The Power of Word of Mouth in Digital Advertising and Overcoming Barriers in Live Streaming

The Power of Word of Mouth in Digital Advertising and Overcoming Barriers in Live Streaming

In the world of digital advertising, three dominant platforms - Facebook, Google, and Amazon - hold immense power, accounting for 40% of all venture capital and 70% of a company's digital ad budget. However, recent developments, such as Apple's decision to kill user advertising IDs and Google's decreasing emphasis on organic search results, have forced marketers to explore alternative methods to drive growth and measure the impact of word of mouth.

Word of Mouth (WOM) has always been a challenge to measure accurately, particularly because a significant portion of it occurs offline. Surprisingly, 80% of online sharing happens through "dark social" channels like WhatsApp, text messages, and email, making it difficult to track. Nevertheless, companies have tried various methods to gauge the word-of-mouthiness of their existing users, such as Net Promoter Score (NPS) surveys and attribution surveys that ask new users how they heard about the product. Additionally, social listening tools have been employed to track mentions and engagement across social platforms and the web.

The adage "You manage what you measure" rings true in the context of word of mouth. Many companies find themselves overly reliant on less efficient channels, leading to poor unit economics and a greater need for capital. To address this, a new metric called NOPDAU, or "New Organics Per Daily Active User," was created. This metric measures word of mouth as a function of what drives it and provides insights into the value of active users in terms of revenue.

The relationship between product retention and the generation of new organic users is a crucial insight. The longer users engage with a product, the more word of mouth they generate. By looking at the ratio of weekly active users (WAU) to new organic users, marketers can determine the WOM Coefficient, which signifies how many new users are generated per WAU through word of mouth. This coefficient holds valuable insights for driving growth and optimizing marketing strategies.

However, it's important to note that the K-Factor, a popular metric for viral growth, does not solve the challenges of word of mouth. Instead, focusing on engaged users, including returning users, can be more effective. Increasing retention is one way to enhance word of mouth, as each new organic user can lead to multiple future daily active users as the word of mouth loop continues to spin.

The application of these growth models can be particularly challenging in certain industries, such as edtech. For example, in products targeting teachers, optimizing in-product viral flows can be difficult because teachers primarily share information offline. Nevertheless, it's crucial to recognize that the value of new organic acquisition should not be underestimated, as each new organic user can have a significant impact on future growth.

In the realm of live streaming, platforms like Mirrativ have successfully overcome barriers to word-of-mouth growth. Mirrativ's approach involves three key elements:

1. Avatars: Mirrativ's use of avatars allows users to create a unique online presence, addressing the first barrier.
2. Recommendations and Notifications: By featuring beginners in the recommended section and sending notifications when someone joins a live stream, Mirrativ tackles the second barrier effectively.
3. Game Commentary and Screen Sharing: The ability to provide entertaining and engaging content through game commentary and screen sharing helps overcome the third barrier.

Stability and seasonality are important considerations when analyzing the WOM Coefficient. While the coefficient remains relatively stable during the school year, bringing in approximately 0.15 new organic users per weekly active user, it fluctuates based on school calendars. This pattern is also observed in other core metrics, such as retention, monetization, and virality, in e-commerce companies that scale. As volume increases, the month-to-month volatility decreases, making the WOM Coefficient more stable.

In conclusion, understanding and harnessing the power of word of mouth in digital advertising and live streaming can significantly impact a company's growth. Here are three actionable pieces of advice based on the insights discussed:

1. Prioritize engagement and retention: Focus on building strategies around engaged users, as they are more likely to generate word of mouth and contribute to sustained growth.
2. Optimize in-product viral flows: Tailor your marketing approach to target specific industries or user groups, taking into account offline sharing habits and preferences.
3. Measure and track the WOM Coefficient: Continuously monitor and analyze the ratio of active users to new organic users to gain insights into the impact of word of mouth and guide marketing decisions.

By implementing these strategies and leveraging the insights gained from measuring and analyzing word of mouth, companies can unlock the full potential of this powerful growth driver.