Ello Today, But What About Tomorrow?

The Current 'Facebook Killer' Isn't the First, Won't Be the Last

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Ello's anti-advertising manifesto
Ello's anti-advertising manifesto

A new social network to take on Facebook and Twitter seemingly hits the scene each week, at the least. But few capture people's attention like Ello did last week.

Ello launched in April as a social network whose pitch was that ads suck and privacy rules. Then last week the company revealed that 31,000 people were requesting invites to Ello each hour, and its profile ballooned.

Here is a chart showing how Google searches for "ello" have trended since April. The chart shows the weekly level of search interest in "ello" in relation to the peak, which came last week.

So what explains Ello's sudden rise in popularity? Perhaps a few things:

1) People are pretty steamed at Facebook for recently deleting a number of drag queens' accounts because they weren't under their real names. It's been widely speculated that many of those whose accounts were deleted by Facebook flocked to Ello, which has claimed an uptick in new users from the LGBTQ community coinciding with Facebook's move.

2) People are a little freaked out over their online privacy after a bunch of celebrities' Apple iCloud accounts were hacked and Facebook researchers fiddled with users' feeds as part of a sociological study. Like Apple, Ello is making the case that it doesn't really want people's data. "Unlike virtually every other social network, on Ello you can opt out of information sharing," the company writes on its About page.

3) People are worried that Twitter is about to convert its real-time stream to a curated one that may make it easier for Twitter to insert ads into the feed. Facebook did this years ago, which has led some people to decry a lack of control over their feeds. Ello is positioning itself as the anti-Facebook in that regard. "Your social network is owned by advertisers…. We believe there is a better way," Ello writes in its manifesto.

But there may be a less lofty and more fleeting reason for Ello's overnight ascent.

"Someone at Ello picked the perfect time for a PR push because Facebook is announcing new ad capabilities this week," said Forrester analyst Nate Elliott, referring to Facebook's announcement that it would incorporate users' data in serving and measuring ads outside of Facebook.

An Ello representative declined to make founder Paul Budnitz available for a phone interview. "We don't really see Facebook as competition, because for us it's an advertising platform, not a social network," he said in a statement in response to emailed questions. He said the number of people requesting invites to Ello is "peaking out at 40,000 invite requests per hour right now."

Potentially hundreds of social networks have emerged in recent years aiming to take on Facebook "by promising greater privacy control and fewer ads [but] not one has collected an audience of its own," Mr. Elliott said.

Remember App.net?
As a recent example, two years ago tech entrepreneur Dalton Caldwell introduced App.net, an ad-free, subscription-based social network. App.net remains in operation, but Mr. Caldwell announced in May 2014 that the company hadn't attracted enough subscribers to pay full-time employees.

Ello could face a similar dilemma by asking users, not advertisers, to bankroll its business. Ello plans to charge users for features, such as a $2 fee for having two accounts, according to Fortune. Mr. Budnitz didn't offer any details when asked for specifics by Ad Age, other than saying that "we have thousands of people writing in requesting features they would be willing to pay for" and that whatever features Ello ends up selling will cost "a very small amount of money."

"Sort of like the app store, the main features of Ello will always be free," Mr. Budnitz said.

However the company opts to make money, to ensure people pony up Ello will need to make sure it offers features not found on similar-but-free services because the ad-free argument may not be as strong as it sounds.

"People perceive Facebook users hate ads. If they hate ads, there wouldn't be 1.3 billion people coming to Facebook every month," Mr. Elliott said.

Other precursors like Path have offered people a social network that's in some regards even more privacy-friendly than Ello. For example, anyone with an Ello account can see any other Ello user's posts, and the service doesn't currently offer private messaging.

"The side [Ello] missed and showed quite a bit of cultural deafness on was the idea that you really couldn't control anything you put out there for the world to see in terms of your network," said Forrester privacy analyst Fatemeh Khatibloo. She added, "Especially given the focus they've had on being a very LGBT-friendly, non-heteronormative network, it's really important to that community because that community has had a harder time with harassment."

In that respect even Google+ -- by letting people create specific "circles" of people to share certain content with -- gave people more control over their privacy than Ello. Of course Google+ carries the privacy baggage of its parent company, and Mr. Budnitz said Ello plans to add private accounts. Ello doesn't plan to introduce a private posting system similar to Google+'s circles, Mr. Budnitz said.

Breaking through the clutter
So what makes Ello any different than its predecessors? At this point, its ability to grab people's attention. Whether that's a good thing remains up for debate.

"Pinterest and Snapchat didn't make a PR push and try to become the conversation when they had tens of thousands of users. People started noticing Pinterest when it had 15 to 20 million users. These guys are playing their hand early," Mr. Elliott said.

But investors may only care that Ello -- which raised $435,000 in funding earlier this year -- is playing its hand well enough to draw big headlines for the small startup. "Lofty and Kurt Cobain-like as Ello's goals may be, VCs don't invest for purely philanthropic reasons," said Peter Csathy, CEO of Manatt Digital Media Ventures, the early-stage venture fund and consultancy arm of Manatt Digital Media.

"Scale is always good. And cutting through [the noise] is always good. The question is the sustainability. But there are absolutely thousands of startups out there, and we're all talking about [Ello]. That's an accomplishment," Mr. Csathy said. He downplayed the notion of Ello's PR push being a red flag, describing it as "the entrepreneurial way."

Even Ello's current lack of revenue isn't a red flag. Consider that Snapchat is said to be valued at $10 billion despite having no revenue stream.

"Let's just assume if Ello's counterculture story resonates and its numbers grow massively, then the fact that it didn't monetize didn't matter because a big fish will buy it out for a significant number," Mr. Csathy said.

Maybe Ello will be the little social network that could and will emerge in several years on par with Facebook. But as Mr. Elliott put it in reference to Ello's latest sign-up rate and Facebook's monthly active user base, Ello is "40,000 down and 1.3 billion to go."

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