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Investors Give Ello $5.5 Million Even After It Bans Its Most Obvious Revenue Source

Investors Give Ello $5.5 Million Even After It Bans Its Most Obvious Revenue Source
[Base Image: Flickr user LASZLO ILYES]

Upstart social network Ello caught the tech world’s attention (if only for a Silicon Valley minute) with its promise to never sell user data or advertising.

But the thing about startups making promises is that often they aren’t in a position to keep them, no matter how well intentioned they might be. Founders often don’t own a majority of the company, and their investors end up making decisions that put money before philosophy. Companies get acquired, and new owners change things.

Ello made the unusual move on Thursday of solidifying that promise in a legal way by becoming a “public benefit corporation.” Its charter forbids the company from selling ads or user data and, in the event Ello is acquired, would force the new owners to abide by this same rule.

The announcement brings the question of how Ello plans to make money even further into the foreground.

Ello says it will charge users for add-ons and modifications in its app, the way that Apple’s app store works, but some are skeptical that’s viable. “Would people like a less intrusive social network than Facebook? Of course they would,” Harvard Business School professor John Deighton recently told Forbes. “Do they want it enough to pay for it? Probably not, as long as there is a giant global community (Facebook), with a billion monthly active members, including that high school exchange student who they lost touch with when they went back to Bolivia. And that one’s free.”

Yet, Ello obviously has earned some believers in the business world. On the same day it solidified its ad-free mission, it announced $5.5 million in financing from the Foundry Group, Bullet Time Ventures, and FreshTracks Capital.

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