"generally accepted 5% to 10% conversion rate" - where did he come up with that? I was under the impression most successful freemium products (Evernote, DropBox, more I can't remember right now) were doing more like 1%?
Also, was Ning really freemium before this shift? I thought they were closer to just being free, period. Could be wrong on that.
I was surprised to see them shift all the way to the other direction of 100% paid. A true freemium model (free plan limited by hits, users, whatever to keep them small) seems like it would have been better.
It may be that they found limitations in the market size, not the pricing model.
When you get "$119 million of funding", having 35,000 paying customers is just not going to cut it.
Since its most likely a niche market, they might not have the network benefit of a larger market that freemium utilizes. Maximizing the revenue from each customer is much more important when the market is smaller.
Interesting article, this point jumped out at me though:
"Since ditching free, 35,000 Ning networks have signed up for paid plans. . . those numbers mean Ning wooed nearly 12% . . . more than double its previous conversion rate."
This isn't an accurate assesment.
That 12% uptick rate was one time, and based on Ning forcing the hand of their communities.
I'm curious to see how Ning markets themselves in the future, if nothing I'm sure lots of those communities that paid the uptick realized how beholden they were to Ning . . .
Thanks for the excellent point re: one-off effects. Here's how I got the 12% number: 35,000 of 300,000 non-paying accounts chose to ante up, which is 11.66%.
Based on my reporting, I think the overall conversion rate might actually be more than that. Off hand, Ning has 50,000 total paid users and an estimated 265,000 non-paying ones (though not for long). That suggest to me that 50k/315k or 15.87% of Ning customers are paying customers.
An interesting follow-up might be how they're planning to attract new communities moving forward.
Freemium to is all about lead gen, they just got their revenue bump from freemium despite cutting it out of the equation - eg those 35,000 came from free accounts right?
12% is a huge closing ratio, forget for freemium.
I imagine a big part of those huge conversion numbers is because the communities had ample time to gain traction, some financial incentive tied to that traction that validates the cost, etc.
Let's say they convert their next 300,000 leads at the same impressive 12% ratio to paid - where do those leads come from?
I applaud the move to "paid" at some levels, but I question that they're going to be able to pull it off without a solid free option - their 30 day free trial isn't going to suffice.
What an interesting thought, and one that only crossed my mind for a moment: What if this free-to-paid transition becomes a _tactic_? Given the traction 'free' affords, could there be a business model in switching business models?
If I remember correctly, Ning raised their last round at a ~$400M valuation. As a freemium Facebook competitor with Pmarca involved, you can sort of understand, but no one is going to pay >400M for a B2B social network maker.
People who put $119m into Ning either believe there will be a bigger sucker to sell it to (hey, AOL is still around) or are the kind who reads Wired & TechCrunch seriously and get star struck when a Valley celeb attaches their name to a company. That's really all there is to it.
I looked at Ning some time ago for players of the small RPG I made. The service seemed redundant with the site, storefront, email accounts, and forum I already have, which are very cheap.
I think Ning is enterprise software of a social sort. As a result, they might fall into a narrow slice of the market: not too small, but not too big.
EDIT: The title should read ...are things starting to look up at Ning?
http://www.google.ca/#hl=en&q=ning+tax+preparation+bette...
Because if so, I'm all for it.