December 13, 2006
Nisan Gabbay is a former analyst at Sierra Ventures and the author of Startup Review, a blog that provides in-depth case studies on successful Internet startups.
The near overnight success of companies such as YouTube, Facebook, Flickr and Digg has motivated a slew of us into believing that we too can create the next big thing on the Internet. But does your idea truly have the potential to attract millions of monthly unique visitors in less than two years time? To create a high traffic consumer Internet service in under two years, the company must exhibit one of two characteristics. It must either be a true viral marketing candidate (likely a communication service at its core) or it must be a strong candidate for leveraging natural search traffic. I will elaborate on both these points in the following paragraphs.
Is It Viral?
First, I think it is important to distinguish between word of mouth marketing and viral distribution. While any compelling Internet service can benefit from word of mouth exposure, not every compelling consumer Internet service possesses the proper characteristics to rely on viral distribution. I’d like to propose a new definition for what qualifies as a viral Internet service. A viral Internet service is one where each new user must involve friends to derive personal value from the service. This is best exhibited by communication and hyper-social services. Xfire is an IM service for online gamers that grew from zero to 5M+ registered users in about two years. Every user that downloads the client cannot receive value from the service unless the friends that they want to communicate with also have the service. Telling a friend is not an option; it is a necessity in order for the user to derive value from the service. Skype is the same way. How about social services like YouTube or Flickr? The main purpose of these services was a way for friends to share video or pictures with each other. Although not a pure communication tool like Xfire or Skype, users of YouTube or Flickr derive the main value from the service by showcasing videos or pictures to their friends.
Perhaps more telling than the successes described above is taking a look at great consumer Internet services that have not exhibited viral growth. Let’s take a look at the job search site SimplyHired. I think SimplyHired has probably built the best web-based job search application on the Internet. It’s a great product and I recommend it to people all the time – so it does benefit from word of mouth. However, the user does not need to tell friends about the service to derive their own personal value from it – hence it is not a viral service. This is the same problem that I believe many new vertical search engines suffer from – there is not enough incentive for users to tell their friends about the service, even if it is a great product. In fact, the majority of consumer Internet sites don’t lend themselves to viral distribution – most content, search, and e-commerce sites are unlikely to be good candidates. This is not to say that you can’t build a successful company in these spaces, however, they are unlikely to be overnight successes. Although it is easy to incorporate viral feature sets into any Internet service, actually getting users to utilize these features is quite hard unless they recognize the value they personally and immediately will receive by involving friends.
The other option to getting big, fast is leveraging natural search. Natural search traffic comes from having your website rank highly on Google and other search engines. The success of Digg can largely be attributed to its success in achieving high natural search rankings, rather than social communication feature sets. Digg’s initial user base of tech enthusiasts provided massive web linking in a very short period of time. By collecting lots of inbound links, Digg submitted stories began to rise in the natural search rankings. This set the stage for a key exposure point in Digg’s history: the Paris Hilton cell phone hack story. One of the first bloggers to break the Paris Hilton cell phone hack story submitted the story to Digg. Because Digg was ranking highly in natural search results, when people searched for this story on Google and Yahoo, the Digg landing page was one of the top ranked results. This directed a large amount of traffic to Digg, and serves as a good example of what continues to fuel Digg’s growth. Other Internet success stories like Rotten Tomatoes, About.com, and Zappos were built on the backs of natural search.
Natural search is a vitally important distribution option for Internet services that can’t rely on viral distribution because it can provide the same kind of massive consumer exposure at no cost. Natural search can level the playing field for a start-up because it doesn’t require consumers to know your brand to discover your service. For example, the highly popular Rotten Tomatoes movie review site gets 70% of its traffic via natural search. This is because consumers search for movie titles and actors by name, not for movie reviews or Rotten Tomatoes specifically. Even though Rotten Tomatoes has some great community-building feature sets and is widely considered an excellent social service, the management team recognized that natural search would be their key to achieving wide consumer adoption. Zappos was able to build its business because consumers know how to search for well-known shoe brands like Reebok or Kenneth Cole, even if they don’t know the Zappos site by name.
In conclusion, if you want to create the next overnight consumer Internet success story, you’d better have a service that is a true candidate for either viral distribution or leveraging natural search.