“Going viral” is often the holy grail for Internet startups, who hope to quickly scale to hundreds of thousands of users (then hundreds of millions) with relatively low user acquisition costs.

However, in a recent blog post and presentation, Andrew Chen argues that SaaS products aren’t viral:

“For consumer internet entrepreneurs that are working on big markets, getting to virality is hard enough. There are plenty of sectors, like commerce or moms, where it’s almost impossible to achieve sustained viral growth, just because of the dynamics and narrow nature of the audience. When you turn your attention to SaaS products that are narrow in industry and profession, it’s even harder.”

Andrew goes on to make the point that virality in the enterprise has a lot more to do with product category and SaaS startups can stack the odds in their favor by developing a product that’s inherently social (i.e. communication or file sharing), can be used by anyone in an organization, is used daily, and targets extroverts.

While virality may be generally tougher in the enterprise than consumer markets, SaaS products can benefit from viral effects far more than Andrew’s post implies. In the enterprise, viral growth is not only driven by the social nature of the product, but also by the superior utility of a product that helps us do a better job across different departments and companies.

Here are three ways that SaaS products can spread:

1. Within the enterprise: Enterprise collaboration products have traditionally lacked a deep social layer but the success of Yammer has shown what kind of viral growth a social enterprise product can unlock. By making cross-departmental communication easier, unlocking knowledge in the enterprise and creating tighter connections between employees, social enterprise products present a high-value daily utility for the people involved and therefore have a high virality potential.

2. Within an industry: Some industries are traditionally very connected, creating a large opportunity for products to manage information flows between companies in the same vertical. For example, in the legal world, lawyers from different firms often interact while working on a case for their respective clients. In the construction industry, dozens of companies often collaborate on a project and exchange information on a daily basis.

3. Between companies: Each company is made up of a tightly knit ecosystem of dozens, hundreds, or thousands of suppliers, vendors, and partners. With daily cross-company interactions, colleagues and companies are incentivized to adopt whatever new tool they see would make their own job easier and more efficient. This could be in areas like cash flow management (Pollenware), purchasing (Kinnek) or work force management (Work Market).

Bottom line for SaaS startups

SaaS companies that streamline daily information exchanges within or between companies have a good opportunity to experience strong viral growth. Virality in the enterprise boils down to useful products and collaboration, and SaaS companies that understand this potential will scale more quickly than others and create the next generation of enterprise solutions.

Related articles

• SaaS products aren’t viral (andrewchen.co)
• SaaS Adoption Accelerates, Goes Global in the Enterprise (forbes.com)