What the Ning?

Posted on July 10, 2007
Filed Under Web 2.0 Kool Aid |

It looks like investors read my blog post entitled “Geni and Web 2.0 Valuations” and decided to take my comments to heart. Ning, which I previously dubbed the ezboard of social networking, just raised $44 million on a rumored $170 million pre-money valuation. As Michael Arrington at TechCrunch notes, this would value the company at just under a quarter of a billion dollars post-money.

Apparently since the opportunity to invest in companies like Facebook and Bebo is long gone, the next best thing is to invest in a company like Ning which makes it easy for every Tom, Dick and Harry to have his own social network. Love Smashing Pumpkins? A Ning user has created a . Love Tamil sex stories? You’re in luck because there’s a Ning social network .

Ning gives individuals who have little to no technical expertise and resources the opportunity to create a social networks for their passions. So what’s wrong with that? Nothing in and of itself. Ning is a decent product and there’s a market for it, just like there’s a market for phpFoX, the social networking software you can license for $300. The question, however, is whether Ning is worth anywhere near the amount investors have valued it. Just as in the case of Geni, I think the logical answer is no.

Anybody who has been involved with online community over the years will probably agree that the social network is simply the natural evolution of the message board community. Social networks have added features, but at their core, social networks are simply “forums” where people congregate online to express themselves, connect with others and share their passions. Realizing this, it does not take an enlightened soul to see just how closely Ning resembles Web 1.0 services like ezboard and eGroups (now ). ezboard and Yahoo Groups enable individuals and groups to create online communities and Ning enables individuals and groups to create online communities. Ning might have different/more features, a different structure and call communities “social networks,” but at the end of the day, all of these products offer similar solutions.

If we accept that Ning looks like ezboard 2.0 or Yahoo Groups 2.0, it seems only logical to consider how those companies developed to forecast what the future likely holds for Ning. As I look into my crystal ball, here’s what I see:

It is amazing that ostensibly intelligent investors apparently failed to look at the comparable examples of ezboard and Yahoo Groups when evaluating Ning, as they are so obvious, however this is far from the first time that technology investors have overlooked the obvious. While I think that Ning has the potential to develop into a decent, sustainable business (just like ezboard has), clearly there’s still room for inflation in Bubble 2.0. At least $170 million worth of inflation, on top of the $100 million worth of inflation provided by Geni.

I do notice one similarity between Ning and Geni that might serve as a partial justification to investors for these insane valuations: both startups were founded by Silicon Valley stars. Marc Andreessen founded Netscape, and Geni’s founder, David Sacks, was COO of PayPal (if you were involved with PayPal, you get funded). Perhaps investors believe that anything these successful men touch will turn to gold. After all, investors invest in people more than they invest in businesses, right? That may be true, but as Silicon Valley star Guy Kawasaki has explained, everything he touches doesn’t necessarily turn to gold - “Whatever is gold, Guy touches.” Great management can do a lot but it can’t perform miracles. In the case of Ning, just like Geni, I think investors are hoping that Marc and David are alchemists. In my opinion, when giving Ning and Geni these types of valuations, the only gold being produced is fool’s gold.

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2 Responses to “What the Ning?”

  1. “Ning” Always Sounded Dirty : The Drama 2.0 Show on January 6th, 2008 2:14 pm

    […] I do think the situation highlights just how risky the $44 million investment in Ning is (an investment that was rumored to leave the company with a quarter a billion dollar post-money […]

  2. Web 2.0 “Investment Boom May Be Peaking” : The Drama 2.0 Show on March 19th, 2008 2:17 am

    […] place to be. The number of deals in the Bay Area decreased slightly and two companies (Facebook and Ning) accounted for $344 million of the region’s $721 million in Web 2.0 funding. Meanwhile, […]

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