Publishers and the Smiling Curve: Lessons Learned in Viral Marketing

Publishers and the Smiling Curve: Lessons Learned in Viral Marketing

In the world of IT manufacturing, there is a concept known as the smiling curve. This curve represents the value-adding potential of different components in the value chain. Interestingly, this phenomenon can also be observed in the publishing industry and viral marketing.

The smiling curve illustrates that both ends of the value chain, such as critical component makers and systems integrators, command higher values added to the product than the middle part of the value chain. Acer, a prominent company in the personal computer industry, found itself at the bottom of this curve. They put PCs together, but it was the component makers and value-added resellers that captured most of the value.

Similarly, in the publishing industry, traditional publishers are finding themselves stuck in the middle. The rise of mobile usage has resulted in more than half of visitors to publications like The New York Times coming via mobile. When people follow a link on social media or through a search engine, their affinity is not necessarily with the hosting publication but with the author or the content itself. This shift in value to the ends of the chain mirrors what happened in the IT manufacturing industry.

Newspapers, despite having the ability to reach audiences worldwide, have lost their exclusivity. The free distribution provided by the internet is available to every other newspaper, making it challenging for publishers to provide something unique. This lack of exclusivity has led to a decline in advertising revenues and the need for publishers to redefine their role.

The lesson to be learned from the smiling curve and the publishing industry is that value will flow to the edges. In the case of publishing, value is found in aggregators on one side and focused, responsive, and differentiated writers and publications on the other.

When it comes to viral marketing, there are two key parameters that drive growth: the viral coefficient and the viral cycle time. The viral coefficient measures the number of new customers that each existing customer successfully converts. This coefficient must be greater than 1 to achieve viral growth.

However, the most important factor in increasing growth is the viral cycle time. This is the time it takes for the viral cycle to complete. A shorter cycle time dramatically affects customer growth. To achieve true viral growth, the viral coefficient must be greater than 1, and the cycle time should be made as short as possible.

The most viral products are those that only work if they are shared. To encourage sharing, the value proposition of a product must be compelling enough for customers to share it with others. Offering incentives to both the inviter and the recipient can further encourage sharing.

In conclusion, whether in the publishing industry or viral marketing, the concept of the smiling curve and the importance of value flowing to the ends remains consistent. Publishers must adapt to the changing landscape and find ways to differentiate themselves in a world of free distribution. Similarly, in viral marketing, the focus should be on creating products that are inherently shareable and reducing the cycle time for maximum growth.

Actionable advice:

1. Publishers should focus on creating unique, differentiated content that resonates with their audience. This will help build a loyal readership and increase the value they provide.
2. Embrace mobile and social media platforms as key channels for content distribution. Publishers should optimize their websites for mobile and engage with readers through social media to increase visibility and reach.
3. In viral marketing, prioritize reducing the viral cycle time. This can be achieved by creating products that are inherently shareable and providing incentives for customers to invite others.

By incorporating the lessons from the smiling curve and viral marketing, publishers and marketers can adapt to the changing landscape and thrive in an increasingly digital world.