Thanks to one of the many other blogs I read, Techdirt, I found a very interesting article on Ning and Viral Expansion Loops. Techdirt’s article, Building A Viral Business Isn’t About Alchemy, is a bitter, yet fairly accurate summary of the article. Adam Penenberg like all writer try to fit everything in a neat wrapper and Techdirt calls him out, but there are the good points and the bad on both sides.

The Viral Expansion Loop has gone by many names within the years and it is known by some as word of mouth advertising. Simply put you get your customers or users in this case to attract future customers. Penenberg has done a decent job of pointing out that this is not really a new concept. Every business owner in the world knows this concept fairly well. There are many business concepts that get boiled down to the bare bones that once presented with the concept you hit yourself in the head and say wow that is easy and you get to work on it.

The issue I think Techdirt is trying to get at is that it isn’t really that easy. There are flaws also in the viral network. Just as there is momentum in companies that are using it to their advantage, by getting users to recommend to others, there is also a critical point where you have no content or users to get it started. Having a truly good product, passionate people, hard work, and the ability to improve your product by listening to yoru customers is what gets the whole thing started.

The worse side of this that affects many business is the concept of detractors. These people start imposing the opposite effect on your business. They tell their friends how awful your product is, they gripe about missing features, they distract you and your customers from progress. These show up for products in reviews, conversations with friends, and people who return the product or cancel their membership.

There is a measure of this called the Net Promoter Score or NPS. Simply it take the people that would promote your product to friends as a percentage and subtracts the detractors or people who gripe to their friends. This gives a value between -100 and 100. Even this is too simple for you to really do anything with. You need to know the value of your promoters and the value of the damaged caused by the detractors, now you see how this gets tough quick. Well, I guess that could be another article or book!

To not get too carried away I will wrap up saying that I dislike the extremes. Viral Expansion Loops have been known and been attempted to be used for a loooong time. They are difficult to start, difficult to maintain, and have great rewards when successful. Welcome to the hunt.

This is where Yahoo Music’s recommendations are trying to go.