Jason Rosenthal, CEO of Ning, positions his company as the Facebook for the set that cares about communicating with a network beyond their friends. With 70,000 paying users and 80 million monthly visitors, the white-label social network company is a quiet force among small organizations, especially schools and other non-profits. With a famous founder, browser pioneer Marc Andreessen, and a scary competitor in Facebook, Rosenthal took over as CEO this year. He sat down recently to discuss Ning’s progress with Fortune’s Adam Lashinsky. An edited transcript follows.
Ning is an unusual name, so why don't we start with it. What is Ning?
Ning is the largest platform in the world for creating your own custom social network. So, whether you're an organization or a nonprofit or a large band like Linkin Park, what we're finding is that people from all around the world, as social media has really taken off, want to create their own branded social destinations, and Ning is a platform that lets people do that very easily.<!-- more -->
I'm having trouble getting my arms around the difference between a social network for Linkin Park on the one hand, and a website on the other hand.
As we sit here today in 2010 the expectations of consumers with the explosion of Facebook and Twitter and YouTube and other properties is that whatever web site they go to, it's going to be inherently social in nature. People want to be able to upload photos and videos, participate in discussions, connect with their friends, and Ning is a platform that builds all those capabilities right into the web site.
Throw some other names of clients big and small at me besides rock bands.
We have thousands of educators who are using Ning: high school teachers, college professors who are using Ning to connect with other educators and their students right in the classroom. We have a big footprint of nonprofits, everyone from Eve Ensler, who runs VDay.org to help stop violence against women, to the Pickens Plan, which is evangelizing clean energy across the United States, are on the Ning platform. Lots and lots of small businesses, from people like Sake Social to local realtors who are using Ning and the social aspects of the web site to rather than just to inform their customers as they might with a traditional web site. They're really using it to connect and interact and get customer feedback. The list goes on and on from politicians, to major entertainment properties like the Twilight books and movies to tens of thousands of people creating social destinations.
What's the average size of a customer?
We have social networks that range anywhere from a couple of people, to families who want a safe, private social space to connect with each other, to hundreds of thousands in the case of Linkin Park and 50 Cent and the Twilight saga.
This past summer you went from being mostly free to being all paid. Can you describe that transition?
Before, we were in two different businesses. We had a free ad-supported business, and we had a premium subscription business. We decided to focus 100% of the energy of the company on our premium subscription business, and we have just completed a process in which our active free communities were able to select from a range of monthly subscription plans and transition over. Ninety percent of our total traffic, our total end users that were touching Ning, who were on the service when we were both free and paid, have now migrated to the paid service.
How many individual users is that? How many were paying before and how many are paying now?
We touch about 80 million people globally every single month. That’s 80 million unique visitors who come to a site on Ning. What we saw in terms of network creators, people who create and run social networks on Ning, is we had about 15,000 who were paying before, and we now have over 70,000 paying subscribers, so more than a 5 times increase in terms of our paying subscription base.
Let's say I'm bigger than a two-person family but smaller than Linkin Park. About how much is it going to cost me to do what I need to do on Ning?
Our core subscription plan is $19.95 a month, and that gives you an unlimited number of members and a choice from a huge range of features, from blogs and photos and events, and really everything that you need to get started. If you're Linkin Park or 50 Cent or Twilight, and you want custom media features and really want to create a professionally branded, custom branded social network, then our plans go up to $49.95 a month.
Why wouldn't the Twilight series, which must have relatively unlimited resources for marketing, go out and just design their own network?
We're really the next generation of the web site. So, all the things that back when I started my career you would have had to have hired 10, 15, 20 developers to do for you custom, we now make possible in a simple drag and drop, point and click interface that's all hosted for you in the cloud. It scales seamlessly. We add new features and capabilities every single week. So, you're really getting the best of both worlds.
So, your pitch to me is that even though I might be able to afford to do all that stuff, why should I if you'll do it for me?
We'll do it for you, and we'll likely do it better and more cost-effectively than you can do it yourself. Martha Stewart has multiple Ning networks around women entrepreneurs, around living a healthy lifestyle, around being an eco-friendly family. Those kinds of things we're seeing popping up all over the place on Ning.
Are you still selling advertising?
Today, the way that we operate is that our network creators are able to sell advertising to help monetize and generate revenue around the social networks that they're creating on Ning. Going forward, what we'll do is make that even easier and really be a partner with them in terms of helping them sell their own advertising.
So you're definitely going to take a cut in the future? Are you taking a cut now?
We're in the process of rolling out some new services, particularly around premium subscription content, where we will participate in the success of our network creators.
You've mentioned Twitter and Facebook. A lot of what someone can do with Ning they can do on Facebook. Why isn't Facebook your worst nightmare?
So, what's happened is as social media has really exploded, people realize it's no longer an either/or decision, and that's what we tell our clients all the time. What they need and what they should have is they should have a presence on every major social media service that's relevant to their brand. But at the same time, what they also want and need is a branded social destination or digital hub that gives them absolute control over the look and feel, over the features, access to the data, and really gives them the freedom to create and monetize in the way that makes sense for them.
What’s an example of something that you'll let me do that Facebook won't let me do?
Well, I think first and foremost we give you complete creative control over the look and feel.
Whereas they're going to force me into a Facebook template.
Right. The second piece that is very important, particularly to the social entrepreneurs who are running businesses on Ning, is on Ning you get access to all the data around what's going on in your community.
And Facebook won't?
Today, that's something that they don't do.
You mentioned you have 80-some million unique visitors per month but not every one of those people needs to be registered. Do you run the risk that because Facebook has become ubiquitous with 500 million-plus users, that they're the platform, they're the common language for anybody to do what they want to do?
Well, one of the things that we've thought for a long time is that to be relevant in the social media space you want to be deeply integrated with every service that makes sense. So, today, we have deep integration with Facebook in terms of supporting the Facebook social graph and sharing on Facebook. The same thing Twitter. And what you'll see from us going forward is out of the box integration with many, many more social services. We think we're in a world where social media has become so front and center that you won't see one service rule them all. You’ll see lots of different services that are important for different purposes. And from a Ning perspective we want to work well with all of them.
I understand at the time that you made the transition there was a bit of an uproar in the nonprofit education community that people were very concerned they were going to have to start paying and that someone stepped in to help.
It was actually a corporate sponsor, Pearson Publishing, who is one of the largest educational publishers. We partnered with them. We actually struck a similar partnership with an organization called WEGO Health around our health focused communities to basically keep Ning free for people and organizations who couldn't necessarily afford the monthly subscription fees. From Pearson's perspective it was a great bargain because it allowed them to connect directly with their most important customer base, students and teachers. You can expect more partnerships and more relationships doing similar types of things.
You have an illustrious founder of Ning -- Marc Andreessen. Talk a little bit about what role he plays with the company now, given that he has so much going on in his professional life.
Marc and I have a relationship going back over 15 years now, and --
You were at Netscape?
Right, I was at Netscape. I was the first employee at a company called Loudcloud that became Opsware, which Marc was a co-founder and chairman of. All through the time that we've worked together, Marc is better than anybody that I've ever seen, in a couple of different areas around product strategy, around the story of the company and overall company strategy, around big deals and working with partners.
Speaking of partners, how do you sell?
Today just about 100% of people who use Ning have found us through word of mouth and through organic search traffic and discovering us on Ning.com. Going forward, you'll hear from us about a number of marketing partnerships and business development partnerships, as well as advertising and lead generation campaigns that we're doing to really get the word out about Ning. One of the things that has been most exciting and surprising as we've made this shift to being an all subscription service is that our number of monthly paid trials has increased by 4 times from where we were before, and that's without any of these programs being in place.
You've raised a fair amount of money for a start-up company or for a pre-public company, a private company, what have you. Are you profitable?
Our plan is to reach long-term sustained profitability mid-next year, but we were actually profitable in August and will be so again in September. This was a result of how successful our transition to paid plans were.
You've raised more than $100 million so far. You’ve got to make a lot of profits over the next 100 years to make back that money, right?
We think we're well on the trajectory to be able to do that.