Congratulations! We’re winding down into the home stretch of Creating Your Viral Engine in 15 Steps. Thanks to the last chapter, you’ve now learned about the incredible power of K, and what effect it can have on your growth.
Now, if only we could get our K above 1.0, all our problems would be solved . . . .
Not so fast speed racer.
The Recipe for Scalable Viral Growth
As you may remember from one of our early chapters, most products will never “go viral” – meaning their K will never even get close to 1.0.
Does this mean all is lost? Is your viral marketing campaign doomed to fail? Is your company destined for the wall of shame and all its employees sentenced to having tomatoes thrown at their faces?
Viral marketing can still be one of the most effective things you can engage in for growth – even with a K < 1.0.
In fact, if you have a K < 1.0, you’re in the same boat as 99.9% of startups. With this in mind, we need to use a new KPI as a more practical measure of virality.
Transitioning from V to A
As I mentioned above, most sites no matter how hard they try will never achieve true viral growth (meaning a K > 1.0). For those who do, it won’t last long. So the primary metric for us moving forward will NOT be our viral factor. It will be our amplification factor.
An amplification factor is a simple multiplier that indicates how many total users you can expect to acquire for every one user you acquire from non-viral means after viral marketing does it’s job.
For example, if your amplification factor is 1.3, this means for every 1 user you acquire via non-viral means, you can expect 1.3 users total after viral marketing is all said and done.
Here’s how to calculate your amplification factor:
Viral factor = K
Amplification factor = A
A = 1/(1-K)
If you’re having trouble wrapping your head around the equation above, take a deep breath. I promise not to throw too much math at you – and when I do, I’ll explain it in so much detail you’ll think you’re the second coming of Einstein.
Moving on . . . .
Let’s say K = 0.2. We can then calculate A in the following way:
A = 1/(1-0.2) = 1/(0.8) = 1.25
You’ve now found that your amplification factor is 1.25. Great work!
Getting the Most Out of Your A
What do you do with A once you have it?
To get to the bottom of this, let’s introduce a new variable, nU. This stands for non-viral users and is the total number of users you acquired today through non-viral channels.
We’ll use nU to find tU, or the total number of users you acquired today overall from BOTH viral and non-viral channels. tU is calculated by multiplying our nU by A (our amplification factor).
tU = nU * A
For simplicity’s sake, let’s say we acquired exactly 1,000 users today from our Adwords campaign. As this is the only non-viral campaign we have running, we don’t have any other sources of traffic (very unlikely but we’re just trying to make the math easy here). This means nU = 1,000.
As those 1,000 non-viral users make their way through their viral loop, they begin inviting friends. But how many total users (tU) can we expect after that loop does its thing? This is where A comes in.
tU = 1,000 * 1.25 = 1,250
Fantastic! But wait . . . what does this mean for our business?
The Business Value of A
If you’re like most companies and have a K < 1.0 you’ll need to continuously acquire traffic through non-viral means in order to continually allow your viral loop to do its thing.
That said, with a strong A factor, you’ll have a huge advantage in comparison to your competitors with an unoptimized viral loop because you’ll now have a significant discount on your ad spend.
Let’s assume our prior data is still true.
Our K = 0.2, our A = 1.25, our nU = 1,000 and our tU = 1,250.
Now, let’s factor in our advertising costs with a new variable, cN. This refers to our cost per acquisition of a new user through non-viral means. As you probably guessed, we’ll also add in tN, which gives us our total cost per acquisition of all users on average – after factoring in virality.
For simplicity’s sake, let’s assume a cN = $1.00.
By multiplying our non-viral costs per acquisition (cN) by our total new users acquired (nU), we’ll get our total advertising costs (aC) for this specific non-viral campaign to date.
aC = cN * nU = $1.00 * 1,000 = $1,000
This tells us that we’ve spent $1,000 to seed our viral loop with 1,000 non-viral users.
But wait . . . we don’t have 1,000 users anymore! Our viral loop has now done its job. Our users have invited friends, and we’re now left with 1,250 users. Let’s then assume our viral value and viral incentive per-user doesn’t cost us anything extra, so we’ve still spent the same $1,000.
Our equation now becomes:
tN = Total costs / tU
tN = $1,000 / 1250 = $0.80
In other words, you’ve decreased your total costs per acquisition from $1.00 to $0.80. If you’re doing the math – and I know you are New Einstein – that’s a 20% discount in your per-user ad spend!
This may not seem super incredible with regards to this example, as that 20% discount only yields a 20 measly cents, but when you’re spending millions of dollars a month on advertising this can be the difference between:
- Achieving a profitable ROI from a channel and not being able to use it cost-effectively
- Spending an extra $1 million on ads you could have spent on 5 new high-level hires
- Pumping an extra $1 million back into advertising and seeding 20% more users into your viral loop
- Dominating a market and getting buried by a competitor
- Not getting a tomato thrown in your face
. . . and it’s all thanks to A.
As you can see above, virality and paid marketing can work in perfect harmony to create scalable, lasting growth.
But remember when I mentioned in the last chapter that K was NOT the most powerful viral KPI you’d be learning about? Well, it actually isn’t A either.
In the next and climatic last chapter of our guide on How to Create a Viral Marketing Engine, we’ll be learning about that very KPI – and what you can do to make it the best friend you’ve ever had.
Fasten your seatbelts, it’s going to be a virally ride.
Do You Know the King of All KPIs?
You’ve met K and A, and have seen how much they can do for your growth. But that’s just the tip of the viral iceberg. There’s a far bigger KPI ready for action. So hop on your bikes because in the next chapter we’re going to take it for a spin.
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