Ning made a controversial move back in April when they decided to ditch their freemium model, leaving many users out in the cold. While the change in direction was for the best interests of Ning, many businesses using Ning felt the sting. To make matters worse, there is simply no easy way to migrate a Ning network. Despite the slap in the face to many users, things are definitely looking up for Ning.
Since ditching free, 35,000 Ning networks have signed up for paid plans. 265,000 presumably have not, but no matter: those numbers mean Ning wooed nearly 12% of its non-paying customers into opening up their wallet–more than double its previous conversion rate. Ning’s paying customer base is now three times its previous size.
At this point, all free Ning networks have been shut down. You can no longer create a free network, but you can take advantage of a 30-day trial. The reason that Ning made this decision boils down to numbers: 300,000 free networks previously on Ning only brought 20% of revenue and 25% of traffic. The rest came from the 15,000 paying customers. In addition to not making Ning any money, these free networks “sucked down its most expensive resources — headcount, bandwidth and infrastructure — at a rate Ning could not support.”
Of the 35,000 who have signed up for a paid plan with Ning, you would think most would opt for the cheapest plan, which comes in at $3/month. This doesn’t seem to be the case at all. According to Ning chief executive Jay Rosenthal, the average monthly recurring revenue per account is between $3 and $50 per year. This equates to $318 per year per account or $15.9 million in yearly revenue. According to Taylor Buley of Forbes, “an impressive $11.1 million or around 70% can be attributed to Ning’s recent moves.”
Ning has had a hard road this year. Chief executive Gina Bianchini exited suddenly just five months ago. In addition to cutting off free users, Ning also cut their staff by 40% since they no longer needed to support all of those free users. They have had to make difficult decisions but, if they can weather the storm, they will become a great tech turn-around story. Regardless of their fate, they will remain an important example in the merits of freemium.
Note: This article erroneously cited Bloomberg as a source. This has been corrected to Taylor Buley of Forbes.