Social networks
Ning wants to be the "Intel inside"
I’ll say this for Marc Andreessen: he knows how to make a splash. First, he writes a whole series of excellent (and lengthy) blog posts with advice for startups — so excellent that my friend Paul Kedrosky jokes about how he’s making the rest of us look bad — and then he announces a blockbuster financing round of $44-million for Ning, which values the company at something north of about $200-million and has got everyone talking.
My friend Rob Hyndman, a lawyer who advises technology startups, says he is skeptical of Ning’s ability to justify that kind of money, and so is Rob Hof at BusinessWeek — who draws a comment from the man himself by comparing Ning to Facebook. Don Dodge says that he doesn’t think Ning’s revenues will scale. And Umair comes right out and says Legg Mason’s investment in Ning is an example of dumb money. But is it really? I think some of those criticisms miss the point about what Ning is trying to do. Whether it will succeed or not remains to be seen, but I think Ning is trying to become the “Intel inside” for social networks.
In some ways, Ning’s strategy is the opposite of Facebook’s. Whereas the Mark Zuckerberg show is all about bringing people — and eventually transactions — to Facebook, and becoming a platform in that sense, Ning wants to be the plumbing for any kind of social network. The company is even happy to help you turn your soc-net into a widget that you can then embed in Facebook.
I used Ning to set up an ad-hoc social network for a class reunion I was involved in organizing, and it was easy enough to use that even the ancient classmates I was dealing with could figure it out. I think Ning’s vision is that instead of everyone going to Facebook or MySpace, there will eventually be hundreds of thousands or even millions of social networks, all tied in to each other in some way (through Google’s SocialSystem perhaps?).
Ning clearly wants to power that explosion — and the way it has been configured is easily powerful enough to do that, I think, given enough horsepower and resources to allow it to scale. Will it succeed? I haven’t a clue. But I think the strategy is an interesting one.
Discussion
Comments are disallowed for this post.
Post a comment
license
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 2.5 Canada License.
subscribe
grazr
TwitterCount
busted tees
hey mathew,
nice post.
i think you are spot on - i would just point out that most investors would be loath to give ning such a steep valuation without a bit more evidence that the strategy is seeing some kind of traction.
Thanks, Umair. I agree that the valuation for Ning does seem a little on the steep side, and without a lot of evidence to support it.
On the other hand, many people (including me) thought MySpace was wildly overvalued when News Corp. bought it, and that Yahoo was crazy to offer $1-billion for Facebook, but I think they have been proven wrong.
I think you are right on. People don’t want a MySpace or Facebook network, they want their own network. And whoever can provide the plumbing best will win. Check out http://www.nexo.com for another approach to enabling groups of people to network. It provides social network, group website and group email for any group you create.
I’d value them like Six Apart, since Ning is doing for social networks what SA has done for bloggers.
Hi Matthew …
Great post. My question for both Ning and Facebook is around the business model and how it scales. I think even Facebook is facing a challenge on how to truly scale their model (in a google or ebay sense). If you read about Facebook’s recent hires and the recent stories, the revenue scale story isn’t sound yet. Facebook is doing somewhere north of $100mm in revenue at a $30mm profit, which is very nice. I think there is a real debate about how to get that to a billion+ at those margins.
Ning will also face these issues, and maybe even more so since they’re segmented across several social networks and advertising isn’t the core value proposition, like Facebook has with its 27mm+ members.
^ brian