Debunking the Viral Coefficient

Viral marketing has long been the Holy Grail of Internet marketing.  But like the Holy Grail, it seems forever elusive, always slightly beyond your grasp.  If only you had the magic formula, all your campaigns would “go viral,” driving explosive revenue growth, slaying your evil competitors, and filling your belly with fine ale and your arms with fair maidens.

To the rescue comes the viral coefficient, just the magic elixir you need.  With the viral coefficient you now have a trusty compass guiding your every step toward that Holy Grail of viral marketing.  All you have to do is point your viral coefficient to any number greater than 1, and you’ve officially “gone viral.”  Congratulations! Viral bliss awaits you.

“Like a rear view mirror, the viral coefficient shows you where you want to go only after you’ve already gone there.”

Snap out of it!  If you’re focused on the viral coefficient, you’re probably living in a fantasy world.  Although it may be useful to help a VC determine if a portfolio company’s viral marketing is resulting in viral growth, the viral coefficient is virtually useless to marketers.  Instead of helping a marketer discover how to make a marketing campaign go viral, the viral coefficient only tells the marketer after the fact that the company’s overall viral marketing efforts have already succeeded.

Just to be clear about definitions, the viral coefficient is simply the number of new customers your average existing customer generates.  If your average customer generates more than 1 new customer, then your customer base will grow exponentially—or “virally.”

The real trick is not measuring success after you’ve achieved it, but figuring out how to succeed repeatedly at creating viral marketing campaigns.  Like a rear view mirror, the viral coefficient shows you where you want to go only after you’ve already gone there.

To figure out how to get viral marketing growth, it helps to break down the viral coefficient into key components that we can either control or at least estimate.  To do this, it’s important to understand the viral coefficient’s limitations which we need to overcome.

Sales Process Bliss

The viral coefficient is blissfully ignorant of the sales process.  By measuring the number of new customers generated by existing customers, it looks at the entire customer lifecycle as a single event.  The viral coefficient ignores the viral marketing opportunities that can exist within sub-processes within the total customer lifecycle.

The Time Value of Viral Marketing

The viral coefficient has no measure of time.  If you achieve a viral coefficient of more than 1, but you have a 9 month sales cycle followed by an 18 month implementation time, followed by 6 months of customer usage before your average customer starts generating referrals which then take another 3 months to warm up new prospects, and if you win an average of only 10 high-priced deals per year…then, well, you can expect your revenues to explode from viral marketing sometime in the next by the year 2100.

All Alone in the Universe

The viral coefficient assumes that only customers create a viral feedback loop.  The reality is that most viral marketing relies on viral campaigns that are not driven by customers at all.  Even the classic example of Hotmail, which made the term “viral marketing” itself go viral, demonstrates this simple point.  Hotmail went viral because its users spread the word about Hotmail every time they sent an e-mail through the Hotmail service that included a link encouraging all e-mail recipients to sign up for a free Hotmail account.  Hotmail’s customers were not the people sending e-mails.  Hotmail’s customers were the advertisers who wanted access to users’ eyeballs.  By the standards of the viral coefficient, it’s debatable whether Hotmail—the progenitor of all viral marketing—ever went viral at all.

Eternal Bliss

Nothing lasts forever.  This is as true of viral marketing campaigns as it is of deodorant, puppy love, and the center of a tootsie pop.  But the viral coefficient seems to defy the laws of physics with no known expiration date.  The viral coefficient assumes that a viral marketing campaign can continue growing a customer base ad infinitum.

Old Fashioned Direct Marketing

The viral coefficient gives no consideration to the number of Patient Zeroes initially infected by direct marketing.  Although the initial pool of Patient Zeroes infected by direct marketing instead of viral marketing might have no effect on how steep the exponential growth curve is, the size of the initial pool of Patient Zeroes can certainly have a big effect on how long it will take before that exponential growth curve becomes significant enough to matter.  And, given that viral marketing campaigns don’t last forever, a good jumpstart from direct marketing can make all the difference between a viral marketing bang and a viral marketing whimper before the viral coefficient dips back below 1 again.

Gee, Thanks for Being Such a Downer, Chas.

If I’ve harshed your mellow by dashing your faith in the viral coefficient, well I’m sorry, but the first step on the road to recovery is admitting you have a problem in the first place.  So now that we’ve gotten the bad news out of the way, I promise to dedicate a series of blog posts to restoring your faith in viral marketing.  I’ll replace the viral coefficient with a relatively simple mathematical model that is truly useful to marketers, not just VCs.  I’ll also show you a simple process for using that model to find plenty of viral marketing opportunities.  Unlike the viral coefficient, I’ll show how to create viral marketing rather than just recognizing it after you’ve achieved it.