I recently had a fascinating conversation with Bernardo Huberman, Senior HP Fellow and Director of the Information Dynamics Lab at Hewlett-Packard Labs.
Dr. Huberman is one of the creators of the field of ecology of computation, and is editor of a book on the subject. MIT Press published that book, The Laws of the Web: Patterns in the Ecology of Information, in 2001. He is one of the recognized experts in the dynamics of viral marketing and has recently published a research paper (PDF) with some of the best data on the topic.
Viral marketing focuses on leveraging existing social networks by encouraging customers to share product information with their friends. One of the quoted examples was the rapid development of Hotmail in the '90s, which grew from 0 to 12 million users in 18 months. But up to now it had been difficult to measure and model the effectiveness of viral recommendations.
A team composed of members from HP Labs, University of Michigan Ann Arbor and Carnegie Mellon University Pittsburg analyzed the data from a person-to-person recommendation network, consisting of 4 million people who made 16 million recommendations on half a million products. The team observed the propagation of recommendations and the cascade sizes, as well as established how the recommendation network grows over time.
Bernardo was able to draw key insights that all marketers should use as they develop word of mouth campaigns:
1. Viral marketing does not spread well
In epidemics, high connectors are very critical nodes of the network and allow the virus to spread. In recommendations networks, a few very large cascades exist, but most recommendation chains terminate after just a few steps.
2. The probability of viral infection decreases with repeated interaction
Providing excessive incentives for customers to recommend actually weakens the credibility of those links. The probability of purchasing a product increases with the number of recommendations received, but quickly saturates to a constant and relatively low probability.
3. Viral effectiveness varies depending on price and category
Social context has a high influence on the potency of viral infection. Technical or religious books, for example, had more successful recommendations than general interest topics. Smaller and more tightly knit groups tend to be more conducive to viral marketing.
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