Ning Valuation Spot On

Steve Rosenbaum · April 21, 2008 · Short URL:

Steve_Rosenbaum Marc Andreesen knew that this latest round of capital would raise some eyebrows so he wasn't about to toot his own horn and make an announcement.   But when VentureBeat discovered the financing - the news was out.  $60 million on a $500 million pre-valuation is pretty heady stuff. Predictably,  the headlines were either skeptical or worse. But here's a case where the pundits got it wrong.  Andreesen has seen the future - and he's right to build it. Here's a take on the 'social' space,  and the role that Ning is out to either serve or own - depending on how you look at things. First of all - let's start with the big dog in the field.  Facebook.  Facebook was a college only network service until it opened its platform last year.   The growth has been phenomenal with users,  page views,  and mind share growing dramatically in this short time.

It's important to point out that the social network platform space is one of the rare places where Google,  Yahoo,  Microsoft,  and AOL don't have meaningful plays.  Ok, sure - Orkut, but only if you're in Brazil.

So why is Ning worth a five-hundred-million dollar pre-money valuation? Well,  let's take a look at the space.   Social networking is the connection between groups and ideas.  Currently there are a handful of social network platforms - and a zillion social network tools.   If  you travel much outside of NY,  SF,  or a handful of other social media centers - the shift from educational social networks (high school / college)  to mainstream hasn't happened yet.   
But for those of us on the edge of social networking - the explosion in tools and resources is often overwhelming.   Twitter alone can be a full  time job - and even with Friend Feed,  Twitteriffic,  Twittervision,  TwitterTools Twitterment, and  the list goes on and on... is Twitter really the ONLY social network you need?  Mashable lists 60 Twitter Tools that help -  but that's really not the problem.  

If you want to add streaming video - you've got a whole long list of alternatives there too.   uStream,  Mogulus,  Qik,  Stikam  and the list goes on and on. 

So,  what Ning has determined is that there is an opportunity to build the platform play that glues all this social stuff together.  Facebook might already be it - but they've had their share of hits and misses.   The open application framework on FB is very spammy - and customers are complaining.  And the more FB opens its platform, the more random 'friend hunters' you get knocking at your door.
I'm not privy to the Ning pitch,  but i'm willing suggest that they're pitching that they could be the next-gen Facebook,   built around self-organizing communities,  and able to either keep pace with or eventually outpace FB as the social operating system for this emerging space.  It's a big play - and there are a bunch of reasons they could miss the boat - but sold in that light - they need the financial resources to keep pace with FB's raise.    And for investors who either didn't get in on FB or who don't think that FB is going to be the long term winner in the space... you can see how Ning could make a compelling argument.
Now,  here's the problem.

Ning - up to this point -  has been in a go-it-alone  mode.   You don't see lots of opportunities to plug in apps or provide tools and services inot the Ning ecosystem.   The result is that Ning builds its own photo,  community,  video,  and networking tools.   While this makes the service simple and accessible,  it also means they don't the the benefit of the extraordinary creative energy currently being pumped into the Facebook platform.   In order to live up to the valuation promises Ning has made to the market,  they're going to have to change that.   The shift from platform to service isn't easy -  but it's essential if they really plan to fight it out with Facebook for platform dominance.  

Social Networking is a buzzword.

But it won't be for long.   The emergence of nano-networks,  groups of friends,  co-worked,  folks with shared hobbies or interests,  is the inevitable result of the explosion of mass media.  Its a good thing.

It won't happen one way,  or be owed by one company.  But it will be essential to the emerging media economy.

Congrats Marc and Gina and the Ning team - well done.

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