@andrewchen

Subscribe · Featured · Recent · The Cold Start Problem 📘

Viral coefficient: What it does and does NOT measure

It’s easy to overemphasize viral user acquisition
I’ve recently been receiving a deluge of e-mail related to viral marketing – in particular, people sometimes represent it as a "magic bullet" to solving their startup’s problems. In fact, I’d argue that it’s merely one of many steps required to create a long-lasting, value-generating web property.

After all, the last thing you want to be is a fad, a one-hit wonder, or many of the other terms that are out there for rapidly spreading idea that quickly burnout.

Viral coefficient is only one metric of many
If anything, my overall point is to emphasize a hypothesis-driven, data-centric view of both the internal and external factors of your business. You need to build a sufficiently fine-grained model to expose the different levers available to you to optimize, verify, and repeat. If you care about pageviews, for example, but are only measuring the virality of your product, then you are missing out on all the other contributing variables in your business.

To summarize – metrics like the viral coefficient give you understanding of:

  • For every user coming into your site, how many friends do they bring?

However, they don’t give you an understanding of:

  • How long will it take for you to saturate the entire network of users?
  • Do your customers love your product? Does it stimulate other positive emotions?
  • Is your product sticky? Does it generate a lot of pageviews?
  • Where does your traffic monetize well? And what methods of monetization work best?
  • When and how does your product fit into the lives of your customers?
  • Is your market big enough? Can your startup grow to be a billion+ business?
  • etc.

The point is, if you’re trying to create an equation for revenue, where the virality is one part of the business – don’t be lazy. Build models and conduct experiments left and right on your product, so that you are always iterating.

Summarizing my undergrad degree in one statement
For some, this might seem like a disaster – an overflow of data. That’s absolutely a danger, and this is exactly when you have to start making smart choices to understand what variables are important to measure and which ones aren’t. Folks like engineers, statisticians, physicists, and other applied sciences will relate to this thought.

My undergrad degree was in a variation of Applied Math, and when describing to my friends what I learned, I often say I didn’t learn much beyond one phrase:

All mathematical models of the world are flaws, yet useful in their own way

Any mathy types that want to swap notes on viral marketing and user retention, feel free to shoot me an -mail ;-) I’m always curious to see how other people are modeling their traffic.

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.

Views expressed in “content” (including posts, podcasts, videos) linked on this website or posted in social media and other platforms (collectively, “content distribution outlets”) are my own and are not the views of AH Capital Management, L.L.C. (“a16z”) or its respective affiliates. AH Capital Management is an investment adviser registered with the Securities and Exchange Commission. Registration as an investment adviser does not imply any special skill or training. The posts are not directed to any investors or potential investors, and do not constitute an offer to sell -- or a solicitation of an offer to buy -- any securities, and may not be used or relied upon in evaluating the merits of any investment.

The content should not be construed as or relied upon in any manner as investment, legal, tax, or other advice. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment. Any projections, estimates, forecasts, targets, prospects and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others. Any charts provided here are for informational purposes only, and should not be relied upon when making any investment decision. Certain information contained in here has been obtained from third-party sources. While taken from sources believed to be reliable, I have not independently verified such information and makes no representations about the enduring accuracy of the information or its appropriateness for a given situation. The content speaks only as of the date indicated.

Under no circumstances should any posts or other information provided on this website -- or on associated content distribution outlets -- be construed as an offer soliciting the purchase or sale of any security or interest in any pooled investment vehicle sponsored, discussed, or mentioned by a16z personnel. Nor should it be construed as an offer to provide investment advisory services; an offer to invest in an a16z-managed pooled investment vehicle will be made separately and only by means of the confidential offering documents of the specific pooled investment vehicles -- which should be read in their entirety, and only to those who, among other requirements, meet certain qualifications under federal securities laws. Such investors, defined as accredited investors and qualified purchasers, are generally deemed capable of evaluating the merits and risks of prospective investments and financial matters. There can be no assurances that a16z’s investment objectives will be achieved or investment strategies will be successful. Any investment in a vehicle managed by a16z involves a high degree of risk including the risk that the entire amount invested is lost. Any investments or portfolio companies mentioned, referred to, or described are not representative of all investments in vehicles managed by a16z and there can be no assurance that the investments will be profitable or that other investments made in the future will have similar characteristics or results. A list of investments made by funds managed by a16z is available at https://a16z.com/investments/. Excluded from this list are investments for which the issuer has not provided permission for a16z to disclose publicly as well as unannounced investments in publicly traded digital assets. Past results of Andreessen Horowitz’s investments, pooled investment vehicles, or investment strategies are not necessarily indicative of future results. Please see https://a16z.com/disclosures for additional important information.