Been watching Ning a while. A pretty common story, really. Great technology, some adoption, but never really found its niche. After taking lots of money from investors, its run out of gas, and runway.

Ning had a difficult job. Provide enough functionality, easily, for people who weren’t web designers. Some of the competition is stiff. If you are slightly technical, you can build a WordPress site fairly easily, add a theme, and have a blog. You can also use one of many CMSs, Joomla, Drupal, grab some plugins and themes, and get similar functionality running there. If all you’re doing is creating forums, groups and events, this might be a good alternative, but it’s almost certainly more work.

Ning had a really great toolkit, but it was difficult to turn that into a solution or web presence that was significantly better than could be put together in some other way, or with one of a variety of competitors products.

As a hosted blog platform, Ning had very stiff competition. Blogger, Posterous, Tumblr. As a social collaboration platform, got the big gorilla, Facebook, for business collaboration, its got the other big gorilla, Google as well. And, of course, Yahoo!, BigTent, MySpace.

Then Gina Bianchini, the co-founder & CEO left. Jason Rosenthal took the job after being COO for 5 months. Always a bad blow when the founders have abandoned ship. And, renewed proof that creating a winning startup is hard, and not a guarantee even if you were talented and lucky before. What will Ning do now in this fast moving Social Networking space? It announced it will eliminate its free service to focus on paid service, and significantly downsize its staff. JSYK, this is synonymous for “we’re spending the rest of our VC’s money as slowly as possible, as we wind down the operation and hope for a firesale”.

A simple glance at the Wikipedia page outlines Ning’s future. 3 categories – History, Features, and most telling – Controversies. If a major topic on Wikipedia is what you’ve removed from your platform, and your next big move is to remove the free from your social networking platform, well, you do the math. And, you could have done that math last year. Ning needed to do something disruptive and press-worthy, and it needed to do it last year.

I’ve been a corporate exec for years. I’ve started, and closed down startup companies. I’ve been in the boardroom discussing which last-ditch option to choose, when none of the options were good. So, I know Ning has to find a way to generate revenue, and simultaneously do that with a company that feels like it’s dying on the inside, sapping it’s remaining staff enthusiasm. And they don’t see any good options.

Taking a few steps back from the problem, it’s another instance in which, from the outside, this is Ning throwing in the towel. They’ve taken a lot of VC money. They can’t get more, unless they show results and potential for repaying all that money at a high return.

Problem: you already haven’t been able to convert free to paid memberships in enough volume to make the company profitable

Solution #1: Eliminate the free option, slash staff. This saves money month to month, and allows you to “focus” (air quotes allowed) on paid member support. What does this really mean? Try to keep your paying members signed up and paying, hope you can shop this customer base to the competition, and sell it all, so at least some of the investors get a few pennies on the dollar.

Side effect #1: No new paid members. Ever. Given the competition of Facebook and MySpace and BigTent and Yahoo! Groups, all free of charge to network creators, anyone creating a new site will first try another free service. Not one of them will go through that exercise, and then say “that was great, now I want to pay someone to do more or less the same thing, what options do I have to pay for this?”

Side effect #2: It will cause many paid members, especially those generating any revenue from their site, to evaluate all the other options, because they can’t afford to have the revenue generated from their site interrupted. And, that will happen when Ning ceases operation. Given that this is a growing competitive area.

Of course, I may be wrong, and Ning may not be going into firesale mode, but if that’s the case, they need an entirely different move than removing their free accounts. They’d need to create some sort of innovative integration with other sites, or invent something no one else provides, in a way that brings people to their platform.

Sorry to see Ning go, it was a very good attempt, better than much of it’s competition at the time.