About Viral Marketing

What is viral marketing?
By: Steve Jurvetson
May 1, 2000
Red Herring

The "viral marketing" meme is hitting us from all directions. Hardly a business plan goes through Draper Fisher Jurvetson the door without some mention of a viral marketing strategy. From March to June in San Francisco alone there are three lectures entitled "Viral Marketing", not to mention many books being written on the subject.

So what is viral marketing? In 1997, when DFJ first coined the term in the bulletin of Netscape, we used several examples to illustrate the phenomenon, without defining more precisely that "the largest network by word of mouth." His original inspiration came from the pattern of adoption Hotmail since its launch in 1996. Tim Draper persuade the company to include a promotional tone for your site based email with a URL to click on each departure message sent by a Hotmail user. Laying it one of the critical elements of viral marketing: each client becomes an involuntary seller simply use the product.

Viral Marketing is more powerful than a third party advertising, as it transmits an implicit endorsement of a friend. Although clearly defined as an advertisement, marketing extends the benefits are much more powerful-effectiveness of radio as read by their favorite DJ. The beneficiaries of a Hotmail message to know that the product works and that his friend is a user. A key element of branded consumer is the use of affiliation: Do I want to be a member of the group-in this case, my friends-who use the product?

We were amazed at how quickly Hotmail extends throughout the global network. The rapid adoption pattern is that a network virus. People often send messages to their partners and friends, both geographically close and scattered around. We would like to note the first user of a university town on the outside, then the number of subscribers in that region that are proliferating rapidly. From an epidemiological perspective, is whether the planet Zeus sneeze.

Hotmail increased its subscriber base from zero to 12 million users in 18 months, faster than any company in any media in world history. Fair enough, this is the Internet, after all. But it did so with an advertising budget of $ 50,000-enough for some college newspaper ads and a poster. Nonviral competitors like Juno spent $ 20 million in marketing traditional in the same period of time with less effect. What's more, Hotmail became the largest provider of e-mail in several countries, including Sweden and India, where he had not done any marketing.

Hotmail is not an isolated incident. Hotmail and instant messaging service ICQ had nearly the same number of subscribers to its 6 - 9 - 12 - and 18-month stages. What they have in common? Hotmail is normally used as secondary or personal account for communication to an end club of friends-very similar to that of ICQ friends lists. There seems to be a mathematical elegance to its proper exponential growth curves. A first order for the spread of viral model is as follows: Cumulative users = (1 + fanout) ^ cycles In this model, cycles exponent is the number of times that the product is used in the period since its launch (or frequency x time). In the early days, Hotmail and ICQ fanned about two new users each month, and each one of them told two friends, and so on and so forth.

The simple model, a seed of users grew to 3 users at the end of the first cycle, 9 of the second, 27 in the third, and so on. Companies with much higher fanouts, such as free email list managers, have grown faster than Hotmail. Those who have provided an economic incentive to spam large groups, as AllAdvantage pays that users see advertising, have grown even faster, from zero to 750000 users in two weeks. The same formula would apply to traditional word of mouth marketing (such as MCI Friends and Family discount plans and Tupperware parties), but the lack of involuntary link to the patterns of communication, the average fanout and often are much lower . For a little more precision, we can factor in variables that describe the success of recruiting message and the retention rate in percentages: Cumulative users = [(1 + x fanout conversion rate) x retention rate] ^ frequency x time Working through the variables, the ideal viral product will be used to communicate with many people, will convert a high percentage of them to new users and maintain a high percentage of them. It will also be used quite frequently. A more precise, second-order model features include the decline in each of the variables, reflecting the novelty and saturation effects. For example, Hotmail variables such as the gradual reduction of population reaches saturation.

Hotmail has blown across 100 million active users, so that there is a Hotmail account for one in four people in the world wide web. Given our excitement about the power of viral marketing, we have funded several companies that are pushing viral marketing in new directions, and we suggested adding an element to a viral product from another noncommunicative. For example, NetZero email vector spread is very similar to Hotmail, but has a higher retention and conversion rates. Free Internet access is a proposition that most free email, so that NetZero has grown faster than Hotmail in the U.S. It has also grown ten times faster than americas Online, becoming the second largest Internet service provider in the United States. The management team RSVP case, and avoid SeeUthere.com fanout has a much higher, reaching many guests but with a lower frequency of the speed at which events and festivals are held. Companies as diverse as Keen / Inforocket (a forum for exchange of questions and answers), Skype (a free telephone service) and Homestead (pages) have found a way to expand its growth through viral spread.

Inforocket users to submit a question to a friend who is likely to know the answer and, instead, the carrier receives a cut of the economic life of the new recruit. Homestead facilitates the recruitment of sponsors to a family or group Web site, which finally the user community in Homestead. In global electronic commerce, online retailers have gained some viral effects through packaging and gift "refer a friend" programs.

Mimeo.com has taken a step further by applying viral marketing for each package being offered. Mimeo offers Web-initiated printing, copying, binding and delivery of a replacement waiting in line at Kinko's. Each sender is a user Mimeo, but multiple recipients are not. Therefore, the FedEx-as a whole is covered with evangelization Mimeo. And this is just the beginning. NetMind / Palm offers free Web-site update notification service as a pilot for pre-sale of corporate servers. The free voice mail, fax, telephone and marketing companies use phonics to recruit new users. Even users of Palm are viral transmission applications such as Epocrates on their infrared ports. From the standpoint of memetic engineering perspective, the idea of viral marketing is spreading like a virus adaptation. The idea itself is developed as retold in society.