Viral Marketing: Free Hamburgers For Everyone

The Myth Of Viral Marketing: Free Isn't Free, It Needs To Be Monetized 

A hamburger restaurant gives away free hamburgers and fries daily to
over 5 million people. 



A car maker gives away 1 million hybrids per month.

A bank gives out $100 to everyone that walks in the door.

A Web company offers a free widget that's installed by 1 million users.



All of these could be considered "viral" marketing successes --
according to the marketing department.

The problem is that unless these companies can turn these campaigns into
revenue and earnings then it's all for naught.

In other words, it's time to debunk the notion of "viral marketing."

I've seen hundreds of companies in the past 15 years try and build
businesses on this notion. Yet unless the business has an underlying
revenue model then being viral is basically throwing money out the door.

That's why companies such as YouTube have struggled to monetize their
asset. Streaming videos hundreds of millions of times per day simply
costs more than YouTube is able to generate. Anyone doing analysis on
bandwidth costs would find their model challenging. YouTube a consumer
success? Yes. A *commercial* success? No.



The challenge is to balance viral with revenue making services, and
that's where many fail. 

Most opt for some form of "let's plug in Ad Sense" as their revenue
plan. I was an early investor in Ad Sense (before Google acquired it)
and know it well. Ad Sense is great for individuals but not a revenue
strategy for a large-scale business. Why? Click throughs on ads (any
ads) are dismal. Great would be 1% click through. Most likely it's
.001%. The winner in Ad Sense is Google as the bookmaker for ads, not
you.

A good example of a company that has figured out viral and revenue is
Craigslist. Now I'm not a big fan of Craigslist's look and feel but he
has figured out a way to offer up free classifieds and charge for a few
things such as job postings and apartment listings. Craig also has been
smart in keeping staffing to under 30 people. Had he tried to "go viral"
and plug in Ad Sense or any advertising years ago it may have tanked his
service. He kept it free and charged where he could, generating more
than $1 million per month. He could get a lot more without compromising
the service also. But that's for Craig to figure out, my business
development ideas aren't free.

Casual observers will also see something widespread in usage and call it
viral. Not so.

For example, eBay was moving along at a slow pace until it landed a deal
with AOL in 1998 to be the auctions on AOL. That one deal propelled eBay into
the mainstream consumer space online.

Google is often hailed as a huge viral success. Yet it actually was
built by business development (not viral marketing). Google struck deals
with AOL and Yahoo in the late 1990s that made Google the search provider on those sites.
Not viral. It took Google's biz dev guy 1 year to get Yahoo to say yes.
1 year! that's the kind of persistence it takes to win.

Going back to the beginning of the viral notion. In my book it's
Netscape. Over 1 million software downloads in a month back when it
first launched (1995). And Mosaic before that was also a viral success.
That's why Kleiner Perkins invested in Netscape. Download rate. And, for
awhile, Netscape became a business selling software (server and client).
It also sold links on its homepage to Yahoo and other search engines
that also bought exposure to consumers (again, not viral). 



Hotmail is cited as one of the first viral successes. I remember its
founder sharing the growth rate with me when it first began.  It was
incredible. Microsoft soon acquired Hotmail for $400 million in a bid to
jump start its own consumer Internet services such as MSN. So there was
a value in reach for Microsoft as opposed to a revenue/earnings
acquisition.

At the end of the day (beginning, too) it's not how viral something is
as much as how do you build a business with a clear way to monetize
customers. There needs to be a balance between viral, business
development and ways to monetize the customer base if you want to build
a scalable and long-lasting business.