Virality is often measured by the viral coefficient or k-value — how much users of a product get other people to use the product [average number of invitations sent by each existing user * conversion rate of invitation to new user]. The bigger the k-value, the more this spread is happening. But it doesn’t only have to happen by word-of-mouth; the spread can also occur if users are prompted but not incentivized to invite friends, through casual contact with participating users, or through “inherent” social graphs such as the contacts in your phone.
Here’s the basic math behind the k-value [there are some other more nuanced and sophisticated calculations here]:
1. Count your current users. Let’s say you have 1,000 users.
2. Multiply that count by the average number of invitations that your user base sends out. So if your 1,000 users send an average of 5 invites to their friends, the total number of users invited is 5,000.
3. Figure out how many of those invited users took the desired action within a defined period of time. As with all measurements, pick a meaningful metric for this action. For example, app downloads are not a great metric, because someone could easily download your app but never actually launch it. So let’s say you instead count users who register and play the first level of your game, and that comes out to 15% of the people who got invited or 750 people.
4. This means you started with 1,000 people and ended up with 1,750 people through this viral loop during your defined time period. The viral coefficient is the number of new people divided by the number of users you started with; in this case, 750/1000 = 0.75.
Anything under 1 is not considered viral; anything above 1 is considered viral. The higher the number, the better, because it means your cost to acquire new customers will be lower than a product with a lower virality coefficient. Now if you can marry that with a high ARPU or lifetime value per customer, you have the beginnings of a great business. On Malartu, we discount customers gained from paid channels when calculating the k-value in order to measure the product’s inherent, organic virality.