Viral Marketing Key to Facebook's Success

July 24, 2007 — -- Relative to most folks, I've seen a lot of business plans and spent a healthy amount of time studying new company ideas. I've seen unique technology infrastructure designs, varied revenue models, marketing plans, expense models and even stock option plan intricacies. Many have interesting elements but few are truly provocative.

However, every so often, a company comes along that has the potential to create real change in its realm. Admittedly late to the party, after a week of playing on the site, I'm convinced that Facebook could be one of those. While previously the domain of students and intercorporate networks, now that the product is open to the general public, and because of the company's particularly robust strain of viral marketing, the potential of this company strikes me as immense.

Viral marketing is defined on Wikipedia as "marketing techniques that use pre-existing social networks to produce increases in brand awareness, through self-replicating viral processes, analogous to the spread of pathological and computer viruses."

Expedite Email Marketing Service is a bit more succinct, defining the term as "any advertising that propagates itself." Whichever the version, the term runs rampant through the conversations, business plans and budgeting meetings of many a technology startup these days.

My marketing genius friend Jennifer Saffo pointed out to me recently that viral marketing is not an invention of new high-falutin technology companies.

In fact, a very good early example comes from a more traditional publishing company, Time Warner, in the form of People magazine, a product that, were it classified by disk drive nomenclature, would be accurately described as a PORM media — or Purchased Once, Read Many. People magazine has the highest pass along rate in history — passed from reader to reader to dentist to hairdresser to reader more than any other.

But People has nothing on Facebook. A friend sent me a link not that long ago, and I signed up. I sent invitation links to three or four others, just to see what would happen. Within hours, my network increased by a factor of 10, as people I had not directly contacted saw my link pop up on other pages, where they already had a connection, and contacted me. (Just to keep the scale factor accurate, I should note that I only accepted the links from people I actually knew, and with whom I have had, at least once, a one-to-one conversation. Without that filter, the growth factor would have been even more rapid.)

New links are fun, like getting e-mails from friends you don't see all that often, but collecting them is a necessary but not sufficient element of a great marketing business. That's where Facebook's move to become a distribution mechanism for third-party application developers comes in.

Way back when, Microsoft became the dominant purveyor of productivity applications by brilliantly working the distribution channel, bundling software on new PCs for both the office and, eventually, the home, to become the de facto industry standard for spreadsheets, word processors, databases and, for a while, browsers.

Microsoft's challenges, and Google's (among others') opportunities multiplied when computer users found it as easy to download or click to a new product as it was to buy or use one resident on the hard drive at the time of purchase.

But what oh what to do about the preponderance of choices out there?

Since distribution is relatively free, and access generally ubiquitous, how do time-constrained consumers discern the best products from the morass of also-rans?

Voila, Facebook! How about that time-honored tradition of the personal recommendation — and how about an always-available network of trusted compatriots to ask or tell? What better way to spread the word about a terrific summer read or a useful new product, or to launch a new application?

I am not suggesting that Facebook will directly collect revenue from recommendations between members of a network. Obviously, the networks have long-term value only if they are used thoughtfully and judiciously, and if the recommendations prove useful and accurate.

However, the speed with which the links propagate, and the potential for a spammer-free, reasonably instantaneous link to trusted connections, opens a lot of doors for some incredibly interesting business possibilities down the road. They aren't necessarily all broadly apparent today, but recall that, it wasn't so long ago that Google appeared to be nothing more than an easy-to-use, more effective and accurate, revenue-free search engine.

Lise Buyer, a long-time Silicon Valley investor, is a principal at the Class V Group, www.classvgroup.com.