Ning is laying off 40% of its staff and dumping free versions of its service. That’s a shitty day for the people who lost their job and the folks left behind without their coworkers. I went through a few rounds back in the dotcom days and fun it was not.

But I can’t help but be puzzled by the coverage of this. Here’s TechCrunch on the situation:

While the massive layoffs are obviously a big hit to the company, it isn’t all bad news for Ning: the service is still seeing its traffic grow according to comScore. But traffic growth is no longer good enough for the company — it needs to start generating some serious revenue, and advertising clearly isn’t cutting it.

Are you kidding me? The company has blown through $120MM of VC funding over six years, built up massive traffic, yet just had to slash and burn, and you’re saying that “traffic growth is no longer good enough”. How the hell was it ever good enough?

Ning’s problem is not a lack of eyeballs but its inability to turn them into cash money to pay the bills. Getting more of something that’s a net-negative is not going to make up for it.

That was always their problem. From day one. Just like it’s any other business’ problem. Acting all shocked and surprised now is just incredibly ignorant of our industry’s very recent past.

This is the same kind of ignorance that goes on to celebrate so-called businesses successes before they posted black numbers on the balance sheet. Until that happens it’s all conjecture and possible maybes.

The just-give-it-away-for-free-and-they-will-come-and-we’ll-be-rich automatron is as broken now as it was in 2001.

UPDATE: Just found this fantastic piece of cheerleader reporting from Business Insider from just last year: “Build-your-own-Facebook startup Ning is still on fire… How much money is Ning making with all that traffic? Bianchini wouldn’t comment. But by our back-of-the-envelope calculations, Ning could be on a nearly $10 million annual”. Oh boy.