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Free Business Models Use Case: Ning

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This lecture looks at how Ning, the Marc Andreessen Social Network company initially started with a Freemium model but later switched to a fully paid subscription service

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Free Business Models Use Case: Ning

  1. 1. (Stanford BUS-21) Martin Westhead Mastering Marketing Free Case-Study: Ning How to make money by giving things away
  2. 2. Overview  Ning history  Monetization  Analysis - Successes - Challenges - Lessons Disclaimer: My view only based on limited info…
  3. 3. HISTORY
  4. 4. 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)
  5. 5. 24 Hr Laundry (2004)
  6. 6. Founders Gina Bianchini Marc Andreessen
  7. 7. 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
  8. 8. 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
  9. 9. The Demo App took off
  10. 10. 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
  11. 11. Product turning points  2007 - Ning launched  2008 - Shut down API - Ban Porn  2009 - Ning as a hub
  12. 12. Success and Celebrity  1M networks 2009  2M networks 2010 - 40M users
  13. 13. New CEO  2010 Jason took over  Changes - Laid off 40% team - Move to paid - Building subscription business Jason Rosenthal
  14. 14. 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
  15. 15. MONETIZATION
  16. 16. 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
  17. 17. Virtual Gifts
  18. 18. Advertizing
  19. 19. THE SWITCH TO PAID
  20. 20. Pricing
  21. 21. 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
  22. 22. How did the new model fair?  Only lost 15% of traffic - Although millions of networks  Careful management of customer communications paid off
  23. 23. Customer Reaction Some customers pleased... ...others less so…
  24. 24. Competition?
  25. 25. ANALYSIS
  26. 26. 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
  27. 27. 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
  28. 28. Lessons – Scale isn’t everything Internet scale does not guarantee monetization  Ning had scale, engagement and growth  Still failed to succeed at Monetization
  29. 29. 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
  30. 30. 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
  31. 31. 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
  32. 32. 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
  33. 33. 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
  34. 34. Summary  Ning history  Monetization  Analysis - Successes - Challenges - Lessons Disclaimer: My view only based on limited info…

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