Lots and lots of conversation and debate over the past 2 days about Ning and their decision to drop free online networks and layoff 40% of their staff. The reason: wanting to focus on their high value premium networks like Friends or Enemies, Linkin Park, Shred or Die and Pickens Plan. According to new CEO, Jason Rosenthal these sites and others drive almost 75% of their US traffic.

As a fellow CEO, I understand the need to drive top line revenue. I also understand the need to focus. But what I don't understand is why they handled the execution of this decision so poorly. Are they trying to piss their 2.3 million users off? Are they trying to ruin their brand? Or is there more than meets the eye? One might conclude that they did it this way, "cold turkey" so to speak, because they believe a high percentage of their free network customers will upgrade to premium services? Only time will tell.

I am surprised that they did not contact other leading social networking and online communty vendors to provide alternatives for their free customers - at least as a gesture of good faith. I think this would of helped with public perception and brand reputation. How as a customer can you trust them now? What are they going to do next? And, where the heck is Marc Andressen - pretty quiet.

I also took a look at the upgrade options - they seem like they are trying to nickel and dime their customers to death with packages like faster access to Ning's support staff ($10 or $100 per month); custom domain names ($5 per month); additional storage and bandwidth ($10 per month); removal of ads with the option to embed your own ($25 per month); and getting rid of the link at the bottom of every page that asks users to create their own social networks ($25 per month).Why aren't they offering solution packages based around a line-of-business or vertical?

I think this problem most likely started when they took (I mean raised) around $120 million and had a market cap of ~$750 million with minimal revenue. This kind of investment comes with HUGE expectations - network and member growth; top line revenue; market share; technology innovation and a need to EXIT at a very high multiple. Add to the fact that online advertising revenue is dead, unless your Google... think about it, who wants to pay to advertise on niche networks?

I believe the Freemium Model is part of doing business on the web in the 21st century. That's why we offer free online communities at IGLOO Software. People are looking for transparency and they want to try before they buy - to validate your company brand promise. The trick is how you upsell and monetize your free offerings - and I don't believe that online advertising is the right solution. I do believe that you need to be offering extremely compelling and cost effective upgrade options and packages to your customers, though.

I hope that those left out in the cold at NING find a suitable home. I encourage any NING users out there to check us out and our free migration offer.