What Facebook, Twitter and Paypal teach us about going viral

DFN: Interesting article regarding ‘viral’ marketing and the synergies that have to exist between seemingly unrelated business entities for each to be successful.

What Facebook, Twitter, PayPal can teach us about going viral
By David Silverberg
11/07/2009 @ 3AM PST

http://www.digitaljournal.com/article/281735

Going viral isn’t a finger-snap way to achieve mass popularity. In fact, as author Adam L. Penenberg explains to Digitaljournal.com, some of the top tech companies found viral success by creating a product that had to be shared to be useful.

Among other similarities, there is one important factor that ties together Web success stories as Facebook, eBay, PayPal and Twitter: in order to best use the product, you have to spread it around, thus creating user-driven growth. You wouldn’t want to be on Facebook if your friends weren’t on it, too. You can’t use PayPal in a vacuum. And imagine if you were trying to sell jewelry on eBay, only to realize 1,000 people log on per day. It’d be pointless.
Adam L. Penenberg explains this important business lesson because his recent book is based on that principle. Viral Loop: How Today’s Smartest Businesses Grow Themselves looks at the trend of word-of-mouth translating into massive traffic and potentially booming revenue. Becoming instantly popular takes work, but the the strategy to harness the company’s fans is the real game-changer here.

"There’s the conventional wisdom that going viral is like catching lightning in a bottle," Penenberg says in an interview. "That’s not true. Some companies like PayPal are designed to go viral because the virility is etched into its business plan."

Penenberg, journalism professor and assistant director of the Business and Economic Program at New York University, says it all comes to user incentive. They have to want to spread the product to friends and strangers. Facebook won over 325 million people because its basic premise — networking with friends — urged its users to spread the word, Penenberg explains. "It’s the same thing with Twitter," he adds. "You invite your friends to Twitter because you want them to follow your feed."

In Viral Loop, he traces this idea to some unusual origins, such as Tupperware parties where housewives became passionate sales reps. When the Web was born, word-of-mouth marketing increased its visibility, and when social networks came to the fore, the users decided on their own to talk up the services they liked.

Turning to PayPal, he says, "Being a transactional medium, it has viral aspects in its business plan." But for something like eBay, the founders didn’t realize it would become viral until later, when the adoption rate soared and executives had to tweak the site to adapt to the newfound popularity.

It’s not just in the tech space where viral business plans are forged. Look at the 2008 Obama campaign, Penenberg remarks. "It galvanized people to act as its own marketing force. It was brilliant. The idea got people involved in the campaign, and asked for many smaller donations instead of a few large sums from big donors."

What about a smaller company with zero marketing budget and limited street cachet? Penenberg cites the example of a fictional T-shirt company looking to spread its product coast to coast. "Instead of finding a sales rep for each major region on the country, why not ask many people to work on 40 percent commission to get those T-shirt into every boutique in the country? That incentivizes people to sell the shirt and makes them feel part of the process."

Penenberg is getting into the viral game, too. The launch of his recent book encouraged him to think of innovative ways to spread the word. He conceived of a Facebook application called Viral Loop, and it calculates how much a Facebook user is worth to the company, if Facebook is indeed valued at $6.5 billion. As the app’s description says, it "uses an algorithm that takes into account Facebook’s estimated valuation with your level of activity, the number and activity level of your friends, and your ‘influence.’"

I tried it out and found out I was worth $209 to Facebook. Thing is, you want to invite your friends to see how they compare so I couldn’t resist inviting a few buddies to download the app. Before I knew it, I was engaging in a viral loop, proving Penenberg’s point about how something innocuous can suddenly go viral with a few clicks.

Penenberg hints he is talking with a few companies to see if they can offer products Facebook users can "buy" with their Viral Loop dollars. Smart idea, since I have $209 to play with, and who doesn’t want something for, well, nothing?

Going viral isn’t a formula, Penenberg stresses. Look at all the vids trying too hard on YouTube. For every JibJab short, there’s a kid in Denver dressed like Darth Vader, trying to make the Digg Video list. And for every Facebook, there’s a social network created by a conglomerate praying for some traffic glory, all in the hope of upping its online presence. But like that guy in the cocktail party telling a great joke, you want to be the first, and the best.

As Penenberg says, no one is prodding the comedian to share jokes — he has to love doing it, and he has to need to share it or else he’ll explode.

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