Last week, high-profile social network infrastructure provider Ning announced it would shut down all its free offerings. That meant literally hundreds of thousands (at least) of the 2.3 million Ning social networks serving every imaginable niche would either need to pay the piper or go dark.
Not that Ning was asking for a horrific pound of flesh. Running a full-featured social network costs only around $70 per month. For that money your site doesn't get served with Ning ads. But for many of those social networks that weren't actually created to make money, the added cost is a dealbreaker. It's yet another indication that the era of the free Internet is rapidly coming to an inglorious end.
For sure, it was something of a surprise. Ning co-founder Marc Andreessen has been one of the loudest, most public advocates of free, ad-supported content on the Internet. Andreessen went as far as to start a "New York Times Deathwatch" on his blog, where proclaimed that old media would have to kiss off its subscription model forever and that online content must be free.
Radical and Rapid
Ning was until recently helmed by Andreessen's significant other, Gina Bianchini. So, Ning's decision to kill its free version bears more than a bit of irony. After all, Ning and the same media that Andreessen bashes have essentially the same revenue streams -- free service for advertising, or subscription services (albeit, also with advertising in the case of media).
The movement away from free Internet offerings has been radical and rapid. The New York Times and Wall Street Journal owner Ruport Murdoch have both announced that much of their content would soon move behind pay walls. Numerous Web 2.0 companies offering free services have either decided to scale back free offerings or cancel them altogether. Of course, this doesn't mean that other "freemium" aspirants aren't waiting in line to take their place. And some freemium businesses appear to be doing quite nicely, such as online notebook company Evernote.
But some savvy VCs have noticed that freemium as a model may not in fact be the Holy Grail -- particularly in cases where the vast majority of users pay nothing. True, no one pays a dime to search with Google (GOOG) or to keep in touch with friends on Facebook. But both of those companies have built enormous platforms with millions and millions of users -- enough users to truly support ad-based businesses at scale.
For most freemium companies, an active user base of 5 million is a wild success. And even under those circumstances, the company is unlikely to scale into a Google or a Facebook by the very nature of the freemium model that relies on a small percentage to pay the freight for technology development.
Left in a Lurch
One big winner in all of this is Facebook. Ning was one of the last semi-viable competitors (Twitter and OpenID are the others) in the all-important race to provide a "connect" or authentication platform to make registering on third-party sites one-click simple. Ning was something of an also-ran in this race, but with its massive user base courtesy of its myriad social networks, having a Ning ID was somewhat useful.
No doubt, the demise of Ning's free service has left many social network operators on the Ning platform in a serious lurch. While those operators can export user names and contact information in a CSV format , the cannot move password data, friend structures and the actual content created on the network. In other words, Ning is holding onto everything valuable in a social network. Ning may yet relent and allow freebie network operators to export this critical data. But the message is loud and clear: Don't trust a free offering to remain free, or trust it with your passwords and content.
Now that's something you'd never expect from Marc Andreessen.
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