free business models use case: ning
DESCRIPTION
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 serviceTRANSCRIPT
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(Stanford BUS-21)Martin Westhead
Mastering Marketing
Free Case-Study: Ning
How to make money by giving things away
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Overview
Ning history Monetization Analysis
- Successes- Challenges- Lessons
Disclaimer: My view only based on limited info…
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HISTORY
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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)
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24 Hr Laundry (2004)
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Founders
Gina Bianchini Marc Andreessen
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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
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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
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The Demo App took off
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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
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Product turning points
2007- Ning launched
2008 - Shut down API- Ban Porn
2009- Ning as a hub
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Success and Celebrity 1M networks 2009
2M networks 2010
- 40M users
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New CEO
2010 Jason took over Changes
- Laid off 40% team- Move to paid- Building subscription
business
Jason Rosenthal
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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
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MONETIZATION
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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
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Virtual Gifts
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Advertizing
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THE SWITCH TO PAID
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Pricing
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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
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How did the new model fair?
Only lost 15% of traffic
- Although millions of networks
Careful management of customer communications paid off
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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…
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Competition?
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ANALYSIS
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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
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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
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Lessons – Scale isn’t everything
Internet scale does not guarantee monetization
Ning had scale, engagement and growth
Still failed to succeed at Monetization
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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
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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
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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
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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
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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
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Summary
Ning history Monetization Analysis
- Successes- Challenges- Lessons
Disclaimer: My view only based on limited info…