🏔️ Viral Loops

Hey there,

Welcome to the SaaS Hill, a weekly newsletter that tries to predict the future of SaaS.

Let's discuss Viral Loops ⚡️.

⭐️️ Intro

In this newsletter issue, we dive into the evolving landscape of SaaS growth. As the cost of advertising rises, customer acquisition becomes pricier each year, and the SaaS market faces a slowdown while competition intensifies, companies are exploring innovative approaches to sustain and expand their growth.

And sounds like Growth loops is something that can change the game.

Initially, I wanted to cover all types of growth loops in a single issue, but eventually, it became so large that I decided to write 5 separate issues dedicated to growth loops(viral loops, marketing loops, ad loops, network effects, and the K-factor).

Today, we will focus on viral loops.

🤔 Predictions

1. For SaaS, ads are becoming an expensive way to grow. It's not an option for prosumer SaaS products with small ACVs at all. Plus, when they turn off ads, growth also slows down.

2. When we zoom out, we see that the YoY growth in the SaaS market is slowing down. Competition is heating up.

3. We see a rise of new types of non-sales-led GTM strategies (product-led, network-led, community-led, integration-led, SaaS media companies).

4. We see a rise of growth roles in tech and SaaS companies (growth advisors, PLG experts, product growth managers, etc.).

5. Yet, CAC (Customer Acquisition Cost) is still increasing YoY.

6. Thus, companies will experiment with finding low customer acquisition cost growth channels.

7. This will lead to an increased focus on growth loops and growth funnels, so more and more companies will try to bring new users to their products relying on cost-effective growth channels.

🤿 Deep Dive

Growth Loops

Before jumping to Viral Loops, let’s discuss what growth loops are.

A growth loop in SaaS refers to a self-reinforcing system where user actions, such as onboarding, usage, or referrals, lead to the acquisition of new users, thereby driving further engagement and growth. This continuous cycle helps SaaS companies expand their customer base and revenue organically.

The growth loop framework has three parts: input, action and output.

1. Input: Input includes strategies and channels used to acquire new users, like advertising, social media, SEO, and email marketing.

2. Action: Action refers to the steps a user takes to extract product value, such as trying the product or exploring features.

3. Output: Output represents the impact from user actions, driving more users and growth in a self-perpetuating loop.

Here are the most common types of growth loops.

Growth Loops:

1. Viral Loops

   1. Organic Referrals and Word of Mouth

   2. Incentivized Referrals and Word of Mouth

   3. Powered By Links

   4. Watermarks

   5. Embedded Loop

   6. External Collaboration Loop

2. Marketing Loops

   1. Company Generated Content Loop

   2. User-generated Content Loop

   3. Paid Ads Loop

   4. Community

3. Product Loops

   1. Free Tools

   2. Internal Collaboration Loop

   3. Integration/Marketplace Loop

4. Network Effects

In this issue, I will review viral loops only.

Viral Loops

A viral loop is a marketing or growth strategy where a product or service is designed in a way that encourages existing users to refer new users, creating a self-perpetuating cycle of user acquisition. In essence, each new user becomes a promoter who brings in more users, leading to exponential growth without the need for traditional marketing efforts.

Viral loops are built to encourage current users to share your product with their own connections.

1. Organic Referrals and Word of Mouth

This is the type of growth loop that every fast-growing company is thinking about. Many social platforms have perfected this kind of viral loop.

1. Spotify - share a new song with friends via social media

2. Spotify Wrapped - a year in review

3. Strava - share your running activity on Facebook

4. YouTube - share a video widget

5. LinkedIn - share posts via a link

2. Incentivized Referrals and Word of Mouth

In an incentivized referrals and word-of-mouth viral loop, existing users are motivated to recommend a product or service to others by offering rewards or incentives, such as discounts or bonuses, for successful referrals. This encourages a continuous cycle of user-generated recommendations and new customer acquisitions, fueled by the desire to gather these rewards.

A classic example is Dropbox's incentivized word-of-mouth viral loop: users who referred others received additional storage space, motivating them to spread the word about the service. This strategy contributed significantly to Dropbox's rapid user acquisition and growth in its early years. Read more here.

3. Powered By Links

The "Powered by” growth loop is also another classic example of a viral loop that can bring thousands of new users. It's used by dozens of successful PLG companies with a freemium model: users can use the product completely for free, but in exchange, companies add a "Powered By" widget that redirects to their website.

1. We can use Calendly completely for free, but Calendly adds a “Powered by” widget to all Calendars.

2. Another classic example is Intercom.

4. Watermarks

Watermarks are similar to “Powered by” links, but typically it’s a logo or piece of text atop a document or image file.

For example, Pitch is a free presentation software, but when I want to download presentation slides, Pitch places a “Try Pitch” watermark atop of my slides.

A few more examples:

1. Brandbird images

2. TikTok videos

3. Tella.tv videos

5. Embedded Loop

Embedded Growth Loop is a type of growth loop that allows products to grow by embedding themselves on other platforms or websites.

For example:

1. We can embed YouTube video player on any website, platform, product, editor etc.

2. We can embed Miro whiteboard on other platfroms

3. We can embed Google spreadsheets on other websites.

4. We can embed X’s tweets on other websites.

5. We can embed Airtable on other websites or platforms.

6. We can insert Trello board on other platforms.

Here is how it works:

Miro example:

6. External Collaboration Loop

An external collaboration loop is a growth strategy in which users of a particular platform invite individuals from outside that platform to participate in a collaborative activity, often for the purpose of conducting meetings, sharing content, or working together on projects. This strategy expands the user base by bringing in new participants who may not have initially used the platform.

Additional examples of external collaboration loops:

1. Slack: Slack users invite external guests to join their workspace, allowing them to collaborate, chat, and share files within the Slack environment, even if the guests are not regular Slack users.

2. Microsoft Teams: Similar to Zoom and Google Meet, Microsoft Teams users can invite external participants, such as clients or partners, to join video meetings, and collaborate on documents.

3. Trello and Asana: Users can collaborate with external team members or clients by inviting them to view and contribute to Trello & Asana boards.

4. Dropbox: Dropbox allows users to share files and folders with external collaborators, enabling seamless document collaboration and file sharing between users and non-users of the platform.

5. Miro: Miro users can collaborate with external stakeholders on digital whiteboards and visual collaboration boards, facilitating remote workshops, brainstorming sessions, and design reviews.

These external collaboration loops are designed to enhance productivity and communication between organizations or individuals, leveraging the strengths of a particular platform while expanding its reach to new users who may eventually become regular participants.

That’s it.

🔗 Useful Links

1. 5 Examples of SaaS Products With Viral Loops by OpenView

2. Growth Loops by Userpilot

3. 3 Viral Loops to boost growth by The Growth Mind

4. Dropbox Referral Program by Viral Loops

5. The awesome power of growth loops by PostHog

6. Growth Loops vs. AARRR Funnels by Gartner

7. productloops > A library of best practices from top startups

8. Growth Loops are the New Funnels by Reforge

9. The definitive guide to growth loops by Thoughtlytics

10. Your guide to B2B referrals by Kyle Poyar

🤝 Related SaaS Trends

1. 🏔 Community Led Growth > or how to strengthen your PLG

2. 🏔️ Product Led Growth > or how we will buy software soon

3. 🏔️ SaaS + Media Company > boost your SaaS growth: add media

4. 🏔️ Free Tools and Sidecar Products > build sidecar product that support growth of core product

5. 🏔️ 55+ Growth Tactics > free experiments to drive growth

Thanks for reading. See you next time 👋
Best, Vlad

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