Hot on the heels of raising $5.5 million in venture capital funding, new social upstart Ello — hoping to achieve the precarious balance between remaining a truly ad-free social network and financial feasibility — has converted to a Public Benefit Corporation. What does this mean? Should we all be super-excited? Let’s take a look.
Paul Budnitz, Ello CEO. Image via Re/code
The funding news should come as little surprise to anyone who’s been paying attention. After all, at the height of the Ello buzz (which seems to have been a couple of weeks ago), the site was reportedly being bombarded with as many as 50,000 membership requests per hour. According to Re/code, which broke the news about Ello’s successful round of funding, the site also recently surpassed the 1 million user mark (though you’ll notice that nothing has been said about how many active users the site has).
There are still as many as 3 million users eagerly awaiting their chance to browse the site in confusion, wondering what the hell they should be doing before logging back into Facebook or Twitter. According to Ello’s CEO Paul Budnitz, “every VC in the nation” has been trying to invest in Ello, but it seems that the Foundry Group stumped up the most cash, the majority of which Budnitz plans to invest in the site’s back-end infrastructure.
One of the biggest “selling points” of Ello is its claim that it is not, and will not, be supported by advertising. This alone has tempted many people into checking out the service, as many social media users are growing weary of being treated as the commodity they are.
Remember this? Ah, those were the days.
However, as I mentioned in a previous post, Ello’s privacy statement clearly proves that Ello’s commitment to remaining ad-free is confusing at best:
Rather than ads, Ello’s business model is similar to that used by many online gaming companies – so-called “microtransactions.” Users will have the option to unlock specific features of the platform for just a few dollars. This is an extraordinarily risky move – this model has proven lucrative in gaming, where players can and will spend money to improve their experience, but can a social network pull it off? Personally, I doubt it.
The screenshot above is still live on the Ello site as of the time of this writing. However, Ello is sending mixed messages to the media in light of the justified and continued speculation about the future of its business model.
Today, Ello formally converted to a Public Benefit Corporation, or PBC. In essence, PBCs are companies that (as their name implies) allow them to serve a public benefit AND maximize profits for shareholders. The fact that Ello has converted to a PBC doesn’t mean it’s not interested in making money, but it does indicate that Ello’s founders are serious about the whole no-advertising thing.
For a site that just raised more than $5 million in VC funding with more than 1 million users, there’s not much going on at Ello.
As brands spend more and more to carpet-bomb Facebook and Twitter in advertising and promoted content, the premise of an ad-free social network is a tempting proposition, especially those concerned about their online privacy. However, even if Ello does remain ad-free – which seems likely, given the strength of Ello’s statement regarding its status as a PBC – that’s simply not enough to make Ello a compelling alternative to the major players in social media.
Unless activity increases along with Ello’s user base, the site could soon stall out. One need look no further than Google+ as a cautionary tale about what happens to social networks that lack the magic “social” ingredient. If Ello cannot scale and attract new users, it might not be long before Ello is populated almost exclusively by marketers claiming that new and exciting features are just around the corner, you just wait and see.
It’s too soon to say whether Ello will succeed, and deliver on its promise of remaining ad-free while turning a profit for shareholders. However, now would be an ideal time to look at several other failed experiments in social media that promised a similarly utopian future but ultimately flamed out – or are dying a slow, agonizing death.
The brainchild of serial entrepreneur Dalton Caldwell, App.net is one service that promises to remain ad-free.
The service generated a lot of buzz between 2012 and 2013, due in large part to its ambitious promises and the helpful addition of $2.5 million in funding courtesy of Andreessen Horowitz. However, App.net soon fell out of favor with the cool kids, due in part to its disastrous decision to charge subscription fees from the outset.
While App.net impressively leveraged its range of APIs to offer a great deal of flexibility to developers (at least at first), it failed to recognize its Twitter-like microblogging platform as the core of its product offering, an oversight that lost the service significant ground in the relentless social media wars. Eventually, the same developers that had flocked to App.net in droves in the beginning gradually abandoned the platform as it failed to accelerate the growth of its user base, which has now withered.
Although App.net eventually corrected course and abandoned its subscription model, it was too late – the damage was done.
Two years ago, Diaspora was created with the intention of providing users with an ad-free alternative experience to Facebook and the rest.
However, while some hardcore loyalists are still working on the project, Diaspora’s leadership team effectively abandoned ship this summer, leaving the platform to the devices of its small community.
Remember Path? Yeah, me neither. The beleaguered mobile social network, which attracted publicity for all the wrong reasons last year, recently announced it would transition to a “freemium” subscription-based business model in order to stay ad-free.
Path claims it currently has 20 million users, but as numerous sources have pointed out, why would anyone pay for an inferior service that charges for many of the same features they can get for free at Facebook?
After being featured in Forbes in 2012, Pheed enjoyed a surge in interest. The site, which offers many of the same features as the major social networks, also breaks from the pack by offering a revenue-sharing scheme for users who upload images, video, and other content to the service. There are no ads on Pheed for now, but then again, there are hardly any users, either.
First, a disclaimer – Unthink (arguably the most unintentionally hilarious name for a social network, possibly ever) isn’t actually a social network, it’s an “emancipation platform.”
Similarly to Ello, Unthink has a “manifesto,” which is even more pretentious than Ello’s, if that were possible. The makers of Unthink want to liberate people from the savage capitalist beasts like Facebook. Self-described “CEO activist” Natasha Dedis, says that Unthink is “a promised land that [users] own and can build what they want to build.”
Actual screenshot from unthink.com
Somehow, Unthink has managed to raise $2.5 million, with very little to show for it at this point. Unthink’s position on ads is excruciatingly obvious, but its future is far less clear. Right now, it seems more like an exercise in outspoken political grandstanding than an actual attempt at a social network, but I guess we’ll have to wait and see.
Only time will tell what Ello can be, and whether it will live up to its idealistic promises of an ad-free yet profitable social network that people will actually use. However, there can be little doubt that, for now, Ello will continue to grow, as well as tempt other VCs into parting with all that filthy lucre.
Originally from the U.K., Dan Shewan is a journalist and web content specialist who now lives and writes in New England. Dan’s work has appeared in a wide range of publications in print and online, including The Guardian, The Daily Beast, Pacific Standard magazine, The Independent, McSweeney’s Internet Tendency, and many other outlets.
See other posts by Dan Shewan
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