Book review: VIRAL LOOP
The Power of Pass-It-On
Genres:
- Microeconomics
- Business
- Management
Review posted on:
04.09.2024
The number of pages:
274 pages
Book rating:
4/5
Year the book was published:
First edition published 2010
Who should read this book:
- Start-up founders, Entrepreneurs, Investors.
Why did I pick up this book and what did I expect to get out of it:
I bought this book back in 2016 but have only now taken the time to read it. I don’t know why it took me so long but I bet I’m not the only one who has a couple of books that I bought but didn’t read yet. Oh yes… there are more waiting on the bookshelf. The reason I bought this book was straightforward, I was interested in how companies leveraged human nature to make their products or services spread as efficiently and fast as possible. And as it says on the back cover “the Viral Loop is the mightily efficient, money-spinning business model that has propelled the likes of YouTube, Google, Facebook, and MySpace to global success.” We all know how those companies turned out, but do you know why? We all heard some things, but it doesn’t hurt to learn more, at least this is how I look at it and one of the reasons why I picked up this book. I have high expectations about Viral Loop because of the chapters in the table of contents. The only thing that worries me a bit is that the book was published in 2010 and some things might be outdated.
My thoughts about the book:
Viral Loop is an interesting and easy-to-read book in which Adam L. Penenberg explains how some of our today’s most successful companies became what they are, and why some were almost too big to fail, but still failed in the end. Each chapter is its own journey for each app or company that the chapter is about. I like that the author also included how some companies fail, and that the book is not only about what worked, it is also about what didn’t work which is very important, and not many authors write about that. When reading how some founders didn’t actually invent something new, but took an existing idea and made a few modifications so the users could more easily use the app or use it for just a certain purpose instead of “everything” it reminds me of what I read in the book Blue Ocean Strategy by W. Chan Kim and Renée Mauborgne when the authors talk how you don’t have to invents new things, you just need to find out what your customers are looking for and create a market for that or at least push the current market boundaries. The only bad thing I have to say about the book is that it is a bit outdated, but at the same time, it’s interesting to see how Adam L. Penenberg and others saw these companies at that time. I would love to see the author come out with a part two that would be written now.
To sum up, if you are interested in how people come up with ideas and how they implement those ideas and build successful companies or end up failing then Viral Loop by Adam L. Penenberg is a must-read.
If you picked up this book please let me know what you think about it in the comment section.
Table of contents of the book:
Prologue: An Insanely Viral Scheme: How the Guys from Hot or Not Rode a Simple Idea to a Fortune
Introduction: Viral President: Positive Feedback Loop, Spreadable Concepts, and the Three Categories of Viral Expansion Loops
I. Viral Businesses:
1. Tupperware and Ponzi Schemes – the Original Viral Models: Party Plans, Referral Networks, and Sizzlemanship
2. The First Online Viral Expansion Loop: Mosaic, Netscape, Network Effects, and the Spark that Touched off the Internet Boom
3. The Spreadable Product as New Business Paradigm: Viral Plain, Ning’s Double Viral Loop, Your Digital Self, and Crushing Crushlink
II. Viral Marketing:
4. The Perpetual Viral Advertisement: Viral Tag: P.S. I Love you. Get Your Free Email at Hotmail
5. When the Audience Decides What’s Good: Collective Curation; Boom, Bust, And Beyond, and the Viral Reality Show of Your Life
6. Viral Video as Marketing Strategy (Psst. Pass It On…): Letting Go of Your Brand, Joke Cycles, and Not Acting Like Some Guy in His Mid-40s Trying to Be a Hipster
III. Viral Networks:
7. eBay and the Viral Growth Conundrum: Faster, Pussycat, Scale! Scale! Scale!
8. PayPal: The First Stackable Network: Viral Synergy, Greedy Inducements, Scalable Fraud, and Battle of the Network All-Stars
9. Flickr, YouTube, MySpace: Spreadable Spreadables, Stackable STackables, and the Point of Nondisplacement
10. Tweaking the Viral Coefficient: Bebo, Patterns in Virality, and Critical Mass
11. Viral Clusters: Facebook, the Social Graph, and Thingamajigs
12. The Search for a New Ad Unit: Death to the Traditional Banner Advertisement, the Arms RAce Between Marketers and Consumers, and Time (Not Clicks).
Epilogue
A short summary of the book:
In the prologue of Viral Loops the author grabs your attention right away with the Hot or Not app story where he talks about how the two friends came up with the idea for the app, what were their initial problems when growing the app, and how they monetized it. In the end, James Hong and Jim Young sold the app for $20 million. Then in the introduction part the author talks about the positive feedback loop and the viral expansion loops. In short, he talks about how companies grow because each new user brings in more users and how by using the product they also spread it.
In part one of the book “Viral Business” the author lays the foundations of viral models by telling the story of Tupperware. The company Tupperware became so by chance when Mr. Tupper discovered that a byproduct when producing plastic filters for gas masks could be used to create a translucent material unlike any plastic of its day. It was unbreakable, flexible not brittle and it didn’t chip or retain odors. Before this Tupper was inventing all sorts of trivial products that never were adopted. But the problem was that Mr. Tupper was not a salesperson, he was an inventor and a perfectionist, which held him back with sales strategies. But that’s where Brownie Wise comes in, a single mother from Dearborn, Michigan who before working at Tupperware worked as a distributor for Stanley Home products. She came up with the strategy of Tupperware home parties which skyrocketed the sales. This story shows the power of virality as each new seller multiplied the sales potential like a Ponzi scheme but in a legitimate way. You will also get to read what were the growing pains, for example, the lack of production capacity and more. In “The First Online Viral Expansion Loop” chapter the author shares the story of Marc Andreessen, how and when he began programming, his journey to college, and how his first big program Mosaic was a success and then was “stolen” from him by his college. The story is not finished there as Andreessen develops a new better program that was a competition to Mosaic and was more successful. Yet again everything didn’t go smoothly as Andreessen’s former college had an issue with him building a competitive program and took legal actions which was in the end solved. In the “Spreadable Product as New Business Paradigm” chapter the author continues Marc Andreessen’s story with his latest company, Ning. This was a company that has been growing from the moment it launched and it was a “Social Network for Everything”, a free platform for everyone. The author shares how the company grew in numbers as geographically. Then he talks about creating double viral loops where different companies help each other with their own viral loop for example how YouTube took off by piggybacking on the success of MySpace and how Flickr grew in tandem with the entire blogosphere and so on. The author also talks about the dark side of virality and the risks that are part of it.
In part two of the book “Viral Marketing,” Adam L. Peneberg shares the story of Hotmail and its founders. The journey of Hotmail wasn’t as smooth as you might think and one big part of why it is here today is the negotiation skills of its founder Sabeer Bhatia. You will also read about the “P.S.: I love you. Get your free email at Hotmail” strategy that skyrocketed the number of Hotmail users. A very interesting part that you don’t get to read a lot in other books about companies was when Batia was negotiating the price of Hotmail when selling it. In the following chapter, you get to read about how digital cameras and phones changed the film industry and the beginning of reality shows. The author then continues to present the potential of viral videos as marketing strategies with the example of the “Mentos and Coke geyser phenomenon” video on YouTube. The author presents the whole story from the beginning how the two friends came up with the idea for the video to the part where they were now paid to replicate their actions and how Coca-Cola and Mentos worked together and even held and promoted a contest for their consumers, all of which lead to better sales.
In part three of the book “Viral Networks”, the author starts out by telling the story of eBay, how it started, what were the biggest setbacks, how it almost failed because the site was down a lot because of too many users and it wasn’t able to process all the traffic it had. Did you know that eBay got its name in 1997. Before it was called AuctionWeb. Also, it got hacked in a big way in 1997, and in 1999 it still had problems with scalability and it almost shut down for good, but luckily eBay found the right person to solve the scalability problem which you can read more about in the book. In the next chapter, Adam L. Peneberg continues with the story of PayPal, well actually he starts with the story of one of the founders of PayPal Max Levchin, and how he met Peter Thiel, how they got the idea of storing money online and their journey forwards. This chapter was interesting as it also includes the funding part and what that brought with it to the company. The author also explains how PayPal stacked their business over eBay and how that helped them to achieve a symbiotic relationship, even though eBay didn’t like it too much at the beginning and tried to create their own company that would do the same as PayPal did. “Spoiler alert”, even though they succeeded at making a similar company as PayPal it didn’t work out and PayPal stayed dominant.
In the next chapter, the author continues with examples of how certain companies or applications grew their business and traffic by building services that the users could use on other apps, such as for example the MySpace apps that weren’t created by MySpace but users used them to differentiate their profiles from others. The same happened with Facebook when others developed apps for users to use on Facebook. The next chapter was about a young couple who tried creating multiple online businesses, and if any didn’t work they would easily let it go and go to the next one. The one that was successful and I had never heard of it was “Birthday Alarm” which was a very simple app to use and you can probably guess what you could use it for from the name. I also never heard of Bebo a social network that was very successful, especially in the UK, and at one point was the third biggest social network in the USA. When reading about these apps and social networks in this chapter you will read how the founders got their ideas, what were the setbacks, and how they solved them if they did. In the chapter “Viral Clusters” you will get to read about Facebook, how it started, and grew, and how Facebook and Myspace competed in which company would be more successful in creating viral elements that would win more users to their social network. In the final chapter ” The Search for a New AD Unit” you get to read the story of Google, and Facebook and how they changed the industry of advertisement.
My notes from the book:
- Viral Loop companies provide an environment that is, in theory, almost infinitely scalable, relying on the wisdom of crowds to create or aggregate masses of material to fill it. The more people, the more content, the more value the company has.
- Since we live our lives through the prism of our minds, online relationships have the potential to become more real to us than real-life relationships.
- 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.
