One of the most powerful marketing effects your startup could produce is the viral expansion loop. The theory is simple, the execution is not. A viral expansion loop is exponential growth produced by users and the system was engineered to produce the viral loop (some happen on accident).
Fast Company did an article on Ning (a site that allows anyone to start a social network) and the effects of the viral expansion loop called Ning’s Infinite Ambition. It is a must read for anyone starting or running a business, even if the tactic is not relevant to your current situation.
The best example to understand the viral expansion loop is given in the article. Take a penny and double it every day for 30 days. By the end of 2 weeks you will have $81.92, and by the end of the 30 days you will have a staggering $5.4 million.
A (successful) social network is the common example of a web viral loop. You invite 5 friends, they all invite 5 friends and the growth is continuous. Other sites that are said to have experienced this phenomenon are Facebook, Twitter, Digg, MySpace, YouTube and Google.
Lets not confuse viral marketing and the viral expansion loop. A viral marketing campaign is a one-off run. A viral loop is a continuous effect. Viral marketing campaigns die off after an amount of time while the viral loop does not. In reality, all sites hit a plateau, but the viral loop works over years while a viral marketing campaign might last a couple months. Viral marketing is considered effective if it receives attention but does not necessarily lead to a large adoption rate (buying or signing up). A viral loop needs a large and continuous adoption rate to be considered effective.
How do you produce the viral expansion loop?
While the time and effectiveness is different, the viral loop has to have some of the same attributes as viral marketing to start the expansion. The site has to be easily adopted by the masses (or a very large niche) and effective enough that members spread the word. The product or service will truly become a viral loop if the majority of every new member invites someone new that will ultimately join. This is why (successful) social networks have been a common example. When you join, you want to connect with all of your friends, and they want to connect to all of their friends.
Fast Company reports that venture funds are making more bets on companies that have the potential to experience the viral loop. This concept is rarely discussed outside of Silicon Valley and you will hopefully considered this growth technique as you build your business.