Ello launched on August 7, 2014 with big dreams and big promises, a new social network defined by what it wouldn’t do.
They laid it all out in a manifesto, right on their homepage:
Your social network is owned by advertisers.
Every post you share, every friend you make and every link you follow is tracked, recorded and converted into data. Advertisers buy your data so they can show you more ads. You are the product that’s bought and sold.
We believe there is a better way. We believe in audacity. We believe in beauty, simplicity and transparency. We believe that the people who make things and the people who use them should be in partnership.
We believe a social network can be a tool for empowerment. Not a tool to deceive, coerce and manipulate — but a place to connect, create and celebrate life.
You are not a product.
From its launch, Ello defined itself as an alternative to ad-driven social networks like Twitter and Facebook. “You are not a product.” (The “I Disagree” button linked to Facebook’s privacy page.)
I’d link to that manifesto on Ello’s site, but I can’t, because Ello is dead.
In June 2023, the servers just started returning errors, making nine years of member contributions inaccessible, apparently forever — every post, artwork, song, portfolio, and the community built there was gone in an instant.
How did this happen? What happened between the idealistic manifesto above and the sudden shutdown?
It’s a story so old and familiar, I predicted it shortly after Ello launched.
Ello’s Funding and Launch
Ello, for those who don’t remember, described itself as a “simple, beautiful, and ad-free social network created by a small group of artists and designers.” It launched with a distinctly minimalist monochrome interface and an even more minimalist set of features.
Like Diaspora and App.net before it, Ello partly defined itself by its opposition to the exploitive business models and content moderation practices of major social networks, so quickly found itself deluged by people fleeing Facebook and dubbed by media outlets as an “anti-Facebook” or “Facebook killer,” something the Ello team never intended it to be. It was an uncomfortable balancing act, but they leaned into the publicity, at least for a while.
Ello’s invite-only beta
In September 2014, one month after it opened its invite-only beta, I wrote a post about Ello on Ello.
Digging through SEC filings, I discovered that the newly-launched indie social network had taken nearly half a million in seed funding from a venture capital firm, which seemed counter to its indie manifesto. Since nobody else mentioned the funding, including Ello themselves, I wrote about it.
Here’s what I wrote:
Building something like Ello costs money. They have a team of at least seven people, and have worked on it for months. That doesn’t come cheap.
The About section makes it seem like Ello was built independently, a group of artists making something for themselves, presumably funded by volunteer effort and maybe a seed investment from Ello president and CEO Paul Budnitz, who also founded Kidrobot and Budnitz Bicycles.
But a little digging shows a much more predictable source: they took a $435,000 round of seed funding in January from FreshTracks Capital, a Vermont-based VC firm that announced the deal in March.
Why is this a problem?
The Ello founders are positioning it as an alternative to other social networks — they won’t sell your data or show you ads. “You are not the product.”
If they were independently-funded and run as some sort of co-op, bootstrapped until profitable, maybe that’s plausible. Hard, but possible.
But VCs don’t give money out of goodwill, and taking VC funding — even seed funding — creates outside pressures that shape the inevitable direction of a company.
Before they opened their doors, Ello became hooked on an unsustainable funding model — taking cash from VCs — and will almost certainly take a much larger Series A round once that $435,000 dries up. (Which, at their current burn rate, should be in a couple months.)
And they’ll have no trouble getting it. There’s a lot of money out there right now, and it will be extremely tempting to take it, especially if refusing it would mean closure or layoffs.
The problem, of course, is that VCs aren’t like Kickstarter backers, or even like angel investors. Kickstarter or Patreon backers just want the thing being made. Angel investors may have other reasons to invest beyond equity: fame, insider access, or maybe just the joy of helping something exist.
VCs may invest in things they think are interesting or want to exist, but they primarily invest money in startups to get a return on their investment, on behalf of their limited partners. That return usually takes the form of an exit: an acquisition or an IPO.
Unless they have a very unique relationship with their investors, Ello will inevitably be pushed towards profitability and an exit, even if it compromises their current values. Sometimes, this push comes subtly in the form of advice and questions in emails, phone calls, and chats over coffee. Sometimes, as more direct pressure from the board. (FreshTracks’ Managing Director sits on their board.) Or, if things go bad, by replacing the founders.
The Ello team knows that how a startup is funded shapes how it behaves. They spend a good chunk of their About pages talking about how they’re not going to make money (not ads or selling your data), and a little bit about how they hope to (paid premium features). I hope they’re right — it’d be great to have more startups that aren’t reliant on ads.
But they completely fail to disclose how Ello is being funded now, which matters just as much, if not more, as any future revenue plans.
I love seeing people build new stuff. More people trying to build crazy experimental communities on the Internet is a very good thing. And nothing’s more audacious than trying to build a new social network.
Social networks become the glue that connect people together — the foundation for friendships, relationships, and new works of creative expression.
Building a social network is like opening the doors to a huge party and inviting everyone in. Without a way to get your stuff out, shutting down a social network is like locking the door and burning the place down.
At the moment, Ello is a free, closed-source social network, with no export tools or an API, fueled by venture capital and a loose plan for paid premium features. I think it’s fair to be skeptical.
Like everyone else here, I hope Ello can stick to their principles, resist outside pressure, fight market forces, and find a unique and sustainable niche.
Let’s hope their investors feel the same way.
The Founders Respond
That post quickly blew up on Ello, and then went far beyond it, with coverage in articles from The Verge, The Guardian, VICE, The Atlantic, and Business Insider, among others.
Ello’s CEO, co-founders, and investors dismissed the concerns I raised, starting with co-founder and CEO Paul Budnitz, who told Betabeat it was “silly.”
Screenshot of Betabeat article: "Ello Founder Says VC Funding Is No Big Secret: ‘That’s Silly’" "There's no pressure for us to do anything we don't want to do," Ello founder Paul Budnitz said.
“In fact, Ello is controlled executively by its 7 founders, who own a majority share in the company,” wrote Betabeat’s Jack Smith IV. “They say that the cynical claim that they’ll sell out eventually, or that anyone can tell them what to do, is ridiculous.”
Co-founder Todd Berger laughed at a GigaOm writer who asked him about my post. “There’s seven founders and we own 82 to 84 percent of the company, so we can do whatever the hell we want,” Berger said.
“We’re not going to sell out our soul to grow our company,” continued Berger. “Maybe it’s hard to believe.”
I followed up with a second Ello post:
I’ve received a dozen emails in the last day and a half from journalists looking for quotes about Ello. I didn’t reply to any of them. I have no interest in being the anti-Ello poster boy, for one main reason:
I think Ello’s pretty neat, and I want them to succeed.
Like I said in my post, more experimentation with online communities is a very good thing. We’ll only break away from the dominant players by trying new crazy shit, and I think it should be applauded. (And, yes, I even like the design.)
But I think taking VC was a bad idea that works against their ethos, and will inevitably lead to a much larger Series A by year’s end.
I think the intentions of the team are pure, and they genuinely believe in what they’re building. But I’m not sure intentions matter unless they can wean themselves off outside funding.
I really, really hope their revenue plan works out, and quickly.
Series A and the PBC
One month later, Ello announced they’d raised significantly more money: a $5.5 million Series A round co-led by TechStars and Foundry Group, who took a board seat, with participation from FreshTracks Capital, who already sat on the board.
Coinciding with this funding, and perhaps anticipating the backlash, Ello also announced they had converted the company to a Public Benefit Corporation.
In a public letter signed by their founders and investors, they wrote:
There has been some speculation in the press since our launch that Ello will someday be forced to allow paid ads on our social network.
With virtually everybody else relying on ads to make money, some members of the tech elite are finding it hard to imagine there is a better way.
But 2014 is not 2004, and the world has changed.
Effectively, Ello would be a for-profit corporation required to pursue social good as part of its charter, instead of solely maximizing shareholder value. Unlike a B Corp certification, this would enshrine their values in their legal structure, which is a pretty big deal. They were the most notable technology company to form as a PBC until that point, preceding Kickstarter’s conversion by nearly a year.
A dedicated page on their site explained the significance of the PBC, and the charter they were now bound by:
To assure that Ello always remains ad-free, Ello converted to a Public Benefit Corporation (PBC). A Benefit Corporation is a new kind of for-profit company in the USA that exists to produce a benefit for society as a whole — not just to make money for its investors.
The Ello PBC charter states in the strongest legal terms possible that:
- Ello shall never make money from selling ads;
- Ello shall never make money from selling user data; and
- In the event that Ello is ever sold, the new owners will have to comply by these terms.
Ello exists for the benefit of the creative community, and we will never serve ads or sell personal data.
This was a commendable change, though somewhere along the way, all the public debate about raising professional money and profit maximization became solely about switching to a paid advertising model and selling user data. This was a straw man argument that was easier to knock down.
But there are many, many ways for a social network to become worse for their users than running ads.
My concern wasn’t that Ello would start running paid ads. I don’t even mind ads, as long as they’re done thoughtfully and with privacy in mind. (I ran ads from The Deck here for years.)
I was worried that, by taking outside funding, Ello’s values were no longer fully-aligned with the community: they were aligned with their investors. In time, given more money and more pressure, they would be inclined to do something the community, or even the original founders, didn’t want to do.
Series B and CEO Changes
In April 2015, six months after their Series A, Ello took another $5 million in a Series B round from their previous investors, giving a board seat to TechStars, and bringing their total raised to $11M.
Later that year, in December, Budnitz wrote a new post on Ello looking back on their first year and looking ahead to 2016:
This past week I gave a few interviews to online news organizations.
One of the journalists scoffed when I told him that Ello is built on principles we believe in, and that in 2015 we did everything we could to grow slowly. Rather than sell out and make another giant network the world doesn’t need, we decided to take our time to build the beautiful and inspiring place we have today.
I felt sad for the guy. It’s awful going through life never believing in anything.
So in the spirit of the New Year, and because it was clear that this journalist wasn’t going to believe anything I told him anyway, I figured I’d publish a short list of things Ello will never do:
- Diverge from our mission to empower and support creators to inspire one another, and move the world forward.
- Tolerate hate. Ello has many tools, some visible and others not, that help keep this network positive.
- Sell ads or user data to third parties.
- Sell out.
- Suck.
Three months later, in March 2016, Paul Budnitz stepped down as CEO, citing the distance between his home in Vermont and the rest of the team in Boulder. He was replaced by Todd Berger, one of Ello’s co-founders and lead designers.
Under Berger, Ello refocused its efforts on artists and creators. From a May 2016 press release: