Bill Miller knows Web, is betting on Ning

The Baltimore Sun

When you manage nearly $1 trillion in assets, as Baltimore's Legg Mason does, your money inevitably ends up in interesting places. But no Legg deal has created so much stir recently as the millions it gave Ning Inc., a Silicon Valley social-networking startup.

As Ning co-founder Marc Andreessen tells it on his blog, Legg led a $44 million venture capital placement that also included Andreessen and "a top-notch group of institutional investors."

Forty-four million is a ton for a venture round. Legg is a traditional stock and bond house, not a venture investor. Ning, only two years old and challenging giants Facebook and MySpace for the business of supporting Web communities, is an offbeat bet.

What gives? Ning won't talk. Andreessen didn't return my e-mail, and Legg Mason can't elaborate, said spokeswoman Mary Athridge. But the deal bears the fingerprints of Legg Mason genius Bill Miller.

He has long been known for making unorthodox investments at the right opportunity. Investment "style" is less important than good odds for a good return. Legg isn't turning into a venture capital firm, but one swerve into the VC lane for the right wager isn't out of character for Miller.

For one thing, he understands the Web. As chairman of the Santa Fe Institute, dedicated to studying "natural, artificial and social systems," he gets networks and their potential to funnel lots of customers and money onto a pinhead.

Miller is the guy who bought a ton of Google for $85 a share. (Now it's north of $500.) Surely no other "value" manager (his flagship mutual fund is Legg Mason Value Trust) has made so much money on Amazon, America Online, eBay and other Web stocks as Miller.

And he's been hanging out with the Silicon Valley crowd. For years he has gone to Allen & Co.'s famous annual media and technology conference in Sun Valley, Idaho, spokeswoman Athridge says.

Last summer he was there with Google's Larry Page, Amazon's Jeff Bezos and other moguls. Three weeks ago he was there again with, among others, Ning's Andreessen, who is famous as the co-founder of Netscape, maker of the first widely used Web browser.

Conference sponsor Allen & Co. is the New York investment house that handled the Ning placement. Andreessen announced the deal the day before the Sun Valley confab began.

It's unclear whose money Miller has put into Ning. It's not the assets of Value Trust, whose charter says nothing about investing in early-stage companies. Legg manages billions in private investments in addition to the open-ended mutual funds available to the public.

Does the world need another social-network site? Almost certainly, although it's far from clear that Ning is the one. Besides MySpace and Facebook, other rivals include PeopleAggregator, KickApps and Neighborhood America.

A bet on Ning, however, is a bet that Web networks will begin to become smaller and more defined than the free-for-alls on MySpace or Facebook, and this is where the business may go.

Andreessen thinks people will start wanting more intimate online networks. Ning has sites for firefighters, Smashing Pumpkins fans, Dallas Mavericks fans, "penguin aficionados" and 70,000 other topics. Yes, you can do this on Facebook or MySpace, too. Ning is trying to make it easier and become the niche-community "brand."

Online communities began as what Andreessen on his blog calls "walled gardens" - separate and insular. Think America Online and CompuServe, whose first users talked only to each other. After the Web enabled anybody to talk to everybody, people were thrilled to break out of the garden and fly through the air.

Geocities, an early attempt at creating smaller online communities, never worked because at the time Web users didn't want to stay in the garden. Facebook, once restricted to people at Harvard and then to all colleges, succeeded by pushing back the garden wall farther and farther. Now anybody can join Facebook.

Miller's interest in smaller Web communities can be seen in Legg's large investment in Vienna, Va.-based Convera, which lets companies create specialty search engines and - not incidentally - sell high-priced online ads aimed at niche audiences such as doctors or homebuilders. Allen & Co. is Convera's biggest shareholder; Legg Mason is its second-biggest.

The niche communities probably won't be as lucrative as the mass Web market. But if Miller is camping out there, expect some rain to start falling in the garden.

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