Whoever speaks of viral marketing – on Internet, in marketing departments of huge companies, on marketing and Internet marketing forums – always brings its selling point: effortless exponential growth. However, is it truly exponential? No. Here is why.

It’s probably best illustrated with the traditional spiel of MLM marketers – a special case of viral marketing. They say something like:

You get $1 commission per month for every person in your downline up to level 5. Imagine that you recruited just 10 people, and then every one of then did the same and so on… Then you get:

You
1st level, 10 people 10x$1 = $10
2nd level, 100 people, 100*$1 = $100
3rd level, 1000 people, 1000*$1 = $1000
4rd level, 10000 people, 10000*$1 = $10000
5rd level, 100000 people, 100000*$1 = $100000

Total: $111,110 per month

Nice, isn’t it?

Saturation point

If you’ve been around the block a few times, you already know where the trouble is. Of course, recruiting 10 people is hard in the first place, but that’s not the biggest problem. The biggest problem is that it started long ago, and you are actually on the 10 or 20th level downline from the founder. What does it mean, to be on the 20th level? It means that if the logic above worked, the founder already would have downline expressed as one with 20 zeros afterward. Right, 100,000,000,000,000,000,000. For reference, all humankind is around 5 billion people, that’s 5,000,000,000, less than one with 10 zeroes afterward. See the problem? Almost everybody, who could be recruited, is already recruited. The product already hit saturation point.

Saturation point is one example, how viral marketing hits the ceiling, and once it happened – no growth. So, actual curve for viral marketing is never truly and exponent, but rather a curve like this:

Viral Marketing Curve

It’s exponential at the beginning, but hits its limits and stay more or less constant after that. In fact, you may start losing customers without a chance to acquire new one, in which case it may even go down.

Ok, if that’s not MLM and you decide to use some form of viral marketing, you are the founder. So why should you worry about saturation? You know, your product is great, there are millions of potential customers out there, and you will be very happy long before you’ve got even the first million of customers, right?

Capacity constraints

Well, there is a reason why you should in some cases. The problem is that market saturation is only one kind of capacity constraints, that is when you hit a limit on a resource, you need to grow. With market saturation you hit the limit of the market capacity, but there are other capacities, you may hit, for example:

When selling physical product, capacity of your suppliers, your manufacturing capacity, your processing capacity (too small space for inventory, too few people in shipping).
When selling Internet service, capacity of your servers or bandwidth. If you use Twitter, have you seen a picture of whale carried by little birds? It means that Twitter reached it’s backend capacity – throughput – and was unable to serve your request.
When you make money on personal services – like speaking at seminars or consulting, your own time.
Even if you sell informational product, you may hit bandwidth limits, your server capacity, or your own capacity to handle customer’s questions.

Not all capacity constraints are fatal or even bad.

In fact, sometimes, it may be good. For example, if you hit limits of your own capacity – 24 hours per day – it only means that you need to charge more for your services, which is hardly a bad thing for you.

And sometimes, it may be relatively easily curable. Two small inventory facilities or too few people in shipping are easily cured by oursourcing shipping or hiring more people. Still, that’s no good, because while you adapt, you lose sales and growth. In fact, you may lose so much of a growth that you may have to start all over again. Viral marketing is slow to start, so that could be very noticeable.

The worst thing about capacity constraints and saturation points, is that until you hit them, your viral growth is exponential. It means that once it comes, it comes very quickly. Have you ever heard the old puzzle about the lake and a weed?

A small weed got into a lake. Every day, it duplicates in size. It took 3 months to fill half of the lake. How long is it until it will the whole lake?

The answer is: One day. That’s the power of exponential growth and why capacity constraints are always hit very fast as soon as noticeable growth starts.

Let me explain how it will look for you, if you encounter this problem. You start viral marketing campaign. First day, almost nothing happens. Seconds day, the same. And so day in and day out. Occasional sale here and there, and that’s it. That’s the original growth period, when numbers are still low.

Then you beginning to get some business, but very little, barely noticeable. You are very unhappy, but still it’s better than nothing, and it slowly grows.

And then it grows a little faster, and a little more, and suddenly you are busy whole day. You are happy. You are kicking at full speed, your business is at last the money machine you dreamed of… and that’s when it happen, because the next day you are over your capacity, everything starts to fall apart, your servers are down, your support is flooded with requests, and you have tons of complaints…

Be prepared

So, what can you do? Be prepared. Expect bottlenecks coming to your business. Try to know the expected size of your market and how much of it you want to handle.

If you have a million customers market, there is no need to plan for million customers when you start, but understand that you’ll have to start much earlier than you intuitively may want to. Imagine a viral campaign that grows twice per day with potential market of 1,000,000 customers, your business is only ready for 100,000 customers and you needing a week to upgrade to server 1,000,000 customers. When should you start upgrade? 7 days before you reach 100,000 customers, right? How many customers you will have 7 days before that? 100,000 / 2*2*2*2*2*2*2 = 100,000 / 128 = 782. Right. You have capacity for 100,000 customers, but if your viral campaign brings twice more customers every day, you’ll have to prepare for million customers when you have only 782 customers.

Of course, this example is a little exaggerated. Most viral campaigns don’t bring twice more customers per day — and you should measure and see what the multiplicator is, but you’ve got the idea.

Even better, design your business to have no bottlenecks. Outsource whatever you can to large scalable specialized companies. It’s most likely that it may cost you less than hiring somebody directly. Of course, that may be not an option at the very beginning, but once you get it rolling, this may be your best choice.

And, of course, try to know the real size of your market. If the size of your market is your capacity constraint, if you hit market saturation point, that’s it. You will have to switch from customer acquisition to customer retaining, because that’s all you’ve got. Of course, considering the size of Internet and the fact that more and more new users join it daily, it’s really hard to hit market saturation point, but for some niche businesses that’s possible. If you did, you don’t need viral marketing after that. And, until it happened, worry, learn your market, plan ahead, and enjoy the ride.

Just in case, you’ve never heard of viral campaigns either. What is it?

Viral marketing is pretty much an old fashioned word of mouth, that is, any form of marketing, when people pass your message (including your offer) to each other on their own without you around. One of older (and somewhat special) forms of viral marketing is MLM, but that’s not the only one. iPod and iPhone gained popularity mostly through viral marketing based on popularity and exclusivity. Similar strategy was used for the Starbucks coffee. Hotmail won a lot of customers through a form of viral marketing, by including a signature “I am using free email service from Hotmail!” in every email sent using it. Each Hotmail customer was “infecting” everybody in his address book by simply sending them their own mails.

Sometimes viral marketing works in an unintended way. A great example is software piracy that helped to spread and widely adopt Microsoft Windows and few other Microsoft products. If Apple hardware was more readily available, and Apple software easier to steal, they could have become “the Microsoft” today. Granted, it has cost Microsoft a lot of money, but it have gave Windows a huge market share. In fact, no matter how much music industry complaints about piracy, teenagers swapping MP3 files is one of the biggest reasons for popularity of the top records. Of course, music and video industry has much tougher problem than Microsoft did: one have to be that good for the viral marketing (or piracy) to work, otherwise they just expose that you are trying to sell junk.

In a simplified form, to start a viral marketing campaign you have to provide something (link, eBook, story, literally anything you choose) that has three qualities:

1. People want it.
2. People want to pass it to other people.
3. It’s inseparable from your marketing message.

That’s it. Looks simple, is it? Alas, it is not, but if you do it right, the rewards are huge. Windows. Hotmail. iPod. Britney Spears.

Actually, here we are. This is exactly what the words “anchor”, “carrier” and “payload” mean.

1. An anchor – the reason why people want that thing that you give away. This is the value they get from having it. It may be new knowledge, monetary gain, self-esteem, or anything else, as long as they really want it.

2. A carrier – the reason why people want to give it to others. That’s the value they get from passing it to others. It could be status, monetary gain, respect of others, you name it.

3. A payload – your marketing message. A reason why you want all the trouble of creating it in the first place. That’s what you gain from sending that object out.

Forget about any one of them, and your viral campaign will stumble and die. Do all three right, and reap the results for years and years to come. Your choice.

Let’s consider article marketing. The idea is simple: you write an article; you submit it to an article directory; webmasters come and publish it on their sites; you get the links. Period.

Gurus on article marketing usually recommend to concentrate on the article directories with the top Alexa rank. By the way, here are the top 20 with Alexa rank, in case you are interested.

You see, there is more to say about an article directory than Alexa rank. For example, here, I picked up the proportion of the traffic coming from the United States as opposed to the traffic coming from India. So, if you want teh US traffic, gurus are right, the higher Alexa rank, the more traffic comes from the United States. Still, if you consider position 5, 6 and, 7, the seventh contender – Helium – would give you almost twice more US traffic than the 5th one – GoArticles.com. Interesting, isn’t it?

And if for some reason you want an Indian traffic, then you may want to consider a completely opposite approach, picking the bottom of this list. You may wonder, why would you want any Indian traffic in the first place?

First, there could be many reasons, especially, if Indian traffic comes much cheaper or with much less effort. I’ll discuss one idea later in a separate article, but consider two facts:

1. I published this article on ViralMarketingEtc.com, not on InternetMarketingPaterns.com. Why?
2. Check my article “What kind of viral network are you in?”
   Think, is the network of people, who’d buy your products, is the same as network of people, who would spread your viral report?

That’s just one idea how to use Indian Internet traffic. I’ll explain it in another article if you did not catch it. Anyway, there are more.

Viral marketing is a craze but will it work for you?

You may think, duh! Everybody’s doing this! It has to work!

Well, everybody was buying stock in 1999… until December, and then again in 2006-2007, until 2008. And everybody will chase another latest Internet marketing scheme or newest product today, tomorrow, in ten years.

The truth is, none of those techniques are silver bullets, but mot of them work if you know how to use them and when to use them. Viral marketing is not an exception.

So, will viral marketing work for you? It depends on what kind of viral network are you in.

Networks are different

You see, the only way to do viral marketing is on a network. It does not have to be a computer network, and even when you use Internet, it’s NOT actually a computer network, it’s always a social network, network of people. But networks are different, they have different, as mathematicians call it, topologies.

Topology is simply a pattern of a network. The simplest topology is a loose network, when you actually don’t have any connections and therefore no network at all, but just a bunch of disconnected people.

Loose network

That’s also the prime example of a network, where viral marketing does not work. That’s pretty much Internet marketers networks before the Internet.

Typical Human Network

Of course, people are connected and they were connected long before Internet. There is a research showing that every person on Earth is somehow connected to any other person on Earth with no more than six people between them. It means that you know somebody, who knows somebody, who know somebody (six times), who knows any person you can think of. The chain will be different for different people, but just asking for referral six times will get you to any person on Earth, President Obama, Pope, Oprah, you name it.

The reason is that a typical human has connections which are very similar to the connections of a neurons (brain cells) in our brains. Both have a bunch of short local connections (friends, family, neighbors) plus a few long connections (a friend and former coworker, who moved to another coast, college buddy who now works in Europe, etc.) These long connections allow to go the distance.

Imagine that you need a contact to Pope. You ask your contacts, if they know anybody in Rome. Somebody usually does. Then you contact that guy in Rome (that’s two connection, one local to your friend, and another long to his friend in Rome) and ask him for connection somewhere in the Vatican hierarchy, the higher the better. Rome is a very interconnected city, so some of his local friend smay have such connection. That’s two more connections, again, one local, one long. And then Pope is definitely reachable in one or two connections. It’s like, if you work at Microsoft, you certainly know somebody who knows Bill Gates. I am not saying that convincing all these people to get you to their connection is easy, it’s probably next to impossible in this case, but the connections are there.

So, here is the typical human network (local links in orange, long links in blue, and, of course, local connections are not necessarily four, they vary):

Typical human network

No matter what you do, this is the base network of what you have to deal with, because that’s how people are connected to each other.

General human network is a dream tool for a viral marketer because that’s exactly what it is for. This is how we learn from each other, this is how we pass knowledge, this is how we cooperate and build alliances. And that’s how we did that before schools, colleges, universities or Internet. However, unless you sell something that everybody needs, that’s not the network that will carry your message.

Interest networks

Interest networks are subsets of the general human network with only people interested in a specific topic. Suppose, you want to advertise to Internet marketers. Pick any other niche if you prefer, but that’s the one I will be using as an example. To make your message pass from one person to another you need both of them interested in Internet marketing. You may persuade your prospect to start bothering friends and family, but unless they are interested, it will be like getting untargeted traffic from AdWords: very expensive and totally useless. In fact, that’s exactly what is it like. You will alienate your prospect, you will annoy a lot of people, you will spend money and time doing so, and you won’t get the sales.

Now, the question is, does your prospect know somebody who is also interested in Internet marketing (or whatever you niche is)?

You can answer this question if you know the topology of the interest network for your niche, in our example, Internet marketing niche.

Imagine that people who are interested in Internet marketing are those marked green in this picture:

Interest network

In the example above, the interest network is basically a loose network with no marketing value at all. If this is your case, Google AdWords and other search engines and advertising networks are probably the only way to get the customers. And that’s a very expensive way to get customers, so if that’s the niche you are looking at, you may want to look someplace else.

Fortunately, most of interest networks have a much better topology. That happens because people tend to talk to each other about the things, they are passionate about, and spend more time with those, who are interested in the same things.

Hub Network

Most common interest network type is a Hub Network. Here is how it looks like.

Hub network

This is not the greatest network to do viral marketing, but it will work. In a Hub Network you have a few disconnected people with a lot of connections, and the rest connected to one or more hubs. Classic viral marketing does not work in a Hub Network, because most people are disconnected. However, once you get one of the hub people to carry your message, you bang for a buck goes wild. Naturally, most of hub people are well aware of their position and it probably will cost you money to make them publicize your message to their followers.

A classic example of a Hub Network is some low profit niche dominated by eZines. And guess why is it low profit? Because it costs a lot to advertise to it.

You may be temptet to think that Internet marketing niche has a hub network, but wait for a moment to see…

Guru Network

Guru Network is similar to the Hub Network, only in Guru Network hubs are very well interconnected. They know each other, they network on conferences, getaways and cruises, and they do Joint Vetures (JVs). Sounds familiar?

That’s how Guru Network looks like:

Guru network

Notice that the rest of the people are still disconnected, so there is no sense to torture them for email addresses of their friends. Guru Network is also driven by deals with hubs (”gurus”) and there is not much you can do with that. Is Internet marketing carried on Guru Network? Looks like that, however, that’s probably not the complete story.

Cluster Network

Cluster Network is a combination of generic network and loose network. How can it be possible? Here is how:

Cluster network

In a cluster network people are organized into small and large clusters. They are very well connected inside their clusters, but the clusters themselves are mostly disconnected. What it gives you is that once you hit a cluster, you are likely to get a lot more people from the same cluster. Clusters work as sort of multiplicators significantly helping to pass the message, however, your message does not go between clusters.

Cluster network is the last form before the generic human network, which is essentially cluster network with long connections between clusters. One intermediate version will be a combination of Cluster Network and Hub or Guru Networks, where those extra long connections are provided by hubs or gurus.

A good example of a cluster network are reading groups for marketing a printed book.

So, what’s in it for you?

Knowing your network is important, and it’s different for each niche.

Loose network is a tough one unless your margins and conversion allow you to swallow advertising costs (AdWords) and still make a profit. You can improve that with some continuity (e.g. mailing list) however, especially if you develop several products, including backend products to sell. What’s good about loose networks, your competition has similar problem when they are trying to steal your affiliate sales from you. On a loose network stealing is as hard as getting the customer. However, once you get the competition and it will start to do the same, your loose network may evolve into a Hub or even Guru network. Using affiliates to market your product on a loose network may be tough, because your affiliates will struggle and retention won’t be that good. Affiliate trains may be helpful in this case. That’s the type of networks, where you may want to think about PPC or PPC to CPA arbitrage, but test first if it works there.

Hub network based niches may work well for you as long as you have a unique proposition clearly distinct from niches used by hubs, but still addressing the same target audience. In this case, making hubs to promote your products through JVs may be not that tough to achieve.

On another hand, affiliate marketing in a hub network is somewhat difficult, because most people in it are already “infected” with hub’s affiliate IDs, and even if you get somebody to have your cookie, it’s likely to be overwritten soon by some hub, even if he promotes a different offer. Have you ever seen bonus offer ending with “Now, clean your cookies in the browser, go to this link and get the program. Once you do, send me the receipt to receive your bonuses.” Guess what does it mean? All your Amazon and Clickbank affiliate cookies are gone that instant from the prospect’s machine. That’s not even stealing affiliate commissions, that nuking them into oblivion.

Guru network based niches have about the same advantages and issues as Hub networks. One big difference is that because gurus are interconnected, and they collectively own one of the most important advertising channels, it’s your reputation among them that defines your success in the niche. Think about Hollywood.

And the last one, generic human network. It happens when your product has a very wide appeal. Think diet and weight loss. Think EXTRA income as opposed to replacing 9 to 5 with your own business. Think cosmetics. Generic human network is great for viral distribution and MLM. On another hand, it may be not that great for affiliate sales, because people are likely to pass the actual website, and not your message or your affiliate link to their friends. In other words, when it comes to on the generic human networks and unless you know some trick to sell there affiliate product, sell your own products there. And if it’s a physical product, you should be the retailer, not an affiliate. If you want to attract affiliates, you may want start creating automatic retail webstores for them. Cookies won’t do.

Now, how do you find out, which type of network you are in?

Yes, that’s the tough one. I’ll write about that soon.