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Here's something you probably don't know about the Internet: Simply by designing your product the right way, you can build a billion-dollar business from scratch. No advertising or marketing budget, no need for a sales force, and venture capitalists will kill for the chance to throw money at you.

The secret is what's called a "viral expansion loop," a concept little known outside of Silicon Valley (go ahead, Google it -- you won't find much). It's a type of engineering alchemy that, done right, almost guarantees a self-replicating, borglike growth: One user becomes two, then four, eight, to a million and beyond. It's not unlike taking a penny and doubling it daily for 30 days. By the end of a week, you'd have 64 cents; within two weeks, $81.92; by day 30, about $5.4 million.

Viral loops have emerged as perhaps the most significant business accelerant to hit Silicon Valley since the search engine. They power many of the icons of Web 2.0, including Google, PayPal, YouTube, eBay, Facebook, MySpace, Digg, LinkedIn, Twitter, and Flickr. But don't confuse a viral loop with viral advertising or videos such as Saturday Night Live's "Lazy Sunday" or the Mentos-Diet Coke Bellagio fountain. Viral advertising can't be replicated; by definition, a viral loop must be.

If you really want to understand how the dynamic works, there's no better place to look than Ning, a startup in Palo Alto -- located across the street from Facebook and a few clicks down the road from Google -- that was designed specifically to exploit viral loops. The brainchild of former Goldman Sachs investment banker Gina Bianchini and celebrity geek Marc Andreessen, Ning has been growing automagically from the moment it launched its Social Networks for Everything -- a free platform for do-it-yourself social networks -- in February of last year. By June, there were 60,000 Ning nets and by August, 80,000. At year's end, there were 150,000, and today, more than 230,000. About 40% of Ning's social networks originate outside the United States, and members from 176 countries have signed up, with the service already available in several languages, including Chinese, Japanese, Spanish, and Dutch. The company estimates that, at this rate, by New Year's Eve 2010 it will host some 4 million social networks, with tens of millions of members, serving up billions of page views daily.

By New Year's Eve 2010, Ning estimates, it will host some 4 million social networks serving up billions of page views daily.

Ning's social networks, where users post comments, questions, photos, and videos, run the gamut from porn to Pez dispensers, motorcycles to motherhood, TV shows to customized cars to Thai kickboxing. Show My Pony is for horse enthusiasts, GAX for gamers, and GYNite for "gay guys and their friends." One of the most popular Ning networks belongs to hip-hop mogul 50 Cent and has 107,000 members and counting. Chris "Broadway" Romero, creative director of new media for Fitty's site, describes it as "an entertainment-industry news/rumor/editorial blog in the vein of TMZ.com, combined with unparalleled access and interaction with the celebrity." Romero uses the site to cast parts for music videos and film projects, and one day, he hopes to release music and video directly to the public, bypassing record companies completely. To Romero, it's nothing less than "a new entertainment platform, period." A single Ning group can, in theory, serve as a platform for an entire business; collectively, the networks represent an ever-expanding commercial universe.