Virality & Network Effect

Piyush Gupta | ProductCamp Silicon Valley | March 14, 2015

Retention

Modeling

In Scope

Network Effect

Virality

Engagement

Platform

Not in Scope

Retention

Let’s begin!

Virality – User Growth

Network Effect – Value growth with User Growth

Network Effect ≠ Virality

Virality ≠ Network Effect

Co

nfu

sed

?

Benefit is realized by each party that is directly

involved

“But often times third parties to the

exchange also either

benefit or incur a cost

even if they are not directly involved.”

I pay a security guard to keep an eye on my premise

My neighbors may also gain a benefit of safety even though they aren’t directly involved and haven’t paid for the service.

My Neighbors benefit – Positive Externality!

I lease my premise to a local rock-band for practice

My neighbors may bear a cost of Noise Pollution without anycompensation.

My Neighbors pay – Negative Externality!

Positive Externalities create

Network Effect

PRODUCT

User Lifecycle

1. Acquire users

Acquisition

2. Users to stay

Retention

Engagement

3. Users to continue using

Acquire Users

2. Advertising

3. Partnerships1. Press/PR

4. User (itself)

Communicate / Word of Mouth

Acquisition Channels

User

2. Digital

3. Via Product1. Manual Cheap

Cost

Inherent

Channel Communication

User

Like

Invite

Dislike

No Invite

Immediate After X days

= Conversion

Signup Not Interested

::

Conversion

Virality Coefficient

V.C. = Conversion / Users Reached

No. V.F. Reality

1 0.15 – 0.25 Sustainable

2 0.4 Very Good

3 0.7 Outstanding

Web Consumer Products

Virality is not

It is Science

Random.Magic.Luck.

linkedin.com/in/piyushgupta | twitter.com/gpiyush | com.gmail@gpiyush