Ning’s Bubble Bursts: No More Free Networks, Cuts 40% Of Staff

http://techcrunch.com/2010/04/15/nings-bubble-bursts-no-more-free-networks-cuts-40-of-staff/

by jasonlbaptiste • 16 years ago

101 79 16 years ago

jbyers2• 16 years ago

With $120M in funding, this blows my mind. I'm reminded of Ho Nam's Fat Startup Watch. Today's announcement suggests that despite massive growth and traffic, Ning did not find sustainable product-market fit.

http://www.blog.altosventures.com/vc/2010/03/fat-startup-wat...

petervandijck• 16 years ago

It's probably partly because of that funding :)

jbyers2• 16 years ago

Oh -- I completely agree. What blows my mind is the magnitude of the loss, both monetary and human.

javery• 16 years ago

I really wonder what the 500M and 750M valuations are based on, or are those just the numbers needed to justify additional investment.?

Also, it would make sense that this is slimming up with the hope of being acquired. Reduce head-count, pour effort into premium services to bump revenue, then sell.

froo• 16 years ago

I'd suggest the valuations are based on perceived value by the investors. That's how we get insane valuations of $15 billion for Facebook when they were hemorrhaging money (not the case now of course).

Either way, I suspect its part voodoo and part negotiations when you're talking about speculative valuations like this

va_coder• 16 years ago

Ning Free had way too much Ning branding.

teej• 16 years ago

You get what you pay for.

raganwald• 16 years ago

True, although the parent post could be read as follows:

Ning Free had too much branding to attract the kind of sites that would later upgrade to pay plans. It could be that the Ning branding interfered with the Freemium model.

I'm not speaking for the parent post, of course, just pointing out that there may be something interesting to consider...

colinplamondon• 16 years ago

The interesting part is that, if 75% of their traffic are from paid networks, all that much heralded viral growth must have really just been bizdev deals to get existing brands and communities onto Ning. If that's the case it's pretty shocking they didn't do this sooner.

dannyr• 16 years ago

from @dhh:

Ning raised spent $120MM of other people's money over 6 years to come to the conclusion that free doesn't pay.

staunch• 16 years ago

If Ning networks had exploded as they had hoped there wouldn't be any emphasis on paid today. The plan was to have a billion people participating in 10 million different networks. That didn't pan out. If it had worked DHH would have simply said that they're one of the lottery winners.

Tawheed2• 16 years ago

Yes, he would have, but he'd also be right, since there are so few that succeed with that model.

chaosmachine• 16 years ago

Would he be wrong, though?

izendejas• 16 years ago

This is just the beginning of a reality check for social media.

Gormo3• 16 years ago

Once it becomes clear that Twitter has no viable revenue model, that Facebook's model will be undermined by the same effects that caused the videogame industry to crash in the early '80s, and that "Web 2.0" has largely turned into a fad, we'll probably face another Dotcom crash.

Meanwhile, genuinely emergent social media like IRC, Wikipedia, etc. keep chugging along.

luu• 16 years ago

For those of us that weren't around in the early 80s, what caused the video industry to crash back then, and what are the parallels to social networks?

pclark3• 16 years ago

except, you know, Twitter isn't panicking about revenue. They're doing really nicely last I heard (Profitable from search deals, and abouts to launch various other monetization programmes?)

tcdent• 16 years ago

Maybe it falls into the same category as the video game industry to you, but it doesn't sound like you're aware of Twitters recent monetization strategy: http://blog.twitter.com/2010/04/hello-world.html

suckafree2• 16 years ago

Free is not a business model. Within 12-18 months expect Facebook and Twitter to go the same route. Their burn rate is starting to catch up to them and Twitter's search deals will shrink.

subwindow• 16 years ago

Do you have any idea how much money Facebook is raking in with advertising? The targeting available on Facebook is unparalleled in human history, and they are making a mint on it.

borism4• 16 years ago

oh yes, they do! much better than google! however there's absolutely nothing advertised on them that I'm interested in.

I literally can count on both hands number of times I clicked on google or facebook ads.

suckafree2• 16 years ago

Yes, I do have an idea. And it is largely do to their user growth. This growth is not sustainable and will start to taper in 6-12 months. Facebook clearly is making money from ads (I'm not discounting this). It's been estimated at somewhere in the $400-600MM range. Of that Microsoft and their own ads make up the bulk of that. That is starting to dwindle and they are going to be headed in the direction of virtual goods a la Tencent. My point is that social media sites like Ning, Facebook, and Twitter are figuring out that free is not a business. Ning is just the first to admit it.

proee2• 16 years ago

Are you sure about this? I imagine they are keenly aware of their burn-rate vs. growth-rate. At some point they may have to make a course correction to bring in real revenue. FB's primary goal was probably to out-pace myspace and they've obviously done that. I'd say they are in an excellent position to make good money.

rewind• 16 years ago

Facebook no longer has a burn rate.

gscott• 16 years ago

Now they just have to figure out how to give the investors a 100x return (or whatever the return rate should be).

apphacker• 16 years ago

Thing that always bothered me about Ning was there no way to browse networks. At least I never saw such a thing, just featured networks and search.

joshuarr• 16 years ago

Jeeze, never saw this coming.

johnrob• 16 years ago

Picking losers is a lot easier than picking winners.

Tawheed2• 16 years ago

Free can work, if you can keep you overhead low. They clearly failed at that.

MartinCron2• 16 years ago

Absolutely. I find the notion that there's only one true business model that's ever successful to be extremely arrogant.

Organizations are like organisms, there are many different workable strategies. Take a look at nature, there's no one-best-way to be a successful animal.

proee2• 16 years ago

In a way, the stack exchange product and ning are very similar. Both tried to create an out-of-the-box product to fill a need. The reason both did not succeed is probably the same as well - too many half-baked communities with nobody behind them.

If hindsight is 20/20, what could Stack Exchange and Ning do different to make it work?

Or on another note, what sites out there have tweaked the model and are doing well?

SlyShy• 16 years ago

They could take a hint from Hacker News. Creating a successful community is all about pre-seeding it. Of course, the problem is this can't be scaled. Making enough friends to found a domain specific website with a good group of them isn't easy work. Communities aren't easy.

sriramk• 16 years ago

SO did successfully create a community. I think they ran into the problem that SO itself was successful because of the 'personal brand' of Jeff Atwood and Joel and this didn't extend easily to other communities.

Or maybe it is because the coders who hang out on SO are a weird bunch :)

netcan4• 16 years ago

Well, if their statements are anything to go by, we can see what they are going to do differently to try and make it work.

They are moving away from the 'provide the platform, get out of the way, let 1000 flowers bloom.' Stack Exchange is going to be launching sites themselves with a more regimented process that (they hope) has a high success rate.

*After seeing Slinkset (I liked that one), these two, Wikimedia etc. have such a hard time getting successful sites going, I have a new appreciation for forums. Forums work. There are a lot of non ghost town, forums started by non social software gurus.

mhartl• 16 years ago

This sucks. Get Satisfaction tried something similar recently (eliminating even basic admin tasks from free plans), but realized their error and elected to grandfather in current members. Ning should do the same thing with their free networks, perhaps with a total traffic limit. (If even that's not economically viable, then I don't know what the hell they were ever thinking.)

I sure am glad I never made an investment in building traffic to a Ning social network. I'd be pretty hot under the collar just about now.

mschaecher• 16 years ago

Go to ning.com (logged out if you are a member) There is literally no attempt to sell you on anything unless you create a network. No feature listings, no pricing, nothing. There homepage is half dedicated to showcasing networks you might be interested in. To get a light overview of the features you have to go three clicks deep into the site.

They should be more focused on selling their product not the various networks. The networks should drive the traffic to themselves based on their own merit and efforts.

Compare that with a competitor, SocialGo, which is pretty clear in explaining what you can get from their service at various price points. Whereas Ning doesn't appear to be trying to sell me anything, let alone compare my options.

hop• 16 years ago

Looks like they spent none of their $120MM on that UI. That is rediculous, these VC's must be wildly out of touch.

motters• 16 years ago

Regrettably, this probably means the end of Ning. It's the classic dot com business model. Once you engage in "community breaking" activities, like kicking off your users or trying to force them into paying subscriptions, the amount of animosity and bad publicity generated by users who have invested a lot of time and energy into the service usually ends up killing the company.

However, I'm not sure that this has wider repercussions for other social networking services. I assume that Facebook is making enough out of advertising to be sustainable (although I could be wrong).

pclark3• 16 years ago

worked great for meetup.com [going from freemium to paid only]

jfarmer• 16 years ago

PayPal did this. HotOrNot went from freemium to free to freemium again.

It's not unheard of, especially if (as the TC article quotes), the majority of the VALUE is being created by paying users.

netcan4• 16 years ago

I want to point out something. The majority of these 'swing-for-the-fence' ideas are expected to fail. It's what is supposed to happen. Doesn't mean anything is broken with the system.

marknutter• 16 years ago

Tell that to the people who ponied up the cash.

netcan4• 16 years ago

You mean the mega angel-investors-slash-repeat-founder or the venture capital funds?

Presumably, they all know. They probably insisted on it.

MartinCron2• 16 years ago

A few months ago I got contacted by some overly friendly recruiters working on behalf of Ning. I'm ignored them because I'm crazy happy at my current job and can't even really think about relocating.

Curiosity being what it is, I took a closer look and was surprised to find it such a large/heavily funded/fast growing organization that I had never even heard of.

I find my "thanks but no thanks" instinct vindicated today.

jemfinch4• 16 years ago

As one of the 69 people who were laid off from Ning today (after a mere six weeks with the company in my case), allow me to say the obvious:

Need a Python/C/C++ engineer with an algorithmic bent and a strong knowledge of scalable data storage and analysis? Email me at jeremy@finchers.us.

ajju• 16 years ago

From my friend, HN'er, and recent ex-Ning'er rjurney (works at LinkedIn) :

http://twitter.com/rjurney/status/12236580762

jemfinch4• 16 years ago

One of the real challenges for me is that I was a remote employee, and I'm not based out of an area with a reasonable tech sector. Telecommute positions (especially with companies of Ning's caliber) are hard to come by, and I'm not significantly free to relocate for another 14 months. Finding an arrangement that satisfies both my personal (family) and professional needs is going to be a real challenge.

earl• 16 years ago

A recruiter from Ning contacted me on either Tuesday or Wednesday. Although obviously my situation doesn't compare to yours, it sure is nice of the company to keep trying to hire when the upper echelons knew damn well they were going to lay a ton of people off.

jemfinch4• 16 years ago

No one knew anything until this morning. If the change of CEO a month ago is any indication, my own manager probably didn't find out until late last night.

The entire recruiting team was laid off today, for what it's worth.

azanar• 16 years ago

I'm another one of the 69 people laid off today -- I lasted a little longer, 4 months.

My condolences to you jemfinch, btw, and anyone else from Ning lurking on Hacker News. Not the best day for any of us.

For those who might be recruiting, I am also looking for new opportunities, especially in the Seattle area. I see myself as very much a generalist, both in the sense of technologies and languages -- and being able to pick up new ones quickly--, and in the sense of being able to act as other parts of an engineering staff (sysadmin, qa, etc.) when called upon. If you want more details, feel free to contact me -- details in profile.

thenbrent• 16 years ago

Sounds like the perfect opportunity for Automattic to introduce a BuddyPress.com using the Wordpress.com model.

OldSnakey• 16 years ago

Google is looking for people with business and tech skills, come check it out!

April 29 - San Francisco open house http://www.google.com/intl/en/jobs/landing/psomixer/

c00p3r• 16 years ago

The longer investors pours money, the more money founders and top personal earns. That is the business model. =) The art is about chatting investors as long as possible and to leave on time - http://en.wikipedia.org/wiki/Marginal_value_theorem

Ning’s Bubble Bursts: No More Free Networks, Cuts 40% Of Staff

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