How to make viral startups with analytics
I wanted to talk about taking a really mathematical approach towards growing a
startup you’re creating. One of the slides in Dave McClure’s presentation that
really made sense to me in doing this and a method taught to me at
Slide was this concept of the “viral growth factor.”
Mixpanel, our analytics service, can help you track
Lots of mainstream widget/application companies take this seriously as an
early predictor of how a new application they are building is going to
succeed. This obviously is not limited to application companies, this works
for anyone that wants to see growth in visitor traffic.
So let’s break it down, though Dave really did a great job, with an example.
With SuperPoke, a Facebook application by Slide, Inc, will have an X that is
the number of users who poke their friends (thereby invite them to the
application), their Y will be the number of users that a user pokes (there’s a
mass poke feature so 100s of users can be poked in one session), and their Z
is the percentage of users who essentially accept the poke and go to the
application. Z is interesting because those users can funnel back into X and
recycle the process again creating near-exponential growth.
Ideally you want to make all three variables: X, Y, Z as high as possible but
sometimes you can easily just focus on one which is why analytics here are so
Z is easy to figure out because it’s going to be rather constant and easy to
predict, 10% of the users invited may accept, this is just the click through
rate. Analytics can help optimize your Z to get the highest rate of return but
it’s difficult to get it really high, such as 70%.
Y depends, with application companies Y is easy achievable by just defaulting
all friends to be selected or a “mass select” all function and this can give a
false representation of how “valuable” your application is, we’ll talk about
that later. Facebook did really well due to Hotmail email importing and
thereby achieved a high Y for distribution. Figure out what your Y is and
come up with ways to increase it, word of mouth is difficult to come by. You
have to be quite clever with Y by letting users “poke friends” or “share
songs” which are better avenues than simply explicitly asking the user to
invite their friends.
X is by far the hardest part of this equation and if your X is bad this whole
thing falls apart. In some cases, I would say getting users to invite their
friends can directly correlate to how “valuable” or “interesting” your
application really is. The best part of X is, you really control it, you can
get this to be really high if you make something great.
Elfyourself created something very entertaining and
I am sure they had a lot of users inviting their friends because the
application directly involved their friends in the movie.
I would say the most important one is the one you have the most control over,
if you can augment Y to be a lot of users quickly then it’s definitely worth
it. Once you’ve got the equation close to 1, use analytics to optimize all
parts of this equation to maximize your potential.
With SuperPoke, it becomes more obvious, X these days is the only variable
they can focus on because they already have maxed out or optimized Y and Z so
creating immense user-value is going to be priority to grow faster.
A common pitfall
A lot of widget/application companies went down this path: if you can achieve
really high Y (mass inviting by default) you can easily achieve large
growth but there is a problem. If your visitor retention is so low eventually
you can fatigue users so much that your Z (acceptance percentage) can start to
fall. This is what happened to lots of application companies. they invited
100s of users but the acceptance rate started to dwindle but when they had
millions of users, those users rarely came back and eventually these companies
hit a saturation point where their user-base declines everyday. Make sure your
product has a high X (which can correlate to user value) or have a plan to
We encourage all of our clients at Mixpanel to take
this approach to building their startup if your goal is visitor growth since
we have the tools to help you track it. If you’re new to Mixpanel, check us