Viral effects are different than network effects, but many people confuse the two.

Network effects add value to a product when more people use it. The more people use a product with network effects, the more utility each existing user gains from it, so the less likely they are to switch to a competitor. Network effects are about retention and defensibility.

Viral effects are about getting new users to use your product. A product is said to be viral when existing users bring you more users for free. A product or service with viral effects has a "viral coefficient", which is the number of new users that join as a result of each user. For example, if an average Facebook user in the early days invited enough friends to get two of their friends to join in a certain amount of time, we would say that, at that time, Facebook had a viral coefficient of 2. This would mean exponential growth in the new users joining per day for free.

The confusion between viral effects and network effects stems from the fact that 1) they are both positive feedback loops, and 2) they were experienced together in famous companies like Facebook, Twitter, and WhatsApp over the last 15 years.

However, since we ourselves have created viral effects in over ten companies that went viral enough to attract over 10 million users, we can attest that it is easier to craft viral effects on products than it is to build products with network effects. What's more, products with networks built in naturally allow for more language to build viral hooks and loops - a subject we'll expand on elsewhere.

Many products can have viral effects without having network effects. Just because a product is viral doesn't mean that every new user makes the product more valuable and defensible. Viral effects helped propel Facebook to its current position because Facebook also has a network effect. However, going viral didn't make JibJab, Buzzfeed, or the Sequoia-backed QuizUp (which raised $27M and died) nearly as defensible or valuable. Their success was flashy but short-lived.

The reverse is also true. Products with network effects don't necessarily have viral effects. A B2B marketplace could easily use paid advertising to attract buyers and sellers and build a 2-sided marketplace network effect with zero virality. A company could deploy thousands of IoT devices across a city creating a mesh network

For example, you could buy ads on Google to drive both sellers and buyers into a B2B marketplace and build a 2-sided marketplace network effect and still have zero virality. Or, you could pay a city to deploy a thousand IoT devices across a city that creates a mesh network whose performance -- due to the network density -- is so much better than any others that no competitor could hope to compete until they also deploy a thousand nodes to their own mesh network.

Understanding the difference in network effects and viral effects is important for getting your playbooks right, especially considering how often people mix them up. Make sure that isn't you. Just because you have viral effects doesn't mean you have nfx, and vice versa.