Ello is back in the news, and is living up to its promise to stay advertising free. The company has become a Public Benefit Corporation, which means the ad-free stance has to be upheld, even if it’s acquired.
That’s not to say Ello doesn’t have a business model, it’s just out of left field for social networks. It will adopt the freemium model – charging users for extra features. Some have praised the business model, while others have questioned it. Questioning it is easy. Barriers to entry are always a concern for social networks.
Even Spotify has to support it’s free streaming offer with ads, so you have to wonder about the ability of Ello to retain users through this model. LinkedIn has managed to use this model to great effect, but the network is niche. People’s online resume is something entirely different that what Ello is looking for. They want to go against Facebook.
Paul Budnitz, the founder of Ello, has dismissed the concerns. He points out that people happily pay for apps that customize their smartphones. True, but usage rates of those impulse buys drop off pretty steadily. Ello is going to have to front serious features to keep people happy, and then work on the microtransactions.
Investors Believe Ello
The growth of the social network has attracted some much-needed cash. Ello recently raised $5.5 million. Fresh Track Capital was one of the lead investors, and praised the company’s business model.
The cash should help the company expand. Currently, it has 14 employees despite its brisk growth rate. If they manage to pull it off and become a player in the social media landscape, I will have to eat my words. I thought the manifesto was just a ploy to garner favor with the anti-Facebook crowd.
Now, we will have to wait to see what features they deem premium. That will be the make or break moment for Ello.