Tim Draper & Viral Marketing Stats

Viral marketing seems to be a part of every startup's business model these days. The bottom line is that viral growth is easy to talk about but hard to execute. In fact a good deal of luck is involved in any successful viral marketing campaign. Many entrepreneurs would like to believe that their product will grow virally because it takes the burden off of them to build a more credible business model. Check out these slides from a talk that Tim Draper recently gave (via Paul Kedrosky), which show interesting stats on page 5 (of the pdf) detailing the month-by-month growth of Hotmail and the a comparison chart of the month-by-month growth of ICQ, Hotmail, Skype and Kazaa. Both of the graphs show amazing growth and all of the companies had at least 5M users within 12 months.

These numbers are both outstanding and totally unattainable for 99.99% of startups. Most products just aren't viral in nature the way that Hotmail, Skype and ICQ were and its a lot easier to spread the word when the current users facilitate the recruitment of new users simply by using the product. Sure there are a couple of other similar wildly successful stories like Facebook and MySpace, but even LinkedIn, which is a great viral growth story took nearly 3 years to hit 5M users. Anything that has a social networking component will lend its self to viral marketing more naturally, however, the social networking space is getting pretty crowded.

My advice to all entrepreneurs is build a business model based on inside sales, channel sales, direct sales or direct marketing. Viral marketing should be encouraged through "tell a friend" buttons and other more creative ideas but relying on it as the primary driver of growth is totally unrealistic. If viral growth takes off, great, but don't hold your breath.

6/7/06 UPDATE: I'm not suggesting that startups shouldn't employ viral marketing tactics. In fact, I believe that all startups should employ viral marketing tactics because they are so inexpensive to deploy that the cost of customer/user acquisition will still probably be the lowest of any sales/marketing efforts even if the campaign is relatively unsuccessful. My point is that most venture fundable startups will not be able to achieve the type of growth rates necessary to sustain their businesses without deploying another business model (inside/channel/direct) as the primary driver of growth.