Dropbox: The Viral Lie Sold To Every Startup. Here Bullet looks at the K-Factor of Viral Growth. Showing you how to calculate if your product is viral.
What can Dropbox teach us about the myth of “viral”?
There has been a lot of buzz lately about the success of Dropbox, and how other startups might learn from it. They now have over 100 million users, and their excellent “space race” referral offer played a big part. A lot of startups would have seen this as another example of the superiority of the viral marketing model, and sought how to replicate it…
Not so fast! Before you go making viral marketing your #1 priority, take a closer look. There’s every chance that viral marketing will be useless to you, so take the following things into account.
Dropbox wasn’t viral, and you probably aren’t either: AxBxCxD=K
First of all, it wasn’t viral growth alone that led to Dropbox’s massive growth. Andrew Chen and Des Traynor have explained how Dropbox’s “K-factor” didn’t come near the viral threshold of >1 (in fact it was more like .1), meaning they never got near “viral growth”. What does this “K-factor” refer to? Des elaborates on the K-factor in this post, where you can see that the K-factor of a product is determined by
(A: what percentage of your users share virally)
(B: how many shares those users publish)
(C: how many new users you get per share)
X (D: how many of those new users become full users)
= Your K-factor
A K-factor of >1 would mean that your users will effectively do your marketing for you and acquire new users themselves. Despite the talk of Dropbox’s “viral” success, chances are your K-fact (like that of Dropbox) is well below 1. Don’t despair though, because…
There’s a good reason for that
Most tech startups’ products can’t and won’t go viral because of the type of products they are. There’s nothing wrong with this, and you should be analytical when judging the viral potential of your product. Chen describes 5 main criteria that determine a product’s viral potential:
1. The product should target extroverts.
2. The product needs an inherently social dimension.
3. There needs to be high retention and usage of the product.
4. It should be a product that anyone can use.
5. There needs to be a complling pitch for users referred from social media
If your product doesn’t match these criteria then going viral will be hard. SaaS products usually don’t. A product needs to be inherently social by its very nature, and how often it’s used and your churn rate will have a big impact too. The whole thing presupposes that you have a good product-market fit, which is also easier said than done!
Never fear… there are alternatives:
In our blog post on the lean startup methodology we outlined the other growth models to target. The simplest would be the Paid model, the standard means of growing a business. This means that you use the revenue accrued from one customer to acquire the next customer. This will work if your Lifetime Customer Value (LCV) is greater than your Customer Acquisition Cost (CAC). This obviously works best with a low CAC.
The Sticky growth model is a trickier concept, and like the Viral growth model, is often misunderstood. The key ingredient to it’s success is retention rate. If your product is good at holding onto customers (usually after a customer has invested a lot of time in the product which increases switching costs: think World of Warcraft or eBay) then you don’t have to worry about losing traction. Even if you have a high CAC you know that users will stick around and keep spending money, so you won’t mind paying for new users.
Eric Ries recommends picking one of the three models and sticking with it, which is great advice. Although Dropbox exhibited characteristics of all three models, it still relied primarily on Sticky growth.
Your product and viral: never meant to be?
Should you go for viral growth? Chen puts it bluntly: don’t bother. Or rather, you have three options:
1. Don’t bother. If your product doesn’t fit with viral then that’s that.
2. Use it to drive down your CAC. While Dropbox never went viral, they did use some viral ploys to get some customers on board and reduce their CAC. This is of value in both a Sticky and Paid model. However, resources must be devoted to increasing your viral capacity and a bolt-on widget probably won’t cut it.
3. Go for it. If viral growth seems like a runner then proceed, but be smart about it. Intercom have some excellent advice on how to maximise the viral growth of your app.