High-growth3 companies grow quadratically, not exponentially.

It’s well-known that growth—as a percentage—naturally declines with scale, even when there’s nothing wrong with the company.

This law of nature has been given a name: Growth Decay (or sometimes Growth Persistence).

In theory, theory and practice are the same. In practice, they’re not.”
—Benjamin Brewster

The difference between “word-of-mouth” and “viral,” is that viral products are unusable unless you invite others to become users (thus exponential growth is enforced) whereas word-of-mouth products encourage sharing.

even if “exponential” is the correct model for the core growth mechanism of the product, it nevertheless cannot continue growing exponentially because it runs out of market.

The logistic curve is exponential in the early days when it is far away from its natural limit. As the product (or gas or virus) gets to around 25% market penetration (or infections or saturation), the curve flattens into linear growth, in a tension between the exponential force of growth, countered by fewer and more demanding remaining targets. Finally it levels out at what is called the “carrying capacity”—the fully-saturated market.

This is why at-scale companies are willing to spend billions of dollars increasing the size of the market—it’s one of the few ways to create growth other than raising prices.

Elephant Curves are more visible when we plot growth as market share, because this incorporates the idea that carrying-capacity of the underlying market can itself be a moving target.

Early on you should focus on winning market share in one space, creating the first Elephant Curve, but after the product matures, something more drastic is required: Wholly new products, or updates significant enough to address new markets.

Because word-of-mouth-driven growth is so much more effective than marketing-driven growth (both in cost-per-customer and in that unlike direct advertising it grows automatically as the company grows), it is worth a great deal of time trying to figure out how to build that into the product, rather than relying only on the marketing team.

Half my advertising is wasted. I just don’t know which half.”
—John Wanamaker