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Pages: 274

Rs 350

The rapid spread of H1N1 (swine flu) across countries has underlined the power of a potent virus to propagate itself. The spread of viral disease is an unintended consequence of human action and interaction. But what if,instead of a disease,one tried to examine the power of human action and interaction to propagate something positive with an intensity that is greater than even a viral infection? That essentially is the rather interesting core of Adam Penenbergs Viral Loop.

The book is a fascinating treatise on the power of pass-it-on how if a business creates and sells something consumers really want,then the consumers can play a major role in propagating the product or service without the need for the creator/seller to spend vast sums on advertising and marketing. In todays world,dominated by big businesses with big advertising and marketing budgets,entry barriers for new entrepreneurs can be very high. But courtesy of the democratising influence of the World Wide Web and the concept of viral loop,new entrepreneurs have many opportunities to build a big business very quickly.

The books introduction lays the foundation for what follows with the case of Hot Or NoT,one of the very first viral loop companies set up in 2000 by 20-somethings Jim Young and James Hong. The duo set up a website where people put up their photographs to be rated on a score of 1 to 10 (depending on attractiveness) by all users a sort of online beauty contest for ordinary people. Once the site went live,they e-mailed all their friends to look it up. Tracking the hits,they suddenly saw a massive rise in traffic in just a few days. The friends told other friends who told other friends,starting a viral loop. After a while,Young and Hong began charging a monthly fee to access the site it brought the first revenues. And then advertisers followed,seeing the massive number of people who logged on to the site. In 2006,the duo sold Hot Or Not for $20 million. Here was a business which had virtually no costs,certainly not in terms of advertising and marketing,and yet through word of mouth and the Internet became a money spinner. At another time,Hotmail became a success with a similar viral loop effect. The next stage in viral loop businesses were networks on the Web business and social. The success of eBay,Facebook,MySpace and LinkedIn are explained by Penenberg. As is the success of peer-to-peer software like Skype.

So,is the book and,therefore,viral loop all about the Net and tech only? While the overwhelming focus is indeed on the Net,Penenberg does write about the possibility of the viral loop working in non-tech,non-Net businesses. In fact,as Penenberg points out in chapter 1,one of the oldest viral loop businesses was started by a certain Charles Ponzi,who conned a large number of investors in the US in the 1920s through what is now known as the Ponzi scheme. He offered some friends a massive return on their investment,who told other friends who then invested. He paid the return to the first investors using the money paid by the next set of investors. That created a very strong word-of-mouth propagation of his investment scheme. Needless to say,he pocketed the money of the subsequent investors without paying the return just like Bernie Madoff in more recent times.

Of course,the point of viral loop is not to start a Ponzi scheme,but viral loops are usually indifferent to business ethics. In any case,the Web now offers unlimited opportunities and audiences to run a successful business with minimal costs,all legitimately. In India,we may still be behind the curve on Internet usage. But well catch up. And then Penenbergs insights will be very useful for a whole generation of entrepreneurs.