Ning Announces No More Free Networks, Cuts 40% of Staff

One month after long-time Ning CEO Gina Bianchini was replaced by COO Jason Rosenthal, the company is making some major changes: It has just announced that it is killing off its free product, forcing existing free networks to either make the change to premium accounts or migrate their networks elsewhere. Rosenthal has also just announced that the company has cut nearly 70 people — over 40% of its staff. Here’s the email Rosenthal just sent out to the company:

Team,

When I became CEO 30 days ago, I told you I would take a hard look at our business. This process has brought real clarity to what’s working, what’s not, and what we need to do now to make Ning a big success.

My main conclusion is that we need to double down on our premium services business. Our Premium Ning Networks like Friends or Enemies, Linkin Park, Shred or Die, Pickens Plan, and tens of thousands of others both drive 75% of our monthly US traffic, and those Network Creators need and will pay for many more services and features from us.

So, we are going to change our strategy to devote 100% of our resources to building the winning product to capture this big opportunity. We will phase out our free service. Existing free networks will have the opportunity to either convert to paying for premium services, or transition off of Ning. We will judge ourselves by our ability to enable and power Premium Ning Networks at huge scale. And all of our product development capability will be devoted to making paying Network Creators extremely happy.

As a consequence of this change, I have also made the very tough decision to reduce the size of our team from 167 people to 98 people. As hard as this is to do, I am confident that this is the right decision for our company, our business, and our customers. Marc and I will work diligently with everyone affected by this to help them find great opportunities at other companies.

I’ve never seen a more talented and devoted team, and it has been my privilege to get to know and work with each and every one of you over the last 18 months.

We’ll use today to say goodbye to our friends and teammates who will be leaving the company. Tomorrow, I will take you through, in detail, our plans for the next three months and our new focus.

Thanks,

Jason Rosenthal

Ning’s announcement also says that it will be giving network creators more details in the next two weeks.

While the email talks about Free versus Premium paid networks, Ning actually has a variety of different premium upgrades. Currently, Ning’s premium options include support (which has a $10/month and $100/month options for different service levels); Custom domains ($5 a month); Extra storage and bandwidth ($10 a month); Ad removal ($25 a month) and the ability to hide any trace that you’re running on Ning ($25 a month).

As a result of today’s news I suspect we’ll see quite a few active networks jump to whatever the cheapest premium option is; I don’t expect Ning to make it especially easy to port their data to a different service. There will also certainly be a backlash from Ning’s vocal community of Network Creators, many of whom have invested quite of bit of time building out their niche networks.

While the massive layoffs are obviously a big hit to the company, it isn’t all bad news for Ning: the service is still seeing its traffic grow according to comScore (see graph below). But traffic growth is no longer good enough for the company — it needs to start generating some serious revenue, and advertising clearly isn’t cutting it. Ning has raised around $120 million, getting valuations of a half-billion dollars in April 2008 and a reported $750 million last summer.