Oslo, Norway
r.jacobsson91@gmail.com

Let’s go viral!

Let’s go viral!

Viral? What exactly does that mean?
And how does it work? Well, let me break it down for you.

Viral is when a certain type of information, for example a video or an image, is suddenly known worldwide. This is because of the power of the internet and how fast information is reaching the whole world in todays society. When people share a post on Facebook, Twitter, Instagram and so on, if people find the post interesting – they will repost it.

If I would somehow enroll 5 people and ask them to enroll 5 new people and so on, this process would only be possible to do 13 times before the whole world is “covered” and even more than today’s population.

Now that’s what I call a viral growth!!

But how is this related to network effects?
“Network effects occurs when each new user of a product or service creates value for existing users of the product or service” is a definition I personally understood very easily. But the network effects is generated by the power of how much the network can grow and depending on how much and how fast it will grow, this is what creates the viral growth.

Transaction costs play a big roll here as well, they affect the network effects for customers. Transaction costs is the steps in a purchasing process – the time it takes to find the right product, finding information about the product, how many options do I have – which model is the best? And so on…

Satisfied members is what makes your network grow, it’s logical – if you think about it. For example, you’re a member at a gym, the more satisfied you are and the more you talk about all the positive things concerning that gym – you will spread the word. And eventually more people will be interested in the gym that you go to.

This is how a network grow fast. By words. The more members the bigger value of the network, and the bigger the value of the network – the bigger value with the members. By talking about it, sharing or posting information online, or even Likes on social media platforms will help the network to expand. And by expanding – this will give the viral growth a boost.

 

Increasing returns is for example iTunes,  where you invested in a digital service that you can use multiple times, without needing to invest more. The more people who use your service the better profits you get.This is also a way to receive feedback within industries, businesses and markets. “Increasing returns are the tendency for that which is ahead to get further ahead, for that which loses advantage to lose further advantage” (Harvard Business Review, 1996).

But how are all these things connected?
To make sure that we get the best opportunities from our viral growth, we have to understand that the transaction costs are important to follow up. They affect how much the network effects will expand and will help to determinate the size and attractiveness of what you have. And the things you have left is called increasing return.

Sources:

Leave a Reply

Your email address will not be published. Required fields are marked *