Ning Fucks Adult Network Owners

Overhyped do-it-yourself social network provider Ning likes fucking its users. Fucking them over to be more precise.

It previously fucked some of them over when, without so much as an hour’s warning, disabled applications sold by one of the company’s most popular unaffiliated application developers. This left many of Ning’s largest social networks scrambling to fix their social networks, some of which were reportedly broken or crippled by the absence of key functionality provided by the applications that Ning had disabled.

At the time, I pointed out that the situation highlighted the risks inherent in relying on companies like Ning. I commented out that, regardless of whether the application developer deserved to have its applications disabled or not, Ning had made it clear that:

• Its API (Web 2.0 translation: “open” platform) obviously had vulnerabilities that put all Ning stakeholders at risk.
• As an organization, Ning obviously wasn’t prepared to deal with the high-maintenance (and sometimes contentious) relationships that inevitably develop between “platform” operators and their third-party, unaffiliated developers.

I concluded:

For all involved, perhaps Napoleon Bonaparte provided the best advice:

“I have only one counsel for you – be master.”

While it’s not always possible to “be master,” for current Ning users it is.

…Ning, its drama with WidgetLaboratory and the increasing availability of self-hosted open-source social networking solutions highlight the fact that, in my opinion, Ning and services like it are no longer compelling solutions for anyone.

Flash forward to today.

Ning, which has up to this point allowed the creation of adult social networks in a “Red Light District,” decided that it wasn’t looking for a long-term relationship with the network owners behind them.

Last week, Ning informed adult network owners that, contrary to their understanding, Ning had just been interested in a casual encounter. Effective January 1, 2009, Ning’s Red Light District will be closed.

Gina Bianchini wrote the “it was just a meaningless fling” Dear John letter:

As of January 1, 2009, we’ll no longer support adult social networks on the Ning Platform.

We’re not discontinuing the Red Light District because we no longer believe in the freedom to create your own social network for anything as long as it’s legal. We do. Practically though, supporting adult networks no longer makes sense.

She gives the reasons:

• Ning feels it’s the only one making an effort in the relationship: “Adult social networks don’t pull their own weight.”
• Adult social networks are attracting all sorts of drama: “By having legal adult social networks on Ning, we’ve seen a rise in volume of illegal adult social networks.”
• Network operators in the Red Light District are high-maintenance: “Adult social networks on Ning receive a disproportionate number of DMCA take down notices creating additional work for our team.”

Translation: Ning just isn’t “compatible” with the operators of adult networks and it’s time to break up.

But what constitutes an “adult network?” In a follow up blog post, Bianchini clarifies. Networks dedicated to pornography, fetishes and “nudity intended to sexually arouse the viewer” are out but networks dedicated to nudists, nude beaches and anything protecting safe sex (as opposed to unprotected sex?) aren’t. There’s obviously a fine line – if a photo of hot, topless Brazilian woman walking nude on the beach sexually arouses you (a decent possibility if you’re a male), is that network an “adult network”? Perhaps you’ll just have to discuss it over dinner and drinks with Gina.

Sexual semantics aside, Ning has proven once again that it’s sort of like a hot crazy woman that you might be inclined to have a one night extravaganza with but really shouldn’t because you know that it’s going to lead to trouble. One minute she’s in love with you, the next minute she’s kicking you out of her apartment and chasing you with a steak knife. Take my word for it: it isn’t as fun as it first sounds.

Let’s look at Bianchini’s comments:

Specifically, [adult social networks] require other social networks to work harder because they don’t generate enough advertising or premium service revenue to cover their costs.

This seems to indicate that Ning’s pricing model (and revenue model) is flawed. Clearly, the company isn’t generating enough revenue to subsidize non-paying networks that are resource hogs. Which is strange, since Ning does have limits – free networks have a quota of 10GB of storage and 100GB of bandwidth. 10GB of additional storage and 100GB of additional bandwidth can be purchased for $9.95.

One might logically infer one or more of the following based on this:

• Ning isn’t generating enough revenue to subsidize lots of semi-popular networks that never exceed 10GB of storage and 100GB of bandwidth but that are within a certain range of those limits. In other words, it’s been banking on the probability that most of its networks will use nowhere near these limits.
• Ning isn’t generating enough revenue to subsidize lots of networks that may require a higher level of support and related services.
• Ning has minimal margins on the pricing for the additional storage and bandwidth. It’s worth considering that Ning’s costs aren’t limited to storage and bandwidth. Depending on how its application has been built to scale, there may be additional costs associated with the allocation of resources to large networks. Admittedly, I know little about Ning’s platform and architecture but based on the Widget Laboratory incident and some comments I’ve read, I’ll say this: I think it’s unlikely that scaling Ning is cheap.

Plus, our ad partners aren’t big fans of the adult networks and therefore require us to identify adult networks or risk our healthy [comment: in light of the above, ha!] advertising revenue. We don’t want to be in the policing business and, unchecked, that’s where this is heading.

First, as far as I can tell, Ning doesn’t have “ad partners.” It seems to have a single ad partner: Google. And as far as I know, Google’s AdSense policy has never permitted anything resembling the type of adult content that Ning was allowing.

This aside, didn’t Ning management know that allowing adult networks on its service was going to create problems when trying to develop a business built on mainstream advertising? Earlier this year, when it was reported that a significant amount of Ning’s traffic was being generated by adult networks, I noted the obvious: this is “not the type of traffic that is going to be highly-monetizable via mainstream advertising.”

I continued, “Unless Ning plans to jump head first into the real porn business, adult-oriented Ning social networks, as noted, are unlikely to generate massive revenues and could in fact be a liability.”

When I’m right, I’m right.

If Ning management didn’t realize that, barring an adult-specific advertising strategy, it could never effectively monetize adult traffic and that adult networks would be of concern to the type of advertisers it would logically want to court, Ning management is incredibly incompetent.

However, the time involved in reporting and assisting the authorities on illegal adult social networks is simply too time and cost intensive for the benefits derived by having adult social networks on Ning.

Another “What the hell did you expect?” statement.

We respect intellectual property rights and comply with the DMCA. Compared to our other social networks on the Ning Platform, the additional work created by adult networks alleged to have violated the copyrights of others is enough for us to discontinue adult networks in favor of investing time and energy in growing the Ning Platform from here.

Yet another “What the hell did you expect?” statement.

I would point out that hiding behind the “policing” excuse is the inconvenient fact that any company hosting free social networks of any kind is going to be burdened by these types of issues. While I don’t doubt the claim that adult networks are especially burdensome, there seems to be some naivety on the part of Ning as to how much effort it’s going to have to make to police its service.

At the end of the day, if Ning’s “focus is on creating incredibly simple, beautiful software and rapidly adding new features for the benefit of all” as Bianchini writes, it should sell software. It shouldn’t be operating a service like Ning and charging people to host their Ning social networks.

Bianchini concludes by stating that “in this recession we have to be relentless in providing the most compelling service in the most efficient way possible” and that “the only practical answer we see is a clear elimination of adult networks from the Ning Platform altogether.”

For a company that has raised more than $100 million, I have to say it: these people are fucking stupid.

When you already have a base of users/customers, you usually try to keep them unless they’re a liability that can’t be turned into an asset. In the case of Ning, I would argue that, as one of its biggest user/customer groups (if not the biggest), Ning should find a way to leverage its adult network owners.

Implementing the wrong strategy for the wrong users/customers and deciding to shed them doesn’t make sense; implement the right strategy, especially now that you’ve built up a base.

Here’s a practical solution: run a separate service for adult networks. Separate brand, separate infrastructure. If the cost structure for Ning doesn’t work for adult networks, develop a cost structure that does. Hell, make adult networks fully paid. This kills several birds with one stone: it ensures that these networks carry their weight and it discourages copyright infringment and illegal content because the network owners have to reveal their identities when paying for the service.

Still don’t feel comfortable? Consider forming a joint venture or inking a licensing agreement with a company in the adult space that is better equipped to take on the responsibilites that you aren’t ready to take on (policing, monetization, etc.). In this case, Ning would simply be selling its “simple, beautiful software” to a company that actually knows how to make money in the adult space.

Of course, that’s a little bit too practical for a company whose co-founder (Marc Andreesen) says his company takes advantage of a “double viral loop.” I’m not quite sure what that is but I think the jargon “double stupidity loop” is more appropriate.

This whole situation is very unfortunate for Ning’s investors. All indications are that a significant amount of Ning’s traffic is generated by its adult networks. While that traffic might not be producing for Ning (thanks only to a lack of a sensible strategy), one has to wonder just how much of that adult traffic has been used to puff up Ning’s usage.

In FastCompany’s bullshit piece on Ning earlier this year that resembled press release journalism, it was stated:

The company estimates that, at this rate, by New Year’s Eve 2010 it will host some 4 million social networks, with tens of millions of members, serving up billions of page views daily.

Perhaps Ning would like to reveal by how much its rosy projections will need to be altered in light of the fact that its Red Light District will resemble Palo Alto nightlife (i.e. dead) in less than a month. I’m sure investors in the Legg Mason Opportunity Trust (which parked $44 million in Ning) would be interested to know. I’d have to think that at some point they might feel just as fucked as Ning’s adult network operators.

At the end of the day, I suppose we can add another distinction to Silicon Valley’s resume: the only place where “smart” people can’t figure out a way to make money selling sex. It would be funny if it wasn’t true.