Sorry but I can’t resist harping on this one.
Venture Beat and Boomtown reported that Ning Raised $15M for total valuation of $750M. This kind of news seems to make everyone all twittery (sorry, could not resist again) especially in the Valley. What does it mean? Only that Marc Andreesen is the master at pumping up valuations and finding some sucker to buy them.
Even if you believe Ning’s numbers and that 200,000 private social networks are active, how many are actually willing to shell out for premium service? I would venture a guess of 1-5%. Even if we assume 10% that is 20,000 willing customers at $25 pop (this price is from their blog), that is 500K per month. Let’s not forget that they also make money selling ads. Assuming they can make $.20 per user* on 6 million users (again their number), they would take in another 1.2M /month, for a total of 1.7M/ month or approximately $20 M per year.
As for expenses, I am not privy to their numbers but I can guess that between employees and servers, they are probably losing money at least as much as the revenue stream.
So to recap the math, $750M for a company that makes $20M a year (using generous assumptions) with little prospects of turning a profit. Do I hear “Bubble 2.0” popping?
*Raj Kapoor (Managing Director at Sillicon Valley’s Mayfield Fund) estimates that social network sites make $.20 month per user on ad sales (source: http://www.undertheradarblog.com/blog/social-networks-will-make-more-money-off-site-vs-on/).
