What the Ning?
Posted on July 10, 2007
Filed Under Web 2.0 Kool Aid |
It looks like investors read my blog post entitled “Geni and Web 2.0 Valuations” and decided to take my comments to heart. Ning, which I previously dubbed the ezboard of social networking, just raised $44 million on a rumored $170 million pre-money valuation. As Michael Arrington at TechCrunch notes, this would value the company at just under a quarter of a billion dollars post-money.
Apparently since the opportunity to invest in companies like Facebook and Bebo is long gone, the next best thing is to invest in a company like Ning which makes it easy for every Tom, Dick and Harry to have his own social network. Love Smashing Pumpkins? A Ning user has created a . Love Tamil sex stories? You’re in luck because there’s a Ning social network .
Ning gives individuals who have little to no technical expertise and resources the opportunity to create a social networks for their passions. So what’s wrong with that? Nothing in and of itself. Ning is a decent product and there’s a market for it, just like there’s a market for phpFoX, the social networking software you can license for $300. The question, however, is whether Ning is worth anywhere near the amount investors have valued it. Just as in the case of Geni, I think the logical answer is no.
Anybody who has been involved with online community over the years will probably agree that the social network is simply the natural evolution of the message board community. Social networks have added features, but at their core, social networks are simply “forums” where people congregate online to express themselves, connect with others and share their passions. Realizing this, it does not take an enlightened soul to see just how closely Ning resembles Web 1.0 services like ezboard and eGroups (now ). ezboard and Yahoo Groups enable individuals and groups to create online communities and Ning enables individuals and groups to create online communities. Ning might have different/more features, a different structure and call communities “social networks,” but at the end of the day, all of these products offer similar solutions.
If we accept that Ning looks like ezboard 2.0 or Yahoo Groups 2.0, it seems only logical to consider how those companies developed to forecast what the future likely holds for Ning. As I look into my crystal ball, here’s what I see:
- Ning attracts individuals and groups that want to create online communities but lack the resources to set up their “own.” Ning’s solution is compelling to amateurs and hobbyists but much less compelling to entrepreneurs and entities hoping to create large-scale communities. By virtue of this, most of the communities these individuals and groups set up will tend to be the consumer equivalents of small businesses. Most have finite growth potential, and many won’t succeed. Like ezboard and Yahoo Groups, the average Ning community will be very small. From what I can tell, the largest communities on Ning have only thousands of members. Many communities will be abandoned by their creators, leaving Ning filled with Internet ghost towns. A quick browse of the communities on ezboard and Yahoo Groups reveals the burial grounds of failed, neglected and abandoned communities. This is what is in store for Ning.
- Individuals and groups that create vibrant, large communities on Ning are likely to recognize that they have created something of value and many will want to take full control of that value. Whether it be for purpose of “full ownership” or for the purpose of being able to add new features and offerings catered specifically to a niche audience, many creators of large Ning communities will migrate away. I personally know of quite a few large message board communities that started on services like ezboard and then migrated onto their own platforms. In fact, I think this tends to happen quite frequently. Ning might counter that this is fine, or that the Ning platform is flexible enough to give community creators the ability to customize and add new features, however anybody who has operated a community understands just how important the feeling of total ownership and control is. Being reliant on another company’s platform just doesn’t feel right and at some point you decide to “grow up.” And no matter how you spin it, losing a considerable number of your most successful users is not desirable.
It is amazing that ostensibly intelligent investors apparently failed to look at the comparable examples of ezboard and Yahoo Groups when evaluating Ning, as they are so obvious, however this is far from the first time that technology investors have overlooked the obvious. While I think that Ning has the potential to develop into a decent, sustainable business (just like ezboard has), clearly there’s still room for inflation in Bubble 2.0. At least $170 million worth of inflation, on top of the $100 million worth of inflation provided by Geni.
I do notice one similarity between Ning and Geni that might serve as a partial justification to investors for these insane valuations: both startups were founded by Silicon Valley stars. Marc Andreessen founded Netscape, and Geni’s founder, David Sacks, was COO of PayPal (if you were involved with PayPal, you get funded). Perhaps investors believe that anything these successful men touch will turn to gold. After all, investors invest in people more than they invest in businesses, right? That may be true, but as Silicon Valley star Guy Kawasaki has explained, everything he touches doesn’t necessarily turn to gold - “Whatever is gold, Guy touches.” Great management can do a lot but it can’t perform miracles. In the case of Ning, just like Geni, I think investors are hoping that Marc and David are alchemists. In my opinion, when giving Ning and Geni these types of valuations, the only gold being produced is fool’s gold.
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Drama 2.0 spikes the Web 2.0 kool aid by providing a critical analysis of Web 2.0 startups and the impact of Web 2.0 on the media industry. Other topics are explored when Drama 2.0 has a slight buzz. Read more about the Internet's version of Keyser Söze here.
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