Andrew Chen Archives

Viral loops are only good for one thing

… and that thing ain’t revenue. Viral loops generate traffic, but you still need to:

• Retain the traffic that’s generated virally
• As well as also monetize the traffic

Between these steps are transition points from acquisition to retention, and then from retention to monetization. You can think of these transition points as a series of bridges (or more accurately, funnels) that you analyze and optimize.

Why separate your viral loop and your retention loop?
Some of you might have noticed that oftentimes, viral loops are extremely simple user flows that build on users’ need for:

• reciprocation (gifting, accepting invites)
• social norms (comparison/rating)
• greed (free ipods)
• etc.

For many of these loops, you can get a user to invite their next set of users, but after the process, it’s easy to feel a sense of completeness and leave the site. There are many Facebook apps, for example, that are just “pure” viral loops – there’s really no retention loop that the user enters after they’re done.

And as I argued in a previous post called “When and why do Facebook apps jump the shark?” the lack of a retention loop can hugely damage the long term value that you’re creating.

That said, the Shangri-La of viral marketing would be a product that not only was viral, but the viral loop was the same as a retention loop. Perhaps this is the easiest to do when you are building a communication app, because ultimately every time you use Hotmail, you are helping them advertise and acquire users.

But if you’re lazy, you can use one of the “pre-built” viral loops that are out there (like gifting, invitations, etc.) and try to integrate that into yoru site. You then have a viral loop that you use to acquire users, and after they’ve helped you acquire some traffic, you then transition them into a user experience that retains them.

HotOrNot case study
I want to use HotOrNot as an example of bridging your traffic engine with your revenue engine, because I think they do it very well. Please go to HotOrNot.com to refresh your memory, if you haven’t visited the site recently.

HoN is really split into two completely different experiences:

1. The classic hot or not ratings experience
2. Then, a dating site with virtual goods as the monetization

The first experience is the one that ultimately drives all the traffic. Without using any “productized” viral techniques, the site was viral because it was fun, and people sent it to their friends. This is their traffic engine, and for some companies, it might have been enough to slap some ads on the site and call it done.

However, the company went further than that – each picture on the site is actually an AD that bridges users into the dating site. At the top of each picture, you see “Click here to meet me,” but also clicking ANYWHERE on the picture also takes you into a registration landing page. Some % of users then convert on this page, and then successfully transition into a general dating site.

Why it works
There are some key things that make HotOrNot work, and I’d encourage you to think about it in the context of your web property also:

• HotOrNot has a novel user acquisition technique – user ratings that drive word-of-mouth viral
• The bridging process is tailored to work with the traffic engine, and thus is also very novel
• The traffic engine is bridged to the revenue engine via pictures that constitute 30%+ of the real estate on any given page
• Once you click, the picture of the person you’re interested in is used on the landing page to “smooth” the transition point and increase conversion rates

I think it’s very important that both the traffic engine, the bridge, and the retention loop are all motivationally aligned.” This means that if the user’s there for hot chicks, then the entire process bridges them into a retention loop that’s all about hot chicks. Or if it’s about making money, it permeates the entire funnel as well. HotOrNot has a very smoothly designed transition, as as a result, I’m sure the conversion rates are quite high.

Measuring the efficiency of your bridge
One might ask, how do you measure the smoothness of the transition? Well, consider the following – would you rather have:

Scenario A:
Acquire 1,000,000 users which turn into 10,000 retained users

or:

Scenario B:
Acquire 100,000 users which turn into 25,000 retained users?

It’s pretty obvious, of course, that acquiring LESS users but ending up with more retained users is better – thus I’d prefer scenario B. Because the carrying capacity on Facebook is roughly 60,000,000, then a more efficient bridge ultimately leads to more retained users, which generate much higher total visits, whcih in turn generate more revenue.

So let’s define a new metric, which I’ll call “Activation Efficiency,” using the marketing parlance of how many contacts you can “activate” into leads and then into sales:

Activation Efficiency = total retained users / total acquired users

where:

• Retained users means total # of users that had 2 visits or more, let’s say
• Acquired users means the total number of uniques that come in through your viral loop

Once you start measuring this, then it becomes much easier to think about connecting your viral loop and retention loops. After all, if you acquire 100 million users but only 0.1% activate, and you have a site of 100,000 active users, your ComScore numbers might look nice, but you’re right about to jump the shark!

PS. Get new updates/analysis on tech and startups

I write a high-quality, weekly newsletter covering what's happening in Silicon Valley, focused on startups, marketing, and mobile.

Leave this field empty if you're human: