How viral marketing works
Dug out of an old Less Wrong drafts folder at the end of 2010 and sent to Michael Vassar. The argument: web companies haven’t made marketing irrelevant; they’ve made it more important. The trick is that companies like Facebook get their users to do the marketing for them, in a way that the old “build a better mousetrap” story never required.
Eliezer Yudkowsky once said , “You have a rather idealized view of academia if you think that they descend on every new idea in existence to approve or disapprove it. It takes a tremendous amount of work to get academia to notice something at all — you have to publish article after article, write commentaries on other people’s work from within your reference frame so they notice you, go to conferences and promote your idea, et cetera.” This principle applies to, not just academia, but the world in general. For the most part, it takes a tremendous amount of work to get anyone to notice anything.
The Web has not made marketing irrelevant. What the Web has done, if anything, is to make marketing even more important than it was already. Consider the magazine market in 1990. What did it take to successfully run a magazine? Marketing skill, of course, but you also needed things like capital, distribution, a printing shop, a graphics design team, paid professional writers. Nowadays, you don’t need any of these. But people still have a limited amount of time — one person can only read so many magazines. Some factor must let people choose between them. What moves in to pick up the slack? Largely, marketing.
The way the Web fools people is a little subtle, since many Web companies don’t have a large marketing department or a big advertising budget. Facebook doesn’t run advertisements. It doesn’t have a huge PR department, with thousands of people who talk to reporters and try to get Facebook in the news. It doesn’t call people up and try to sell them anything. How can it be doing more marketing than, say, the local piano company, which runs ads in the newspaper all the time?
The answer is that a lot of Web companies have come up with an ingenious plan: hire your users to do the marketing for you, in exchange for their use of your website. Suppose it’s 2006, and Joe Schmo, a random member of the public, signs up on Facebook. What does he need in order to use Facebook? Well, he needs Facebook’s software and databases. But he also needs his friends to sign up — if none of his friends are on Facebook, the service is useless. So, of course, he asks all of his friends to sign up on Facebook. In effect, he’s paying for Facebook with time instead of money — instead of paying for the service, he is required to spend time marketing it in order to use it effectively.
How is this different from people just telling their friends about something they like? In the pre-marketing days, if I built a better mousetrap, and you bought it and it worked well, you might tell your friend about it (this still does happen sometimes, e.g., with Apple computers). And for that to happen, I don’t need to have a marketing strategy — I can just concentrate on making good mousetraps. The incentives are directly aligned; I am motivated to do those things, and only those things, that actually help my customers. With Facebook, on the other hand, the user benefits directly from evangelizing the service. If I buy an Apple laptop, and then recommend it to my friend, there’s nothing in it for me. But with Facebook and MySpace and Twitter and FarmVille, each time you refer one of your friends, it directly makes the service more useful for you. So all these companies aren’t really a return to the old days, where good ideas and products spread by word of mouth; they’re a sign of the new days, where only things painstakingly designed to spread by word of mouth spread by word of mouth.