Viral Loop

Adam Penenberg’s  Viral Loop: From Facebook to Twitter, How Today’s Smartest Businesses Grow Themselves is an entertaining and useful read.  Much of the book is stories of some of the most successful companies, such as Facebook, Twitter, Ning, Paypal, and many others,  that used the “viral expansion loop,” to gain success.  The premise is that these companies use the design of the site to create word-of-mouth, with each user inviting other users, until the site hits critical mass, and, eventually, a percentage of the market that leads to such dominance that the service cannot be easily displaced by competitors.  He goes back to Netscape and Hotmail as early viral companies, and moves into the present, giving examples of stackable viral loop companies, like Paypal, which built itself on the back of eBay, another viral loop company.

The stories in the book may be familiar to you, as he draws a lot from other published accounts in addition to interviews, but the style is engaging and a pleasantly readable.  Interspersed with these compelling stories are relevant numbers , complete with charts and graphs, revealing the some of the statistics behind viral businesses.  One good example is the viral coefficient, which represents how many new users each new user brings to a site.  For a site to go viral, it must have a certain coefficient.  Penenberg does a good job explaining how these different companies got to this number, and why others failed.

What I like best about this book is that Penenberg does not pretend to have all the answers to the conundrums facing some of these (and future) services when it comes to making money.  The book is exhaustively researched, and he puts forward some ideas about how viral companies might succeed in the future, but he is optimistic without being dogmatic, which is a refreshing stance these days.

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