09 Mar 10 The viral formula. Yes there is one!

So it’s no secret that we’re crazy about data here at MyGuestlist.

Ahhh…not stealing it that is, but rather creating models, metrics and generating some useful information from that data to use as leverage for critical decision making in our development and a sales sectors.

So it should come as no surprise then, that many of the world’s tech companies (including us) are utilising what is known as the viral coefficient to deduce whether a certain action/application/entity is technically considered viral or not.

Up to now, this information has not been really interpreted for all us other bar, restaurant and club folk, but let us do that for you.

So, how do you find out if your latest video is going viral?  How do you know whether that last competition you just created in MyGuestlist is working its magic? Is your Facebook promotion actually making some sort of impact? Is word of mouth spreading online? We finally have a way of measuring it all.

Let’s explore a little.

So the idea behind the concept of something being viral, is that new members or new activity is introduced to the parent (or original) concept in a perpetuating fashion. So instead of you finding members for your mailing list, they find you. Instead of you finding patrons to enter competitions, they find your competition and spread the word on to their friends. Those friends to friends of their own and so on. This is all well and good but there are two questions that need to be answered.

How do I create viral content?

How do I measure viral activity?

This post is focusing on the latter.

There is a variable in our formula called the viral coefficient. What this is, is a measure of the number of additional members, each new member brings with them.

So based on this information, if the viral coefficient is 1 (i.e each new member brings only one other new member in), the activity/content/distribution will grow, but only at a linear rate and eventually topping out.

So the scenario may be as follows:

10 people become members
10 invites sent per person
10% of those people convert to new members
End Point: 10 new member to the site

So therefore, 10 new members / 10 original = 1 (which is our viral coefficient)

Above 1 however, it achieves our desired and classic hockey stick on the graph scenario of exponential growth.

10 people become members
15 invites per person
10% of those people convert to new members
End point: 15 new members to the site

15 new members / 10 original = 1.5 viral coefficient

The following table is created by Jeremy Liew, a venture capitalist in San Fransisco’s Silicon Valley. Study it carefully as it illustrates the difference between a tiny increase in the viral coefficient of 0.6, 0.9 and 1.2. In the example, Liew starts with a base of only 10 members and a viral coefficient of 0.6 and defined time as the period it takes for a member to invite others, which he estimated could be anywhere from 2-8 weeks for this specific experiment.

So the idea was that starting with a base of 10 members and a viral coefficient of 0.6, you flatten out at 25 people, a gain of 15 members. At 0.9, you end up with 75 new members and growth slows dramatically.

With a viral coefficient of 1.2 however, those same 10 members, yield an amazing 1,271 additional members.

We come up with the following formula:

Viral Coefficient = Invitations x Conversion x Infection

where Invitations = average number of users invited by each active user
Conversion = proportion of invited users who activate
Infection = proportion of new active users who invite additional new users

For some more info on how to calculate growth and population forecasting, read this blog entry by Robert Zubek.

So, what to do about increasing this viral coefficient?

Identified, are 5 solid ways to increase the viral coefficient. To first understand these 5, we need to understand what we are trying to do. This is:

- Trying to get our members to send more invites or share our content more to other non-members.

- Try to get our members to return more often to our site/content/venue/party so that they are able to invite more often.

- Find more channels and mediums for the recipient to receive the invites.

With the above in mind, we can now explore the techniques for increasing our viral coefficient so that this can be achieved.

1) Invitations/Sharing integrated as a part of the core

To increase the average number of members that each of your active members invites, you must ensure that new member invitations are a core process in your marketing, action or content.

Examples:

- Hotmail has a small invitation at the bottom of every email which helped with early adoption.
- PayPal allows members to send money to non-members and provides a referral bonus if they join.

2) Immediate utility or usage without external needs

In order to achieve traction with initial members, you must provide some immediate action/task/utility for them to look at, play around with even when none of the member’s personal contacts have joined.

Examples:

- Twitter allows you to micro blog, before you’ve started following or getting followers
- Linked in allows you to setup resumes and connections prior to any invites going out

This step is quite important as most users will not invite other friends until they’re familiar with what is being presented to them. If you don’t provide them with something to do before they’re ready to invite others, you will probably lose them before they reach that stage.

3) Persistence. Keep pulling people back into your world over and over.

There are heaps of examples of this. From Facebook pulling you back in to update your status, to Facebook apps like Mob Wars reminding users of new features that are unlocked. You should always remain in touch and keep sending useful communication that will encourage people to come back to your event, or website.

In addition, once you do one of these pull-ins, remind these active members that they can invite more people and what the benefits are of doing so. Just be careful to not fall into the trap of becoming a spam machine and sending reminders or newsletters all the time without a good reason.

4) No Artificial barriers

According to the CyWorld Behavioural Distribution from “Do friends influence purchases in a social network?”, Raghuram Iyengar, Sangman Han and Sunil Gupta, there is a following approximate distribution:

47% of people are not well connected, have limited interaction with others and are unaffected by social pressure.

43% of people are moderately connected and “Keep up with the Joneses”

10% of people are highly connected and can also be negatively influenced by others

So the fact of the matter is:

- Most people will not invite anybody
- A few people will want to invite lots of people
- Ask yourself how you will make it easy for those few to invite as many as they want: 5, 10, 20, 40 people at a time

5) Influencer targeting

It isn’t important that your content or word of mouth is just spreading, but it is equally as important to make sure they are spreading from the right person. The connectors.

You should select those people to receive viral content based on the number of friends they have, the size of their network (online and off) as well as the probability of instigating action.

If you have anything to add which you may think increases the viral coefficient of your promotions and content in the hospitality industry, please share it in the comments.