a social networking company founded by Marc Andreessen. The article discusses the concept of viral loops (The image on the right is a graphical representation of a compound viral loop).

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.

Andrew Chen further riffs on the viral loop:

“most advanced direct-marketing strategy being developed in the world right now.” And make no mistake: Viral expansion loops are about marketing, just not in the traditional sense. “Nothing can be truly viral unless it is good,” Wilson allows. “You can create a crappy application, build viral hooks in it, but if it’s bad, then nobody will follow the viral channel, and the company will go out of business.” But if you create something people really want, need, or merely enjoy, then your customers will grow your business for you. Users, just by using a product, are, in essence, offering a testimonial. “When your currency is ideas, people become emotionally attached,” Ning’s Bianchini says. “Then you become a public utility like Blogger, YouTube, or Facebook.”

Alex has some great information on his blog.

Now here’s what really got my attention:

The company calculates that each person signed up for a Ning group is worth, on average, 2 people, compounded daily: On day two, that individual brings in 4 group members and on day three, 8; within a week, she has brought in 128 people. Which is how Ning has been able to grow at a daily average of more than .4% and add 500 new groups a day, doubling roughly every 137 days. “It’s the power of compounding, predictable growth rates,” Bianchini says.

That’s a beautiful thing acquire a customer that recruits other users at a compound rate. Given the description of open source software as viral in nature it makes me wonder how we might get the I don’t know how to incorporate a viral loop into open source software . I am not sure exactly what method would work for systems management software like Zenoss but maybe the guys at OSS start-ups  Ringside Networks and Appcelerator might have a clue…

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Technorati Tags: Appcelerator, marketing, Ning, Ringside Networks, Social Networks, Viral Loop

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