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The Evolution of Ello

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"It was a little bit like throwing a party with nobody in it," Paul Budnitz answers without missing a beat. He's heard it all - or read it, mostly.

In April of last year, his seven-person social network was declared the "Anti-Facebook" by the cream of the technology press. Six months later, it had replaced Friendster in lazy Silicon Valley punchlines about abandoned social networks.

It's been a strange year-and-a-half for Ello. In Spring of last year, the site kicked off an invite-only launch after a year or so of private beta testing, its simple homepage greeting users with a plain language manifesto - a shot across the bow against the social network status quo.

"Your social network is owned by advertisers," it stated, reading more like a declaration of revolution than the unending legalese of a standard terms of service. "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."

Closing with the now infamous, "you are not a product," the mission statement clearly struck a nerve.

"I think it just hit a chord," explains Budnitz, the Burlington, Vermont-based serial entrepreneur who made a name for himself with Kid Robot and the boutique street bike maker Budnitz Bicycles, prior to co-founding the ad-free social network.

The CEO chalks Ello's early success in part to the manifesto, along with a Bill of Rights that, fittingly, first appeared online July 4th of last year, promising users freedom of privacy, control and ownership, among other Facebook achilles heels.

Even so, the executive's at a bit of a loss to explain precisely how a Denver-based startup employing a smaller starting lineup than a major league baseball team managed to become the hottest social network since Mark Zuckerberg and a pair of Winklevosses took Cambridge by storm.

"If I could tell you I knew, then I would be a billionaire, because I would be able to repeat that stuff whenever I wanted to," Budnitz answers with a laugh. Best he can explain it, Ello owed its initial spark of success to some combination of its outright rejection of ads and the way it serves up posts.

"There's a fundamental war between paid content, which you may or may not really want to see, and the content that you've chosen to follow because you've decided to follow somebody," the executive adds. "[Quality content] is shifting its way over to Ello and that all clicks in really well with the business plan. It's kind of groovy that it's actually working out. It's kind of weird when you think of something that happens because it usually doesn't."

In the inevitable movie adaption, there'll probably be some quick montage of hyperbolic headlines from across the blogosphere. "Facebook Killer Called Ello Gets The Timing Right," "Mad Genius Creates Ello, the Elegant Anti-Facebook," "'You Are Not a Product': Ello Wants to Be the Anti-Facebook Social Network."

By late September, the company reported receiving 4,000 invite requests an hour. A day later, the number had nearly octupled to 31,000. Users were selling invites for ungainly sums, a phenomenon one of the company's spokespeople rightly labeled "bizarre" at the time.

Over three days, the company's requests jumped 34x, according to Ello's accounts. Not surprisingly, demand drove the company's servers offline, which naturally only served to further interest in the still mysterious new startup. By year's end Ellomania had gone the way of the Friendster testimonial and the Myspace Top Five. VentureBeat cheekily declared, "Ello hasn't given up yet" in a post about the company adding new features.

A month later, the ever-blunt editors at TechCrunch stated "Ello Pretends It's Not Over" in a headline for a story that also showed the smiley Ello icon inverted to display a frowny face and the opening line, "Already-forgotten, anti-Facebook social network Ello today launched the ability to share music and video clips in its feed, but that won't matter."

Ello's devoted minimalism ultimately served as its short-term downfall. All those users maxing out the company's servers in search of the promised Anti-Facebook found that there were certain Facebook features they couldn't live with out.

"When we launched Ello, I think our entire budget was $375,000," explains Budnitz. "And everyone had other jobs and was part-time. So do I regret not having millions of dollars not two years before? That would have been so wonderful. It would have been wonderful, but that isn't the way the world is. Do you know what I really regret? The only thing I really regret, was is that when all that hype was happening, we didn't even have a Twitter account."

The site's ironic lack of social presence was less an issue of resources than attitude from a co-founder situated in a city best known for a pair of hippie ice cream executives. "It was sort of like, we're building our own network, we're not using traditional means, we don't our users to feel like they're tracked, so we're just not gonna have accounts on all these other networks," the CEO adds.

"It was very punk rock. Literally the three images that we had poster size on the wall of our office before we even launched were Captain Kirk, Theodore Rams, and Kurt Cobain. And it's a big picture of Kurt Cobain giving you the finger. Our attitude was 'Well, we don't have any money, and everyone thinks this is an absolutely stupid idea, but we're having fun doing it,' so it was very punk rock."

Punk rock posters aside, the limitations truly hampering Ello's longterm mainstream success were mostly practical. The site simply wasn't positioned to become a global phenomenon.

"When all that hype happened, [we were] a company of seven people, all of whom were part time," explains Budnitz. "We put out a product where it was basically like what we'd been using for a year. Which was you could follow people and you could post. You couldn't even comment, you know what i mean? You couldn't love, you couldn't bookmark, you couldn't repost, you couldn't share, you couldn't do anything."

Even more glaringly, Ello's budgetary and staff limitation caused the company to commit the cardinal sin of startup launches - opening up to the world without a mobile presence. When the company's iPhone app finally arrived two month ago, it was greeted by the same flippant two word question by TechCrunch, PCMag, TheNextWeb and this very site: "remember Ello?"

"Yeah, it took us 10 months to put out an iPhone app and it's probably going to take us through this year to put out an Android version," Budnitz explains. And while the privately-held company has never offered actual user numbers, engagement estimates for the site aren't particularly bullish following that initial bump.

In October of last year, data analysis firm RJMetrics estimated:

36% of Ello users have never posted
27% of Ello users have posted more than three times
20% of Ello users are still active four, five, and six days after signing up

Though, as the firm points out, that last number isn't quite as unfortunate as it may look at first glance, adding, "In 2009 (three years after launch), a little over 20 percent of Twitter users were still active about a week later."

Of course those are not definitive numbers, and until Ello offers up something more concrete, we'll just have to keep guessing at the site's successes. (It ought to be noted that, if anything, this lack of user tracking is inline with the company's mission statement.) Though Budnitz, for his part, is quite frank with regards to concerns about the site's sticking power. As with most aspects of the site, he approaches things with a tempered positivity.

"Most of those accounts were created in a five week period, 10 months ago, or maybe it was a two month period at the most," he explains. "A lot those people came on going, is this Facebook? I'm looking the Facebook killer, or whatever the story was at the time. A lot of them came and left. A lot of them come back on. We watch them come on and peak and see whats going on. And a lot of them both get our newsletters and a whole bunch of the other stuff."

In fact, Budnitz contends, the early attention has ultimately been more a blessing that a curse.

"Blowing up helped us raise money pretty early," the Burlington executive adds. "That gave us a lot of money, and because we're not spending a lot of it, we actually have years. So we're taking our time. Part of the good thing was I really got to choose my investors and I chose i think the best investors in the world and got a really good deal. And they're still really faithfully behind us so it's been really cool."

And even while the tech world has since largely dismissed the social network, life out of the spotlight has provided the company the ability to develop Ello in earnest. In the intervening months, the company has steadily rolled out features and made more hires, while still employing a modest 18 staffers (alongside contract workers).

In February, Ello hired its first-ever chief marketing office, Rene Alegria, who candidly admitted to The Wall Street Journal at the time that while the company's quick rise "was a blessing" when it came to getting the word out, "Ello wasn't ready for prime-time at all."

The company's modest expansion has been facilitated by increased investment. In October, the same month RJMetrics released those retention numbers, Ello rallied the VC troops to raise $5.5 million in capital - a considerable boost over that initial $375,000.

Budnitz adds that spending the last several months off of TechCrunch's homepage have also allowed Ello to focus more closely on its intended user base: creatives.

"From the start, Ello has been a network for creators," he says. "The people who built it, the seven of us, were the founders, they're all creative people one way or the other. Whether we're designers, or artists, and I've done all kinds of different stuff. And so, you know, our goal was, that was originally a private social network. I mean, it was completely private for a year. And the only people on it were our creative peers."

The co-founder likens it (somewhat problematically, he admits) to his time in New York. "I lived in Brooklyn in some pretty bad parts of Brooklyn for a number of years when I was a filmmaker. I didn't have any money. But my friends and I all moved in, and suddenly there were coffee shops opening. Gentrifications sort of a bad word, but one thing you can recognize, is that when artists, designers, artists, creative people in general, they tend to make really interesting neighborhoods. So we're more interested in building the neighborhood."

Part of the plan is a weekly newsletter that goes out to Ello's massive subscriber base, featuring content from the site curated by a wide range of creative types, from electronic musicians to photographers and architects. And the focus on fostering Ello's artistic community also plays nicely into the biggest question mark of all: monetization.

"We're going to be launching commerce," Budnitz says simply. "Forget all the other social networks."

Facebook's algorithmically determined content curation is out the window - and unlike the social networking behemoth, users won't pay Ello to push their stuff to the top of the heap. What Budnitz describes as a "level playing field" employs a much more classic approach - chronological postings designed to target the people who have chosen to follow an artist.

"I'm a creator, and I build a following, it's a real following, in that if I have something to sell, I can sell it to my fans and the social network is for free," he explains. "What we're essentially going to do is we're going to create commerce so that you can sell stuff to your followers and you can build a following and you can post and talk to your following for nothing."

Budnitz compares Ello's commercial future to Etsy's craft marketplace, wherein the social network facilitates the transaction and takes a little off the top to help keep the lights on for its growing staff.

"We have a certain patent for a certain kind of social commerce that I don't think anyone thought of before," he adds somewhat cryptically. "Basically it will apply to everything from you name, hard goods, real goods, digital downloads, you can be a band a sell tickets into your shows, you can sell digital downloads, you can sell software, you can be a massage therapists, you can schedule appointments, you can do that for the people that are following you on the social network."

And most importantly, Ello doesn't have to be Facebook for the plan to succeed.

"What we essentially can do is be a really great source for creative people and for their fans who love what they do," Budnitz says. "And we don't have to take over the world to do it as you probably started out this conversation by saying. We don't need to have five billion people on the network to be profitable, we need just enough and we already have so many great people and thats why we're building this way."

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