Posts Tagged ‘Psy Gangnam Style’


Are Viral Loops the Building Blocks of the Future Marketplace?

Friday, November 15th, 2013
flickr user Gavin Llewellyn

flickr user Gavin Llewellyn

Andrew Chen defines a viral loop as simply “the steps a user goes through between entering the site and inviting the next set of users.” Former entrepreneur-in-residence at Mohr-Davidow Ventures, now freelance adviser of startups and expert on the vanguard of marketing, Chen dedicates the rest of his collection of essays, “The Viral Startup: A Guide to Designing Viral Loops,” to demonstrating how every product can be seen as a site with a viral loop built in. A viral loop is most definitely not “a mythical vortex that propels products with a magic bang into public consciousness and millions of YouTube hits,” which is what I thought it was before reading his book.

A viral loop is what brought us the viral video phenomenon “The Fox” this fall.

This is a common viral loop scenario: people react to a link they find online and share it on a social network like over and over again, and next thing you know American teens are in love with a South Korean rapper and something called “Gangnam Style.” A viral loop is a business model that emphasizes an exponentially growing feedback-and-recommendation chain of users.

Here is an example of a company that seemed to be doing just fine without a viral loop business model: Years ago I worked for a New York double-decker bus company that the tourism industry anticipated would be a refreshing, disruptive newcomer. As a family business with a history of ventures, however, they opted for the “tried and true” approach of beginning with a Minimum Viability Product—they figured out the minimum product necessary to qualify for the market, just to feel things out.

They bought old buses and fitted them with only a top deck – there was no interior for passengers who preferred to ride from inside. Because of the constant influx of tourists in New York, profits were high despite the fact that the business was in a preliminary stage, and customer dissatisfaction was frequent, especially concerning customer service. The company had not made social media a priority either. All the elements of a viral loop were missing, yet the company prospered. We’ll catch up with their journey a little later.

Chen explains that the key mistake marketing departments make is that they attempt to “bolt” a viral loop onto a product, not realizing that in order for a viral loop to work, it has to be built into the product itself. It is not about an ad going viral, it is about letting the consumer feel like they are playing a very real role in the culture of this Happy Meal, or cell phone, or song. The implication here is that only experiences go viral.

One of Chen’s essays in the book is about the role Steve Jobs played in the marketing of Apple products by making sure each of them was constructed as a viral loop from the start.

A way to build a viral loop into a product is to ensure that the consumer can share an experience; that experience would be balanced between marketing, functionality, and design at every point of the product’s evolution, as Apple did with the iPhone. Even the first iPhone had high functionality and sleek design, while encouraging users to share experiences through the device itself. In a department-driven company, there is competition between these aspects, and the focus on marketing very often wins out. Steve Jobs edited the output of each department and blend it all into a whole.

Awareness of products as facilitators for viral loops separates the waning business culture of yesterday from the adaptable, sustainable entrepreneurships of the future.

Let’s return to the tour-bus company. Because of low overhead, during the recession the company was able to actually take a significant amount of their competitors’ market share. As a result, they stagnated in the Minimum Viability Product model. Its purpose was no longer to explore the market, but to turn in profit quickly. They acquired their main competitor and applied the same model to them. However, small modern tour van startups that already have their own tour-guide apps, have a sustainable loop of followers, and who will soon be able to afford state-of-the-art double-deckers have been growing in the shadows of the skyscrapers.

The colossal tour bus company does have one very important asset, which if exploited can integrate a viral loop into their business model and help them blow any tech-centered, GPS-activated tour guide app-wielding startups out of the water. They have walking, talking viral loops in their live tour guides. A happy employee is a perfect balance of marketing, engineering and design.

Can the future be the Minimum Desirability Model—defined by Chen as “the simplest experience necessary to prove out a high-value, satisfying product experience for users, independent of business viability?”

The difference between minimum effort for maximum profit and simplicity is subtle, but it makes all the difference in who will survive the exponentially accelerating technological shifts of the modern marketplace. Perhaps a viral loop is one way of looking at true simplicity.