In 1996 Sabeer Bhatia and Jack Smith, two young entrepreneurs, were brainstorming business ideas to capitalise on the ‘e-revolution’.  One of their problems was that both had work-based e-mail and were worried about their bosses reading their plans.

Their solution to this problem was to make their fortune.  They came up with Hotmail – a free, anonymous, web-based e-mail service.

An hour after Hotmail was launched it had 100 users.  An hour after that there were 300 users.  And it continued to grow.  Within 30 months, Hotmail had 25 million users, signing up at the rate of 25,000 a day.  The business had grown faster than any media enterprise in history – and almost completely without marketing.

The success of Hotmail introduced the idea of viral marketing.  Everyone who sends a message is involuntarily acting as a salesperson for the company.  The recipient not only sees the new product in use but also an endorsement from the friend who sent the message.  It’s the kind of promotion that marketing people dream of.

But is viral marketing actually anything new?  The most obvious comparison is with ‘word of mouth’ promotion – where people tell their friends and colleagues about a product or service they like.  One commentator has described viral marketing as ‘word of mouth on steroids’ – instead of being limited to a circle of friends and acquaintances, the message spreads at lightning speed to a huge audience.  Weeks after the first hotmail message was sent to India there were tens of thousands of Indian users.

It is important however not to regard viral marketing as a ‘magic bullet’ – a quick and easy solution to complex marketing issues.  To be successful, a campaign must offer real value to sender, recipient and vendor.  While viral marketing is generally more effective with net services than physical products there can be a fine line between genuine marketing and ‘spam’.

For every successful example of viral marketing like Hotmail and McAfee anti-virus software there are many more failures.  The internet is a highly unpredictable place to do business and the viral effect is something that is impossible to control.  Once the message is out, the company surrender control and can only hope for the best.