(Stanford BUS-21)Martin Westhead

Mastering Marketing

Free Case-Study: Ning

How to make money by giving things away

Overview

Ning history Monetization Analysis

- Successes- Challenges- Lessons

Disclaimer: My view only based on limited info…

HISTORY

Timeline

2004 - Founded 24hr Laundry

2005- Launched platform to create social apps

2006- Pivot to focus on 3 apps: Videos, Photos, Groups

2007 - Ning launched based on combining these apps

2009- 1M social networks

2010 - 2M social networks- Jason Rosenthal takes over as CEO- Free -> subscribed

2011 - Bought by Mode Media (formerly Glam)

24 Hr Laundry (2004)

Founders

Gina Bianchini Marc Andreessen

Funding

Unknown amount - Series A- Jan 1 2007…(possibly earlier)- Investors: Marc Andreessen, Reid Hoffman, SV Angel

$44M Series C- Jul 1 2007- Investors: Legg Masson

$60M Series D - April 1 2008- Investors: Allen & Company

$15M Series E - July 1 2009- Investors: Lightspeed Venture Partners

Total: $119M

Platform for building Social Apps

Toolkit for building and hosting social network applications

Build your own Facebook, Linked-in, Myspace Underlying functionality

- User accounts- Friends- Blog posts and discussions- Messages- Photo, Video and music sharing

Mix and match and add your own

The Demo App took off

Pivot

Hosting other people’s code is hard- Poorly written code hard to control

More interest in the application than in developing

After several years of not being a social network company…

Ning was born, a provider of social networks

Product turning points

2007- Ning launched

2008 - Shut down API- Ban Porn

2009- Ning as a hub

Success and Celebrity 1M networks 2009

2M networks 2010

- 40M users

New CEO

2010 Jason took over Changes

- Laid off 40% team- Move to paid- Building subscription

business

Jason Rosenthal

Ning bought by Glam Media

Tech-crunch estimates they paid $150M Glam (now Mode) Media

- Advertizing- Specializing in the long tail- Potential monetization engine for Ning

Ning 3.0- Relaunch of subscription product- Totally new user experience

MONETIZATION

Early Freemium

2007 Premium Services Place holder

- Show users they would have to pay for something someday

Created two classes of customer / user

Plus additional monetization challenges down the line

Virtual Gifts

Advertizing

THE SWITCH TO PAID

Pricing

Why Subscription?

Ads- Best inventory sold- Hard to target the log tail- Hard to identify brand-safe content

Value conflict- Free sites – maximize page views- Paid sites – want control

User generated content policing- Costly and risky

How did the new model fair?

Only lost 15% of traffic

- Although millions of networks

Careful management of customer communications paid off

Customer Reaction

Some customers pleased...

“At last a business model!”

“Great service I’m happy to pay”

“Outrageous!” “F**k you! You

blood-sucking

B*st*rds!”

...others less so…

Competition?

ANALYSIS

Successes

Successful product- Rapid growth- Diverse and fascinating use-cases- People loved it

Scale- In the top 20 websites in the world

Hot area- Social networks

$119M funding

Challenges

Too many pivots- Long-time users fatigued- Flip-flopping on white label

Limited cross-site network effects- Each Ning was an island- Tried to fix it but failed to find the right product

Building communities is hard- Not just a technology problem- Needs an “abundance” approach

Market perceptions changed- Early on Social Networks were being discovered- Today: Facebook + Twitter- Harder to create mindshare foothold

Lessons – Scale isn’t everything

Internet scale does not guarantee monetization

Ning had scale, engagement and growth

Still failed to succeed at Monetization

Lessons – Think Ahead

It pays to think about Monetization early Sold premium ad inventory

- Worth $1000’s per month- For $19.99

Hard to put the Genii back in the bottle Early paid networks include Marquee VIP

customers

Lessons - Pivots

You only have a small number of pivots – use them wisely Hard to bring existing customers along Each pivot reduces user faith Bigger you are the harder the pivot Be lean

- Treat each model as an experiment- Understand clear criteria for success- Pivot early- Fail fast

Lessons – Network Effects

Network effects Double viral loop

- Networks pull in users- Who create networks

However- Unable to leverage cross site traffic- Each site had to build its own following- We needed something like the Tumblr model

Lessons – Two Customers

Paid and Free users in opposition Different user segments Different expectations

- White label- Ownership

Early premium offer created more problems than value

Lesson – Customer Expectations

Manage Customer Expectations Move from Free to Paid managed well

- Consultation with customer council- Overall transparency- Advanced notice

Creation of Paid customer segment- Created unreasonable expectations- Charge was way too low

Summary

Ning history Monetization Analysis

- Successes- Challenges- Lessons

Disclaimer: My view only based on limited info…