We thought the Ello team was bluffing; it turns out they were serious.
On October 23, the upstart social network's executive team-which already had promised never to serve ads or sell its users' data-sent out a user-wide email stating that the company was now legally registered as a public benefit corporation.
The body of the email outlines the terms Ello must abide by as a PBC:
- "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."
For a social network that's still in beta, this is a bold move.
What's a public benefit corporation?
A benefit corporation is essentially a for-profit company that has a legal obligation to do social good. There are three major qualities that a company must meet before they are considered. They must:
- Have a corporate purpose to create a material positive impact on society and the environment,
- Consider the impact of their decisions not only on shareholders but also on workers, community, and the environment; and
- Make available to the public an annual benefit report that assesses their overall social and environmental performance against a third party standard.
To this point, Ello has been funded by institutional investors, but its conversion to a PBC opens the floodgates to funding from the general public. The law allows any individual investor with more than a two percent stake in a PBC to sue the company if it violates the public benefit outlined in its filing, which, in theory, forces the social network to keep its word.
Will Ello stay afloat?
Though some major brands are already racing to create a presence on Ello, there's still a lot of skepticism about Ello's business model.
From the get-go, founder Paul Budnitz has proclaimed Ello would monetize through paid premium features, or "freemium" content for power users-people who want, and would pay, for particular capabilities. However, even Budnitz admits it's a strategy that "has never been tried on social networks."
After the initial surge of invite requests, which peaked at tens of thousands per hour, 36 percent of users have never posted, and only 20 percent of users remained active after six days of sign-up. However, many social networks launched with not-so-stellar beginnings.
I asked some of my coworkers to weigh in on the latest news, and whether Ello is on its way to becoming a successful competitor to Facebook:
"I feel like they really set the record straight on paid ads. Pretty interesting and bold move on their part-I think they will have added support from their users."
Lindsay Ruddy, Senior Art Director
Follow on Twitter: @LindsayKRuddy
"So far, I've enjoyed my experiences on Ello and it's great to hear that things only stand to improve as more funding becomes available, and that funding won't change the user experience for the worse."
Jen Jensen, Digital Media Analyst
Follow on Twitter: @JenJensen
"It's an interesting thought. They are really trying to put the screws to Facebook. It also counters obvious cynicism that people have. People probably assumed that, like many brands, Ello would promise this until they became successful and then change their terms."
Ryan Johnson, Organic Distribution Manager
Follow on Twitter: @rsj8000
"Definitely a bold move, but it might be too soon. I think we like the idea but I don't think we're 100% ready to embrace it yet. I don't think this value proposition will be enough to sustain long-term success. Ello needs something more. It needs to give us something we didn't know we wanted or needed."
Vicky Oyomba, Social Content Director
Follow on Twitter: @VickyOyomba