The social networking platform Ning has been growing at a breakneck pace with numbers from traffic analysis site Compete stating Ning has had growth around 690.9% in the year of 2008 in U.S. visitors alone. While Ning isn’t exactly knocking on the door of MySpace or Facebook they have definitely made waves in the social networking industry by making big deals like raising over $100 million in funding. This has put Ning at a $500 million dollar valuation.

With growth still moving at a fast pace, 3rd party developers were seeing brisk adoption of their alternative Ning add ons and customized options for the Ning social networking platform. The clear leader in all 3rd party modifications was a company called WidgetLaboratory.com founded by Spencer Forman. Development over at WidgetLaboratory.com had been innovating at a fast pace with new updates and modifications almost weekly. Abruptly and without notice on the morning of August 22nd, 2008 Ning unilaterally disabled all WidgetLaboratory.com plug-ins, add-ons and modifications to all Ning social networks.

Ning publicly released this statement on their Ning Developer Network which you can read here. “This morning we removed WidgetLaboratory, a third party application developer, from the Ning Platform for violating Ning’s Terms of Service. WidgetLaboratory provided independently developed applications that could be added to a social network on the Ning Platform by a Network Creator. While we try to be as transparent as possible, it’s our long standing policy not to comment on specific cases where we remove networks or third party developers from the Ning Platform so we will not be providing any additional details publicly.” Although Ning refuses to provide additional details publicly network creators, Widget Laboratory members, Ning users and bystanders are getting upset and posting their comments in all corners of the Internet revealing extra information on the events between Ning and Widget Laboratory.

On Blogspot Spencer Forman, CEO and Co-Founder of WidgetLaboratory.com released a statement on the current events. You can read his entire statement here. We have provided a snippet of some of the more important parts of his statement below:

“As of this morning, August 22, 2008, we learned from our customers that Ning had unilaterally removed Widgetlaboratory.com and all of its products. We have received no formal notice or explanation at this time. We have not violated any Terms of Service, nor have we violated any published “guidelines” from Ning.

This action by Ning was completely without any notice, was without any merit, and in our opinion was done for the sole purpose of eliminating a company that had started to provide a useful and valuable service to all of you. We have a full and complete documentation of our relationship with Ning from the very first moment that we contacted them in November of 2007 and met with them subsequently to get their blessing for creating our company and products. The facts and details contained therein will substantiate our claims regarding Ning’s actions.

We have achieved a level of market penetration into the Ning community that has made WidgetLaboratory a somewhat “essential” resource for add-ons and widgets. Based upon the personal phone calls and correspondence from the entire Ning team, including their entire Executive staff, it would appear that they decided to eliminate WidgetLaboratory for anti-competitive purposes alone. This is truly ironic to us, given the fact that our products have demonstrably INCREASED the popularity of Ning and caused more customers of Ning to purchase their Premium Services. This was truly a win-win-win relationship between Ning, WidgetLaboratory, and all of you.”

While many users and network creators do admit that Ning terms of service do state that they can remove and shut down just about anything at anytime without notice, it clearly shows a lack of credibility and professionalism from a company that has grown so large and that so many people depend upon. We here at the Business Shrink also utilized Ning.com and WidgetLaboratory.com to develop a niche social network for the Business Shrink at www.bizshrinkonline.com. The CEO of the Business Shrink, Kurt Iverson made this statement about the current events, “As a company who’s focus is on creating relationships and delivering articles through several blogs, we are very concerned about the blatant disregard for the thousands of customers and end users that Ning’s decision affects. It is without doubt that Ning has not provided the expanded features necessary to truly make their platform a customized experience for developer and end user alike. By giving no warning, no time to find alternatives, nor any method by which to recover from the loss of such effective tools, Ning has inadvertently removed two of our methods for monetizing the site. Ads (the Widget Laboratory ad widget) and an entire store (embedded into Ning through the MediaNow widget). It is disconcerting to know that Ning’s leadership has not taken into account those users who relied on Widget Laboratory to make Ning’s solution a more viable platform for their businesses. These are basic rules of business. If you’re going to shoot yourself in the foot, you should at least have the foresight to have some gauze pads on hand.”

There are other network creators that have made statements about the issues too. One network creator named Brother Richard posted this on Ning’s Developer Network, “I have spent hundreds of dollars and several hours developing my site. Widget Laboratory offered several wonderful features, none of which Ning provides. The fact that this was done without warning to them, or anyone else is inexcusable. I have nearly 4000 members who now have many of their favorite features and information is now lost. Because of the great products that they offered, I have resisted the recommendations of many of my members to leave the Ning Network altogether. Unless, their items or restored or Ning provides any replacements, I may be forced to do so. Ning offers NO chat features, NO easy way to make drop down tabs, NO easy way to add new pages, etc.” You can read the current set of comments on the Ning Developer Network that has 24 pages of comments here and here.

With hundreds if not thousands of networks hurt by this shut down it also extrapolates into a large amount of users. When looking at Brother Richard’s statement that he had nearly 4,000 users you could go with a small estimate of hundreds of users per network and be understating the damage. It has been estimated that there were over 10,000 users of WidgetLaboratory’s 3rd party add-ons for Ning. If only 100 networks were using WidgetLaboratory.com and each had 100 users that would be 10,000 users hurt by Ning’s actions that happened without warning. Is this how a half billion dollar company treats it’s clients, customers and users? It will remain to be seen how Ning.com decides to find credibility, trust and professionalism again after they have possibly become too greedy to allow successful 3rd party developers to exist. It could be that Ning just wants a social networking solution that is featureless, dull and lacking fast pace innovation that 3rd party developers were creating while taking up the slack for Ning’s in-house development. What do you think Business Shrink readers?