The virality model Sean Parker taught the early Facebook team

Um, so virality. So Sean Parker has this model that he taught, or he told us about when he. When. When I joined Facebook, which is to think about virality for a product in terms of three things. First is payload. So how many people can you hit with any given viral blast? Second, he had cooler words for these. I'm not quite as cool. Second is conversion rate. And third is frequency. Payload, frequency and conversion rate, whatever that would have. So how many people can you hit at once is payload, how many times can you hit them? Per blast is frequency, and what are they going to convert at? And that gives you a fundamental idea of how viral a product is. So Hotmail is the canonical example of brilliant viral marketing. Right back when Hotmail launched, there were a bunch of mail companies that had been funded and they were throwing huge amounts of money at traditional advertising. How many people know the Hotmail story about virality? Awesome. Great new audience. Sorry, there's two or three people will be bored. But Hotmail, back in back at that time, people couldn't get free email clients. They had to be tied to their isp. And Hotmail and a few other companies launched and their clients were available wherever you went. You could log in via library Internet or whatever, school Internet, and be able to get access to that, which is a really big value proposition for everyone who wanted to access it. Most of the companies went out there and did big TV campaigns and billboard campaigns and newspaper campaigns and things like that. Bought a lot of advertising off Yahoo, all of those things. But the Hotmail team didn't have as much funding, and so they had to scrabble around to figure out how to do it. So what they did was add that little link at the bottom of every email that said sent from Hotmail. Get your free email here. Now, the interesting thing is that meant the payload was low, right? You email one person at a time, not necessarily going to have a huge payload. Maybe you send around some of those viral spam emails, but then I'm not sure I'll click on your link. The frequency is high, though, because you're emailing the same people over and over and over, which means you're going to hit them once, twice, three times a day with that same link and really move up the impressions. And the conversion rate was also very high because people didn't like being tied to their ISP email. And so Hotmail ended up being extremely viral because it had high frequency and high conversion rates. Another example is PayPal. PayPal. PayPal is interesting because PayPal has two sides to it PayPal has the buyer and the seller side. The other thing that's interesting about PayPal is its mechanism for viral growth was ebay. And so you can use all kinds of things for virality that may not look necessarily obviously viral. So PayPal, if you sent money, if you said to a seller, I am going to send you money, like, I can't think of a higher conversion rate. Frequency was low, payload was low. But PayPal did this thing where they gave away money when you got your friends to sign up for PayPal. And so that's how they went viral on the consumer side, they didn't have to do that for sellers because if I said, I am going to send you money via this, you will take that. And even on the consumer side, they went viral because someone said, sign up for this thing and you'll get 10 bucks. Why wouldn't you? So they were able to go viral, but in both cases it was because their conversion rate was incredibly high on the buyer and the seller side, not because their payload and frequency was high. Make sense? So this is a really good way to look at virality. If you want to say, is this product viral? Facebook was not viral via email sharing or anything like that. Facebook was purely viral by a word of mouth. Because the interesting thing about PayPal and Hotmail is to use them, the first person had to send an email to someone who wasn't on the service. With Facebook, there's no native way to contact people who aren't on the service. And everyone thinks of Facebook as like viral marketing success. And that's actually not how it grew. It was word of mouth virality because it was an awesome product you wanted to tell your friends about. How's everyone doing? Is this interesting? Great question. Yes.

When you're talking about this low payload in both those examples, in the later rounds, as this sort of campaign or whatever you want to call it gets going, are you going to have a much higher payload as more and more people are sending hotmail to more and more folks? And that way your payload grows and grows and grows.

So the question is, in the first round it makes sense that it has a low payload, but in later rounds, aren't you going to have higher payloads as people send more and more and more emails? I guess in my head, well, first and foremost, I think you actually only send emails to a small number of people. So compared to the massive viral engines that exist today, where you import someone's entire contact book and send them all an email, or where you post to everyone's friends on Facebook, the actual payloads are still very small. Even if it's everyone that you email on a frequent basis you hit. And I'm also thinking, really, per email sent out, how many people are on it? But it's a fair point. Yeah, as more people get on Hotmail, they'll send more emails. As more people use email, the product actually grows more and more successfully. So that's a fair point. Go for it. Doesn't point of conversion also matters. So like, fortunately, you just click and you sign up.

But if you see a billboard ad, it's.

Completely agree. That's why. Oh, sorry, doesn't point of conversion matter as well? So on Hotmail you click to sign up, but on a billboard you have to remember the URL, go to the website, type it in, find the registration button, click register and sign up. Yes, yes. Anything you can do to move friction out of the flow. And going from an offline ad to an online ad removes huge amounts of friction from the flow, obviously. Totally agree with that. One more at the back.

Frequency and conversion related.

Aren't frequency and conversion rate related? Absolutely. If you hit someone with the same promotion, I repeat to that. Aren't frequency and conversion rate related if you hit someone with the same email over and over and over again or the same banner ad. This is one of the things that's fundamental about online marketing. The same rules apply to every channel. If you hit someone with the same Facebook ad over and over and over. The more times you hit them with the same ad, the less they'll click. That's why we have creative exhaustion. You have to rotate creatives on Facebook. Same with banner ads. Same with newsfeed stories. The 50th time you see that IQ story in your newsfeed, you are not going to click on it. If you haven't clicked on the 49 before, you're not going to click on the 50th. The same is absolutely true with these emails. So if you send the same email over and over and over to people for an invite, or if you send the same little link at the bottom over and over and over to people for Hotmail or I mean, the PayPal one's different because people just signed up. But yes, you will get lower conversion rate. And the more you hit someone with the same message, the less they convert. Is fundamental across every online marketing channel. Every online marketing channel. Cool. Second way to look at virality, which I think is awesome, is by this guy, Ed. And Ed runs the growth team at Uber now. He was at the growth team at Facebook and he was a Stanford MBA student, did a, a class similar to this where they talked about virality and they all went and built viral products and there was a bunch of press about that actually. And he's brilliant at this stuff. The interesting thing about Uber is if you look at their growth team, they're incredibly focused on drivers because as a two sided marketplace, they need drivers. That's a huge, huge chunk of their focus as a team. Even though they've got like probably the best viral guy in the world at the company. So with virality you send out, you get someone to contact import, let's say, then the question is how many of those people do you get to send imports? Then the question is to how many people? Then how many click? And you can put extra steps in this. You could put how many open, how many click, whatever, how many click, how many sign up and then how many of those imports. So essentially you want people who sign up to your site to import their contacts. You want to then get them to send an invite to all of those contacts. You want to get it to all of those contacts, not just one of them. Then you want to get a percentage of those to click and a percent of those to sign up. If you multiply out the percents at every point in this, this is essentially where, well, this isn't a percent, this is a number. If you multiply those out, that's essentially the point where you get to the question of what is the K factor. So if you have when someone imports, if on average they send invites to 100 people, sorry, doing that wrong. Let's say 100 people get an invite per person who imports and then of those 10% click, that gets you to 10. And then of those, let's say 50% sign up, that gets you to 5, and then of those only 10 to 20% actually subsequently import, you're going to be at a point where you're at 0.5 to 1 as your K factor and you're going to not be viral. So a lot of things like Vidi are very good at pumping or were very good at pumping out stories that got the K factor over one, and it's perfectly doable to get the K factor over one. But if you have something that doesn't have high retention on the back end, it doesn't really matter. So you should look at your invite flow and say, okay, what is my equivalent of import? How many people per import are invites sent to? How many of those receive clicks? How many of those convert to my site. How many of those then import to get an idea of your K factor. But the really important thing is still to think about retention and not to think about virality. And only do this after after you have a large number of people retained on your product per person who signs up.