Ello’s Ad-Free Stance Stays Put
Ello, the mysteriously growing social network, doesn’t seem to slow down — with its user base and potential to stay in the headlines.
The social network which had just 90 users in August, now boasts of over a million users. How do they do it? By keeping the site ad-free, of course.
We wondered how long it would be before Ello succumbed to dark arts of bombarding advertisements on their site. But it seems that Ello was firm in its resolution of saying no to ads.
The invitation-only social medium announced that it has planned to strike back as a public benefit corporation whose very charter forbids the company from using ads or selling user data to make money.
“It basically means no investor can force us to take a really good financial deal if it forces us to take advertising,” Paul Budnitz, co-founder and CEO of Ello said. “It points us in the right direction, and it protects us.”
Ello’s “ideological purity,” however, has not kept aloof from financial backers. So far it has managed to raise $5.5 million in financing from the Foundry Group, Bullet Time Ventures and FreshTracks Capital.
While the company is not aiming for domination of the market, it still aims to be profitable with its legal charter prohibiting the sale of ads and user data, and stating that any buyer of the site must also comply by the rules.
Though it’s still not clear about how much their stance might limit the company’s expansion, one thing is clear – their determination. Ello refers to other public benefit corporations like Patagonia and Ben & Jerry’s as its role models.
“There are a lot of great companies that are using this law to do good in the world,” Budnitz said.
You still might be wondering what Ello has in mind to make money. Budnitz compared Ello’s approach to Apple’s App Store: Users will be able to download widgets and modifications, paying a few dollars for each purchase.
This customizability also goes well with their belief that the one-size-fits-all template like Facebook is an “old model.”
Budnitz said initially Ello had not planned to raise money from outside anytime soon. But with the sudden surge in its popularity, with a waiting list of 3 million, the company realized it had to finance its future growth and make sure the site didn’t go down.
The immense spike in the demand naturally drew venture capital giants, but Budnitz turned to investors whom he could trust to back the company’s mission, like the Foundry Group.
“I loved it. I was totally all in,” said Seth Levine, a managing director at the Foundry Group. “Ello isn’t saying this isn’t the only way a social network can monetize, but that this is the way they want to monetize.”