Jul 23, 2012

One of the best ways of growing a website or a web application is to have your current visitors or users recommend it to their friends. Your friend’s recommendations are instantly more credible than any marketing or sales pitch because you know that they are making the recommendation for your benefit without the intention of making a sale.

Your Viral Coefficient is a way of tracking how viral your product is. In this post I’ll be looking at how to calculate your Viral Coefficient, why it is important, and how you can test and improve your product or website for greater future success.

Why is the Viral Coefficient so important?

The internet is a powerful network and a huge opportunity for an aspiring new company or website. Through network effects, open communication and the relatively low cost of serving content on the web, you are in a powerful position to reach a global audience.

The explosive growth of YouTube, Facebook, Twitter, Tumblr and Instagram amongst many others can be attributed to having a positive Viral Coefficient and the network effects that are leveraged when current users use the product and share their usage with their friends.

As you can see, by focusing on improving your Viral Coefficient, you will greatly improve your product and your ability to acquire new users or customers. Growth in fledgling products is incredibly important. Rarely do companies die through lack of product, they are far more likely to die through lack of traction, or more precisely, lack of a strategy for growing traction and user acquisition.

One of the top priorities of any website or application is growth. Having a positive Viral Coefficient means you can acquire new customers for essentially free and your product will grow exponentially.

Customer acquisition can be incredibly hard. By focusing on your product, acquisition techniques and your Viral Coefficiency, you give yourself a much better opportunity for success.

How to calculate your Viral Coefficient

Calculating your Viral Coefficient is pretty straight forward, but there are a couple of things to remember.

1. Take your current number of users (e.g 100)
2. Multiply by the average number of invitations or referrals that your user base sends out (100 x 10)
3. Find the percentage of referrals that took the desired action, for example, signed up to be a new user. (12%)
4. If 12% of 1000 invitations signed up for your product you would have 120 new users.
5. You started with 100 users and you gained 120 users. So you divide the number of new users by the number of existing users to find your Viral Coefficient (120 / 100 = 1.2).

In order to grow virally, your product needs to have a Viral Coefficient of greater than 1. In our example, a Viral Coefficient of 1.2 is not very spectacular and would typical represent very modest growth. A growth rate of 20 or more is the kind of level you are looking for if you are hoping to achieve explosive growth amongst your user base.

Things to remember

Calculating your Viral Coefficient is easy enough, but there are a few important things to consider.

1. Only measure acquisition - If each of your users invites 20 people to your website, but none of them sign up or make a purchase than you have a Viral Coefficient of 0. Ultimately if new visitors don’t convert then they have no value. Don’t let yourself get carried away by measuring the wrong data.
2. Be realistic with referral estimations - When modelling viral growth, it is easy to forget that your users are unlikely to invite their friends more than once. It is far more likely to have users only send out invites once, and so you must only model new referrals from newly acquired users.

The importance of Viral Cycle Time

Another, often forgotten aspect for calculating the Viral Coefficiency of a product is Viral Cycle Time. David Skok covers the topic in his excellent post Lessons Learned - Viral Marketing, but I’ll summarise his point here.

Viral Cycle Time is basically the number of steps that a user needs to take in order to share your product. A YouTube video is very likely to become viral because all it takes to be shared is to copy and paste the URL from the browser into Twitter or Facebook. If your product requires users to be signed in, and then copy and paste their friend’s emails into your application, they are not going to refer many friends.

Facebook Connect or sign in with Twitter alleviates the problem a bit, but it doesn’t really get to the core issue. In order for your product or website to have any chance of going viral, you must make it as simple as possible for your current users to share it with their friends. Ideally this should be a one step process like sharing a URL.

The opportunity and risk of Social Media sharing

Facebook’s News Feed and Twitter’s user stream are perfect opportunities to share viral type products. Many companies have jumped on this opportunity and aggressively targeted key features of their products and applications to get their current users to outward share to their Facebook or Twitter accounts. Zynga is the perfect example of this.

However, you also face the risk of backlash of users for being annoying or sharing without explicit permission. Whilst this represents a huge opportunity to grow in user numbers, care must be taken not to violate your user’s trust or to annoy users before they have even experienced your product.

A lack of virality in your product

The final thing to remember is, if your product lacks that special ingredient that automatically gives your users the desire to share it with their friends, you are going to struggle to grow through viral means.

A boring, or bland product is never going to be shared because sharing has the implicit trust attached that this is worth your attention.

Other products just do not have the features or DNA that lend themselves to being shared. It is incredibly hard to add viral features as an afterthought, or even worse, try to force them into a product where they don’t belong. Virality should be baked into the features of your product and should be planned from day one. It is not a job for the Marketing department!

Virality is not a magic spell, or a unicorn that you can just aimlessly chase in the hope of striking it lucky. When done right, it can be an exact science that you can control and improve upon to better improve your chances of success.

Testing and improving your Viral Coefficient should be a continuous process over the lifetime of your product or website. Whether it be users to a new social network, or customers to your Software as a Service, you must be always looking to improve and optimise your Viral Cycle Time and your Viral Coefficiency.

Viral Cycle Time

Improving your Viral Cycle Time is as easy as taking stuff away. Your should put as few barriers as possible in place to allow users to share your product or website.

If you require email addresses, build contact integration to allow your user to import their friends email address automatically. LinkedIn have done a great job with this as they know your business contacts live within your email contact list.

If you want your product to be shared on social networks, build in integration with the leading social network APIs to allow your users to sign in and have a pre-populated way of sharing their content to their existing social graph.

The optimum Viral Cycle Time is one easy step. You need to create your product around this restriction or your users simply won’t refer enough friends for your viral growth.

Viral Coefficient

The first thing to improve is your product’s value proposition. Take a hard long look at what you are offering and honestly ask yourself, is this something worth sharing? This can be a hard question to answer as you are obviously in love with the idea. In order to objectively find the answer, run a series of test to see how many people share your product. If no-one is sharing your product, you have your answer in plain sight.

Again, as I mentioned above, Virality is not a magic spell, and it is not relevant for every product. You might have to just accept that your product and use case just does not lend itself to being shared virally.

The next thing to understand is, what are my user’s motivations for sharing and how can I make it easier for them? The point at which your users want to share your website might not be how your first envisioned it, and so you must work to facilitate and build features to assist them. This is an iterative process of running tests and collecting usage data in order to inform future decisions. Refer back to my post How to make decisions based on data, rather than assumptions for more details.

It is incredibly unlikely that your initial vision will be correct and your newly acquired users use your product exactly how you thought they would. Allow their usage data to inform your decisions and improve your product.

As with just about every other aspect of your website, A / B and split testing should be an important tool for finding out what works and what does not. Use testing to find the most successful referral campaigns and then continuously improve them through iterative experimentation.

You might find that one of your unfavoured techniques actually brings in the most new users or users with a significantly higher life time value. By tracking specific campaigns and testing the wide variety of variables of each test, you can become much better informed on the correct way to acquire new users. Once you have this kind of information you have found your engine of growth for future expansion.

Don’t waste time agonising over your product decisions. At the end of the day, nothing matters until your product is live. As the old saying goes, “If you are not ashamed of your first version, you shipped too late”. If you have no live product, you have a Viral Coefficiency of zero.

Also, don’t worry about testing and changing things. The path to success is one with a huge amount of little bets and failures to find out what works or what combination of variables work best together.

Tactics used by others

There are a number of fantastic strategies that have been used by a variety of companies to successfully grow their product through viral means.

One of the very best ways of growing virally is to offer the sharing user and the new user a benefit or a reward for sharing or recruiting new users.

For example, Dropbox grew very quickly by offering current users more free space if they referred their friends. FreeAgent offers current users money off for the life time of their subscription for every friend they introduce.

To conclude

There is a huge opportunity for you to grow your product very quickly through viral means. Do not approach it as a quick fix or a solution to acquire new users or customers without much effort. Improving the viral coefficient of your product will take a huge amount of effort, but in the long run it can be the difference between success and failure.