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Andreessen-founded Ning cuts staff, free service

Business is restructured to focus on paid customers, a memo from CEO Jason Rosenthal tells its workforce--which is about to be reduced by 40 percent.

Uh-oh. Just a month after Gina Bianchini, co-founder of build-a-social-network service Ning, departed the company, it's cutting 40 percent of its staff and axing its free, ad-supported service.

Bianchini had co-founded Ning with Valley legend Marc Andreessen, and it had raised $119 million in venture capital, including a whopping $60 million round in early 2008 that Andreessen famously characterized as a stockpile for the "nuclear winter" that would help get it through the economic recession.

Jason Rosenthal, the Ning COO who took over as CEO from Bianchini, sent an e-mail memo to company staffers on Thursday that somebody forwarded to industry blog TechCrunch. He explained that Ning will be focusing on premium networks--which come with additional features and are not ad-supported--because that's where the company's business successes have been, thus far.

"We are going to change our strategy to devote 100 percent of our resources to building the winning product to capture this big opportunity," Rosenthal's memo explained after detailing the success of a number of its paid networks. "We will phase out our free service. Existing free networks will have the opportunity to either convert to paying for premium services, or transition off of Ning."

The company's staff reduction will take it from 167 to 98 employees.

In a later memo to the press, Rosenthal explained, "Within 90 days, we will launch the next generation of Ning, which will include a range of new premium features and services for our Network Creators, a new mobile experience, and a new set of APIs." He added that he and Andreessen will "work diligently with everyone affected by this to help them find great opportunities at other companies."

Ning has already made big steering decisions: at the beginning of 2009, it voluntarily lost a fifth of its page views when it banned pornographic networks, and several months later, it said it had recovered the traffic and hit 1 million total networks.

Andreessen, the Netscape founder who currently serves on the boards of companies such as Facebook and Hewlett-Packard, and spearheads the $300 million Andreessen Horowitz venture capital fund, has served as Ning's chairman since its inception.

Update, 11:17 a.m. PT: Comment from Jason Rosenthal has been added.