VIRAL LOOP - The Power of Pass-It-On: ADAM L PENENBERG

VIRAL LOOP

The Power of Pass-It-On

ADAM L PENENBERG

Hachette India 2009

Pp. 221       Rs.350

Here it is! The power of pass-it-on – the astounding effects of referral marketing, the wonders of mouth-to-mouth advertising. Only, this is all virtual …and the expansion hyper-exponential. It’s multi-level marketing (MLM) gone berserk.

MLM giants like Amway, Tupperware and others thrive on this concept of consumption and sales by consumer-dealer initiatives – a concept that goes beyond franchising, where each franchisee (of sorts) is a franchisor (of sorts)… and virus like the business spreads. The viral business model is not new, says Adam Penenberg. The infamous Security Exchange Company (Charles Ponzi: December 1919) also worked on this concept: the typical rob-Peter-to-pay-Paul scheme. The development of Tupperware on the other hand, covers the pioneering efforts made by Brownie Wise to get Tupperware sales spiralling even beyond the company’s production capacity – only through patio parties; it also describes Wise’s unwise decision to join the company as an executive, where she was the ‘effervescent face of the company’ for around eight years … only to be fired by Earl Tupper ‘tired of Wise receiving the lion’s share of the credit.’

On the net of course, you forward the ‘forwards’ that fall into your inbox, (the painful price of emails) and somebody somewhere prospers. The crucial difference is that in the ‘traditional’ MLM everyone prospers while in the internet schemes it is only the originator of what Penenberg calls the virus. And if you ever wanted to have a readable account of how several of these companies came to be set up, and flourished, this is the book. 

The companies covered here are not the ubiquitous sweatshops (however ‘air-conditioned’ they may be) of the third world, leveraging time zones to the advantage of other ‘worlds’. Here we have virtual-brick-and-nebulous-mortar moving through whatever it takes to traverse the World Wide Web – and the path to prosperity. The first of such companies is ‘Am I Hot or Not?’  - which started out as a lazy Heineken-soaked October-2000-afternoon session where the criteria for ‘rating’ an unnamed woman were being tossed between Young and Hong – a discussion, which the author assures us, was the ‘logical outgrowth of a broader discussion they had been having about Web services.’  At a time when web services were mainly B2B, the entrepreneurs mused over the creation of a consumer friendly site “that would appeal to regular people”. They went on to launch their website that they sold two years later for $20 million.

Some of the other companies mentioned are Hotmail, eBay, PayPal, MySpace, YouTube,  Facebook, Digg, LinkedIn, Twitter, Flickr, Mosaic (which helped transform the internet from a ‘playground for geeks into a mass market phenomenon’), Netscape (which collapsed under the barbed strategy of Bill Gates and his Internet Explorer) and Ning (with its double viral loop and ‘collective curation’ – where the audience decides what’s good and passes it on). There’s an interesting analysis of the ‘Viral President’ referring to Obama’s strategy for his campaign that inter alia (“forging ongoing connections with the candidate”) brought in $750 million over a period of two years.

There are stories of how brick-and-mortar companies have also been caught in the viral loop – sometimes inadvertently – and prospered beyond imagination. Mentos for one, minted money out of a show by ‘two goofy guys’ (actually one was a professional juggler and the other a trial lawyer). Knowing that Mentos dropped into a coke bottle would cause an explosion, they tried it – with over two hundred bottles ‘in an intricate design’ and over five hundred mints. The video (available now on http://www.eepybird.com/exp214.html) was downloaded 20 million times, with 215 million mentions of Mentos in TV, Print or radio stories, amounting to free publicity of approximately $10 million to the company. Mentos’ sales climbed 20% during this period, to level off at 15% higher than they had been. Of course Coca-Cola also prospered: diet cola which till then showed flat sales, rose by 5 to 10% according to an unconfirmed statement.

Then there is the company that sells ‘real stuff’ over the net. Originally called AuctionWeb, now eBay, the site launched in mid-1995, hosted 28,000 auctions in October 1996, 200,000 in January 1997. 2005 had 181 million users. eBay bought out PayPal for $1.5 billion & Skype for $2.6 billion – bringing out the ‘stackability’ of programs – a concept to which the author devotes more than one chapter. AuctionWeb/eBay was started by Pierre Omidyar who resented that his on-line application for an IPO was delayed, resulting in his paying 50% extra. Constructive ire, mi dyar!

We will in conclusion permit Penenberg some liberty with one of Winston Churchill’s gems: Never before in human history has there been the potential to create wealth this fast, on this scale, and starting with so little. A powerful paradigm-busting phenomenon precisely presented.