Ning, in a dramatic about-face, is shuttering its free social networking platform to concentrate solely on fee-paying networks and cutting 40 percent of its staff. Jason Rosenthal, who became CEO in mid-March after Gina Bianchini left, said in an email to employees that he’s “taken a hard look at our business in the 30 days since I became CEO, and I’ve decided to focus the company 100 percent on our paid networks business.” Rosenthal said that the free part of Ning would be phased out “soon,” and that existing networks would either have to convert to paying for the premium service or “transition off Ning.”
The shift from mostly free to 100-percent paid is a major strategic shift for Ning, which gained a lot of media attention not just because of co-founder and ex-CEO Marc Andreessen, whose former company Netscape Communications helped usher in the modern web era, but also because — in contrast to the “walled garden” approach taken by Facebook — Ning’s free platform provided a place where anyone could build their own social network. But Ning’s recent move is also a sign that the much-hyped “freemium” model might not be the road to riches many seemed to think it was. In a post on the 37signals blog, David Heinemeier Hansson notes that “Eyeballs still don’t pay the bills.”
The obvious implication from both the shutdown of Ning’s free offering and the staff reduction — not to mention the speed with which Rosenthal is making the change, and without communicating it to the company’s networking users beforehand — is that Ning couldn’t sustain its business at that level. Is that a sign that the “social networking for all” phenomenon was simply not workable? If nothing else, it suggests that providing free services (in the hope that some users will pay) doesn’t scale at the rate Ning and its investors were hoping it would. And there’s no question that some big bets have been placed on the company: last year, it raised another round of financing that gave it valuation of $750 million....