The Limits To Viral Marketing

For the last few years virality has been in vogue.  Talk to almost any consumer or small-business-based startup and they’ll tell you that their marketing plan is to figure out how to grow by word of mouth, become viral (so that each person who joins brings in at least one more person) and then sit back and watch their customer-base exponentially grow.

Virality is a great cause (and often difficult to achieve) but it is almost always fleeting.  You can be viral to start off your membership base but you will almost never remain viral for long.

Here’s why: When you first start becoming viral, your users can reach out to a pool of 100% of potential new users.   As more people sign up via viral channels, the number of potential new users decreases since more people become existing members.  As a result, whereas someone might have originally been able to introduce 10 new people to your service, they might only now be able to introduce 9, 8 or 7 (since the rest already know about it and have signed up).   

A company that starts off with a K-coefficient of 1.1 (i.e. 1.1 new people sign up for every initial signup) will stop being viral once less than 10% of its target audience becomes members. Since the available pool of new members decreases by 10%, you will end up with a K-coefficient of less than 1 and your growth will soon start to decelerate.  A company with a K-coefficient of 1.05 will stop being viral after only 5% of its target audience becomes members.

In fact the only companies that continue to grow by word of mouth in the long run are those that both have absurdly high virality coefficients – think messaging companies like WhatsApp and Facebook –  and are in huge markets (think global population).

Reaching viral growth is a noble goal and definitely can help kickstart your company.  But keep in mind that it will only get you the first set of customers of your total audience.