Ning’s new pricing system, in moving away from free community building
In his book Free: The Future of a Radical Price Chris Anderson proposed that the rapidly falling cost of digital technology enabled companies to create digital content and spaces for essentially nothing. In addition, he added that the word free is so popular that the mere use of it will increase demand and instant engagement with consumers. Therefore, his hypothesis was that the future of digital business is free.
While this approach may assist companies in gaining traction for a new digital technology, it doesn’t always work in trying to establish a sustainable business strategy. Especially, it seems, within the social media space. One of the big misperceptions of social media use has been that it is free. The truth is for companies interested in using social media tools – it has always cost money in hours and resource allocation. However, in addition to those resources – it will cost money going forward as social media service providers realize the demand is there for premium, paid services.
Yesterday, Jason Rosenthal, the CEO of Ning, sent an email to Ning users that officially noted the company’s plans for phasing out all free uses of the Ning network by July – as part of its new pricing and business strategy. According to Rosenthal, “We (Ning) want(s) to provide a new level of innovation to Network Creators — including all the valuable features Network Creators have asked us to build. To get there, we need to focus 100% on paid Ning Networks.”
Why now? Ning’s problem seems to be the same as the issues faced by YouTube in endorsing “free.” Although, their model was able to entice millions of people to share videos, their revenue model suffered because brands didn’t want to advertise against videos made in people’s basements. Now Google and YouTube are pushing for premium video content that advertisers want. In the same vein, Ning drew lots of users (including marketers interested in an easy and free way to build a community), but the advertisements it leveraged on its free communities for revenue were hardly targeted and drew little interest from big name brands (it was mostly Google display ads). They also found that a large portion of their traffic was willing to pay for premium features. Hence, they’re now focusing on different levels of paid services. Even an enterprise or professional level for $49.95 a month. With that move, according to some reports, Ning sizes their market around $4 billion.
Yammer, which has taken a similar track towards the premium market of microblogging, may be a good case study for Ning. Unlike Twitter, they’ve cornered a market on enterprise collaboration over bits of information and now have 70,000 customers (many of those happily paying). In fact, according to Yammer , “A number of Fortune and Global 500 companies such as Cisco, Nationwide, AstraZeneca, Alcatel-Lucent, SunGard, and Molson Coors have upgraded to Yammer’s paid product. ” This news has some investors calling them the next billion dollar company. Meanwhile, Radian6, the popular social media monitoring service used by the likes of AMD, Comcast, Microsoft and Dell (to name a few) starts its pricing at $500 per month and can reach several additional figures.
Of course, there are other examples of “free” social media tools thriving with no plans to make their services pay-per-play. The aforementioned Twitter has been adamant in stating that they have no plans to charge corporate accounts. Even, Co-Tweet, which assists brands in engaging and monitoring Twitter (and was acquired earlier this year), offers its service for free. Facebook doesn’t seem to have any plans to make users pay, although they could make a nice amount for a $1 a day and would certainly find brands willing to pay for fanpages.
Others are adding paid-for, premium features, in addition to free features. PitchEngine, which has become a very popular free (and paid-for) tool (platform) for PR practitioners and social media mangers to share news and information, recently announced a new pricing system for agencies and brands interested in additional features. However, according to their CEO Jason Kintzler they have no plans to abandon free use of the service’s entry-level features. “We will still be ‘freemium’ and people will be able to publish for free. We’re just adding more premium features,” he told RaceTalk in an email.
However, any way you look at it, there is a current set of market happenings that makes pay-for services a new attractive option for social media tool or platform providers.
- Online advertising cannot support most businesses (including social media services) in its current form as the only revenue stream (low CPM’s, etc.) and investors are shying away from companies that are only looking at ad revenue to support their business.
- Measurement of social media campaigns is improving and any tool’s use that can be measured against (or that do the measuring!) previous strategies , mediums (traditional or otherwise), can now be budgeted for. In short, folks are willing to pay for social media tools that work.
- Investments are now following in the footsteps of the demand for these tools and platforms. Look no further than investor interest in the social media measurement space. New social media service providers will now have the money and runway to move away from launching as “free.” Something that can be painful to shut the door on down the road.