In early October Adam Penenberg’s new book will be released Viral Loop: From Facebook to Twitter How Today’s Smartest Businesses Growth Themselves. While I’m a bit envious that he’s published a book on a topic that has been the subject of so many of my conversations with entrepreneurs in the past year, he first covered the topic in April 2008 for Fast Company in an astute article on the growth of Ning.

While I haven’t read an early preview of the book, here’s why I’m excited. In my conversations with CEOs of companies that sell both virtual and physical products, tough times have created a very basic need to get close to their customers, to develop exceptional products that deliver true value, so consumers are willing to part with their declining discretionary income. The exuberance of astronomical valuations is gone, and leaders are more likely to be out in the field building business rather than in the corner office. Build a fantastic product that delights someone, and that person is likely to recommend it to a friend. What is viral, fundamentally? It is something that is passed along, exponentially, so that one person tells two people, who each tell two more, etc. It’s a process as old as fire itself, elegantly accelerated by the internet.

As Marc Andreesen states in Fast Company’s feature on Ning, “a viral loop is something that incorporates virality into the function of the product.” If you haven’t heard of Ning, the most familiar illustrative example today is Facebook, where the product only has value if you invite others to join you, then those who have joined from your invitation create their own networks by inviting more of their friends. A virtuous cycle of growth. Tupperware and Avon are examples in the physical world, where one purchases the products from a friend or acquaintance at an event, yet also has the opportunity to become a rep and sell the items to their own networks.

What’s missing from this discussion of viral loops? While most discussion to date has focused on the growth mechanism of these networks, few have articulated the benefits consumers receive from being part of them. The Tupperware parties of the 60’s and 70’s weren’t just about creating financial independence among housewives, the events built and supported social relationships and connection, and fostered esteem as reps were engaged in new work. All of these psychological benefits are components of happiness and well-being, according to icons like Maslow and respected psychologist Diener. Suddenly passing along Smirnoff’s Tea Party video doesn’t seem so trivial.

How can companies that create physical goods, such as beverages or books, capitalize on the virtuous circle know as viral loops? While I don’t have all the answers, I’ll suggest it’s not just about the utility and connection between a consumer and a product, but the psychological benefits and rewards in sharing insight, expertise, and being connected within their social circle. While a bottle of Bailey’s doesn’t come with a “pass along” button, enabling a night of Bailey’s tasting parties in homes with new cocktail recipes creates an opportunity for connection, sharing, and memories among friends.

What do you think of viral loops?

In his 2007 novel Spook Country, William Gibson envisioned a word where virtual art installations were suspended in the real world using GPS coordinates, visible only to those wearing special goggles. Massive astral sculptures loomed in warehouses and recreations of celebrity murders stood on the streets of LA. Today augmented reality (AR) for the masses became a reality thanks to the iPhone and the Paris Metro App: check out the Fast Company article here.

Paris Metro Appliation, from Fast Company

Early adopters of technology include automakers launching new cars and publishers seeking new and better advertising vehicles. The June 2009 issue of Popular Science featured a cover highlighting GE wind technology that became 3-D and animated when held up to a webcam, using software by Metaio. Here’s a quick profile by Mediapost.

What’s next in AR? Surely retail businesses that depend of foot traffic will jump onboard (Find my Starbucks apps? McDonalds?) How long until personal navigators, worn individually, will replace my Garmin GPS? Will visions of my renovated home stand optimistically on the spot of my fixer-upper? The applications seem limitless. How would you augment your reality? Leave a comment below.

If you’re working in augmented reality, drop me a note!