Taking viral for a loop

If you haven’t read the article on DIY social network site, Ning, and its “tech hottie” co-founder Gina Bianchini in the May 2008 edition of Fast Company, don’t. It’s an advantage to the rest of us who have aspirations of becoming Web 2.0 millionaires. Bianchini and techgod business partner Mark Andreessen (Netscape and Opsware founder, Digg investor) have taken a mathematical model and turned it into a predictably expansive jackpot. Of course, at first glance, it’s not hard to overlook the brilliance of what they’ve done.

Graphical representation of a viral loop - very cool....

It’s pretty easy to get caught up in the social media craze these days – everyone seems to be doing it. With ad agencies opening up dedicated social marketing offshoots, site owners scrambling to inject ‘community’ features into their offering and Facebook receiving a paper valuation in the tens of billions in spite of having no discernible model for revenue or sustainability, the bandwagon is filling up quickly. That’s why when you hear about Ning, a site that lets users create their own social networks, it’s easy to think – “oh that’s cool, throw another log on the fire I guess”. That is until you realize the principle behind the ‘viral looping’ that makes Ning sing.

Illustrated above, Ning is actually an ingeniously designed mathematical accomplishment based around what those in the know call a ‘viral expansion loop’. This is a very powerful phenomenon which has been harnessed to its fullest by the Ning model, as the article’s author Adam L. Penenberg describes:

Ning grows because each new user begets more users. Every time someone sets up a social network, he has no choice but to invite friends, family, colleagues, and like-minded strangers to sign on as well. The company calculates that each person signed up for a Ning group is worth, on average, 2 people, compounded daily: On day two, that individual brings in 4 group members and on day three, 8; within a week, she has brought in 128 people. Which is how Ning has been able to grow at a daily average of more than .4% and add 500 new groups a day, doubling roughly every 137 days.

Now let’s be honest here – who wouldn’t want their business to double every 137 days? And who wouldn’t want to be able to predict that growth with certainty? The cherry on top of this sundae (and the real hook for this nitch-lover) is that each community created in Ning is clearly defined by its creator and revolves around a highly targeted interest which allows for, say it with me now, c-o-n-t-e-x-t-u-a-l a-d-v-e-r-t-i-s-i-n-g. Wow! A social network with a business model?!?! Surely it can’t be true!

If you scan through the online comments on the article as well as the blogosphere, you’ll see that there are many who have written this article off as advertising / hype / anything but journalism. But I happily endorse Mr. Penenberg’s piece and the good folks at Fast Company for reminding us all that when we look back on these early days of the social age, the true success stories – the sites we’ll remember – will be the ones that found an audience and had a plan for what to DO with them once they were hooked. In five years we could well be looking back at Ning as the eBay or Amazon of Web 2.0 and facebook as the govWorks.com – the site that got lots of hype that it ultimately could not sustain by doing actually turning a profit.

Now if you’ll excuse me, I’m off to work on my own million dollar idea before you beat me to it…

  • http://blog.pmarca.com Marc

    Hi Nitch,

    This isn’t the case. Really Ning is falling far short of doubling every 137 days. Gina says that the porn networks are something we should discourage, so this is hindering Ning’s growth. Her photo spread & layout in Fast Company doesn’t seem to match her convictions, but that’s another story.

    Also, joining facebook’s board of directors should tell you something about where I stand on this issue. More money will be made with the options I get as a facebook board member than the ownership I have starting and funding ning.

    Go read my blog!

  • Andrew

    Marc – appreciate the comment and the inside scoop! I’ll definitely take a look at your blog…