Today, I spoke to Adam Penenberg,who is the author of Viral Loopand has written for Forbes, The New York Times, Fast Company, Inc., Slate, Wired, The Economist, Mother Jones and Playboy. Currently he’s a Contributing Writer to Fast Company. In this interview, Adam introduces us to the concept of a “viral loop,” and then explains the power of virality, how social media isn’t a fad, how brands can’t be controlled anymore, and more.
What is a “viral loop”?
“A “viral expansion loop“ is accomplished by incorporating virality into the functionality of a product. In plain English, it means a company grows because each new user begets more users.”
Just by using a product they spread it. After all, what’s the sense of being on Facebook if none of your friends are, or using Flickr if you can’t share your photos? Why post an item for sale on eBay if no one is around to bid on it, or use PayPal if no one accepts it? Many iconic companies of our time—Hotmail, eBay, PayPal, MySpace, YouTube, Facebook, relative newcomers like Digg, LinkedIn, Twitter and Flickr, as well as hundreds of widget makers navigating the emerging “social media” economy—are viral loop companies.
While a negative feedback loop can create a vicious circle and drive investors to dump stocks, further pushing down the market, leading to more bad news and inducing others to sell, and so on, a viral expansion loop is the opposite: a type of positive feedback loop, a virtuous circle. The result is a type of alchemy that done right, leads to a self-replicating, borg-like growth. Put another way, a viral expansion loop is like compounding interest on a bank account: One user becomes two, then four, eight, to a million and more. Not unlike taking a penny and doubling it every day for a month: By the end of a week you’d have 64 cents and within two weeks, $83.92; by day 30, about $5.4 million. By day 38 you top $1 billion. It’s no wonder that viral loops have emerged as perhaps the most significant business accelerant to hit Silicon Valley since the search engine.
Can virality really be controlled, or is it like trying to catch lightning in a bottle?
Absolutely. If you design a product to spread virally it’s possible to build a multi-million or even billion-dollar business from scratch. No advertising or marketing budget, no need for a sales force, and venture capitalists will kill for the chance to throw money at you. Of course, this may sound too good to be true, like some dodgy get rich quick scheme from a late night cable TV infomercial or the latest spam come-on on to hit your inbox. But the trick is to create something people really want, so much so that their customers happily spread their product for them through their own social networks of friends, family, colleagues and peers.
“That’s one of the beautiful things about the Web: You can nurture a business like never before and achieve almost cosmic valuations in record time.”
When a business grows exponentially, each user spreading the product to 
more than one other user, human behavior, in large enough numbers, becomes largely predictable. We seek to pass on interesting or funny memes or products to our personal social networks, whether they are included in our email address books, part of our collection of friends on Facebook, visitors to our blog or participants on discussion threads. You can measure this phenomenon; it’s called a “viral coefficient.” If it is above “1,” and on average each user successfully induces more than one other person to also try the product, the result is exponential growth. And this is a powerful growth driver. Because the larger you get, the more you grow. Look at Facebook, which is still experiencing exponential growth. After it hit 250 million users, Facebook gained 50 million new users in the span of two months. It’s on track to crack half a billion users by the end of this year.
In your book you say social media is no fad, it’s something we are biological driven to do. Can you explain?
Increasingly there is your public self—the person you present to the physical world—your personal self (who you are when you are alone) and your digital self, which reaches far beyond the other two. If you spend time online many more people know you—or think they know you—through your digital self, which can be as (or more) real to them than your real self. Indeed, people’s perceptions of you can be quite vivid. Two Washington University in St. Louis researchers scanned the brains of fiction readers and concluded that they create intense, graphic mental simulations of sights, sounds, movements and tastes they encounter in the narrative by activating the same brain regions used in processing similar real-life experiences. The memes we create spread virally, far beyond our networks of friends, relatives, acquaintances and colleagues. Once they leave our brains and hit the Web’s viral plain, they are out of your control and can take on a life of their own. Then you become more than just a guy trying to hold onto a job and pay down your mortgage. You are a brand that must be managed. With apologies to Marshall McLuhan, the medium is not the message. You are.
Why do we do it? What explains our Blackberry-bearing, Twitter-tweeting, Facebook friend with the need for constant connectivity? As facile as it may sound we do it because we are hard-wired to socialize. It’s in our best interests. Social networking makes us happy and online or off-, all of this congregating is merely a product of biological necessity. Research indicates that engaging with friends helps us live longer and better lives, with those with strong friendship bonds having lower incidents of heart disease. They even get fewer colds and flu. A decade-long Australian study found that for the duration of the study subjects with a sizable network of friends were 22 percent less likely to pass away than those with a small circle of friends—and the distance separating two friends and the amount of contact made no difference. It didn’t matter if the friends stayed in contact via phone, by letter or email. Just the fact they had a social network of friends acted as a protective barrier.
A research project by Paul J. Zak, a professor of Economics and the founding Director of the Center for Neuroeconomics Studies at Claremont Graduate University, found that when a test subject learns that another person trusts him, the level of oxytocin, a hormone that circulates in his brain, rises. “The stronger the signal of trust, the more oxytocin increases,” wrote Zak, whose primary interest is neuroeconomics, a discipline that attempts to gauge how the brain’s neurologic functions process decisions involving money. And trust, Zak learned, begets trust: The more oxytocin swimming around your brain, the more other people trust you. Notably, his test subjects had no direct contact with one another. All of their interactions took place by computer and with people whose identity they didn’t know. “Trust works as an ‘economic lubricant’ that affects everything from personal relationships to global economic development,” Zak says. Although he didn’t explicitly state it, trust is also an integral part of social networking. Another trust study discovered that when an investor in an experimental game was given a dose of oxytocin he was more likely to allow someone else to control his money no questions asked. The substance, which is sometimes referred to as the “cuddle hormone,” has also been found to increase generosity and decrease fear and been associated with maintaining healthy interpersonal relationships and is a key to bonding.
Taken together, research strongly indicates that we are biologically driven to commingle online and off. Fortunately, as big as the world is, we are never far from one another. We are not, as the saying goes, six degrees of separation from one anyone. It’s actually closer to 6.6—at least that’s what a Microsoft researcher estimated after combing through 30 billion electronic conversations over the company’s instant-messaging network in June 2006.
How can someone control their brand at a time when anything and everything—–the good, the bad, and the ugly–—has the potential to spread virally and affect how people view us?
To a certain degree you have to let go. You can’t control opinions about you that spread far and wide. But you can fight viral memes with your own viral memes. Stay abreast of what is said about you or your company and confront those propagating information about you. If you are a company you need to redress customers’ complaints fast, because nowadays a call to an abusive customer rep can end up becoming the equivalent of a hit single. Or snarky commentary about a computer company (OK, it’s Dell) can suddenly spread through the blogosphere and Twitter land, and suddenly you have a crisis PR moment. Mark Cuban, the billionaire owner of the Dallas Mavericks, conducts almost every interview with the media via email, because he can keep a written trail. There have been times he believes he was misquoted, or his views taken out of context, and he has posted the entire email trail on his blog. His blog sometimes gets more traffic than the original piece about him, which enables him to effectively parry what he views as unfair coverage.
Jason Calacanis, a serial entrepreneur and founder of Mahalo, the human-powered search engine, told me that “social media, like blogs, are truth-seeking technologies. In fact, the Internet itself is the greatest truth-generating device ever created. Everything in our lives gets put into the Internet, mashed up, manipulated and eventually spit back out as the truth.” I’m not sure that’s completely right. Everything does get spit up as information, but it can be either true, partly true or varying shades of false. I agree with Jason that taken in its totality the truth is out there. Your job then is to point people to your version of it.
You are a journalist and journalism professor. How does publishing Viral Loop extend your personal brand?
Viral Loop was an irresistible project for me. I first heard of the term “viral loop” from Marc Andreessen, who conceived and co-coded the first widespread Web browser (Mosaic) and was a co-founder of Netscape. I was interviewing e was explaining how his latest venture, Ning, was growing so quickly, through something he called a viral expansion loop. Then explained that some of the highest flying companies in history had tapped viral loops to grow to millions–if not hundreds of millions of users–and in many cases became billion-dollar companies over the span of just a few years. I’d never heard of viral loops. Neither had anyone I asked–journalists, entrepreneurs, tech-savvy professionals. Yet Marc was indisputably right. Companies like Skype, Facebook, eBay, PayPal, Twitter and many others had grown virally, achieving a viral expansion loop. In some case (PayPal and Skype, for instance), the product was conceived and designed to spread virally. In others it was completely by accident. It was right under our noses, an incredibly powerful growth engine that took advantage of one of the defining characteristics of the Internet. Yet no one had written about it.
As a journalist who often writes about the impact that technology has on business, culture, politics and entertainment, I think Viral Loop was the perfect book for me to pursue. I originally pitched it as a cross between Tipping Point, by Malcolm Gladwell and Chris Anderson’s The Long Tail. This was, of course, salesmanship, part of the publishing game you play. But I had 5 publishers bid on the proposal and an auction that lasted three days. I even got to interview a couple of the editors bidding against one another, and both said the same thing: “Every week we receive book proposals from authors who claim their book is the next Tipping Point of Long Tail. But Viral Loop is.” Their point was that Viral Loop explains something that is so fundamental to how we live and do business. I don’t profess to know if it will sell a tenth as many copies as either book, but I do believe it is a book for its time.
Getting back to how publishing Viral Loop extends my personal brand, I didn’t stop at simply writing about viral loops. I worked with Studioe9, a top web design and social marketing firm in NY, to develop a proof of concept for Viral Loop. In essence, we sought to create a viral loop business to promote a book about viral loops. The Viral Loop widget, which you can download at apps.facebook.com/viralloop, tells you what you and your friends are worth to Facebook, based on your level of engagement, your friends’ activity level, and your influence. After all, Facebook wouldn’t be Facebook–and have a valuation north of $6 billion–if it weren’t for the 300 million people on it. Users have value. We tell you how much. There’s also a leader board published on fastcompany.com that lists the top 20 Viral Loop Facebook app users and their respective values, as well as a list of top celebrities on Facebook.
I don’t know exactly what this tells us about the times we live in, but according to Facebook’s own data, Adam Sandler and Ashton Kutcher are worth more to Facebook than God is.
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Adam Penenberg is the author of Viral Loop and has written for Forbes, The New York Times, Fast Company, Inc., Slate, Wired, The Economist, Mother Jones and Playboy. A former Senior Editor at Forbes and reporter for Forbes.com, Penenberg garnered national attention in 1998 for unmasking serial fabricator Stephen Glass of The New Republic. His first book, Spooked: Espionage in Corporate America (Perseus Books, 2000), was excerpted in The Sunday New York Times Magazine and received a starred review in Publishers Weekly. His second, Tragic Indifference: One Man’s Battle With the Auto Industry Over the Dangers of SUVs (HarperBusiness, 2003) was optioned for the movies by Michael Douglas and excerpted in USA Today. He penned the popular “Media Hack” column for Wired News and covered technology for Slate. Currently he’s a Contributing Writer to Fast Company. A journalism professor at New York University, Penenberg is the assistant director of the Business & Economic Program, heads the department’s ethics committee and teaches investigative reporting, magazine writing and media ethics to graduate students. He has appeared on the “Today Show” with Katie Couric, FoxNews, MSNBC, NBC, CNBC, CNN (“American Morning” with Soledad O’Brien, “Moneyline” and “Headline News”) and NPR.
