Why Ello's Plan to Stay Ad-Free Can Actually Work

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I want to believe in Ello. It's a cheeky little startup from Vermont with idealistic ambitions and a haunting logo and the promise of no ads. What's not to like? Well, a few days ago, Ello revealed its grand plan to stay ad-free, and honestly, it sounded at first like total bullshit. But it's not.

We've heard companies sing the no-ads tune before, only to inevitably slowly mix them as the business grows. I know what you're thinking: Won't Ello just change its manifesto and start selling ads when the going gets tough?

According to Albert Wenger, a partner at Union Square Ventures, that's probably not going to happen. See, Ello recently revealed that it's converted to a Public Benefit Corporation (PBC), which the founders and investors explain in a blog post 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 new Ello charter states that the company will never make money from selling ads or user data. If the company is ever sold, the new owners will theoretically have to comply with these terms.

Wenger, who's long been an advocate of the PBC arrangement, explains that incorporating a company in this way means that the mission is written directly into the charter. It's literally part of the foundation upon which the company is built, and all of the investors agree to that from the start. "The charter is a meaningful corporate document," Wenger told me in an interview. "It's not just a thing you nail on the wall."


If a company like Ello ever decided that it wanted to change the charter, it would require 90 percent of the shareholders to approve the changes. Put another way, if Ello ever did an about-face and wanted to sell ads or user data, nine out of ten people who agreed to give money to the company would have to sign off. And you'd better bet that the vast majority of people that helped get Ello off the ground did so under the auspices that it would be a new kind of social network.

It's a little bit refreshing, actually. If we've learned anything from the myriad social networks that have grown from dorm room and garage projects into multibillion-dollar corporations, it's that these companies' missions evolve dramatically during that dizzying process. Ello is literally, legally a different kind of company, however. Other benefit corporations include fan favorites like Kickstarter, Etsy, and Warby Parker. You might argue that the recent affection for benefit corporations comes in response to decades worth of schizophrenic corporate missions.


Take Twitter, for example. Way back in 2009, when the world was just starting to realize that this little microblogging service was going to become a big thing, Twitter co-founder Biz Stone famously boasted of his intentions to keep ads off of the site. "There are a few reasons why we're not pursuing advertising—one is it's just not quite as interesting to us," he said at a conference. "There are no people at Twitter who know anything about advertising or work in advertising. So we don't have anyone there to make or take those calls."

Hey guess what: Twitter found people to do that. The day after his somewhat-off-the-cuff remarks, Stone explained in a official blog post—perhaps at the behest of Twitter's many investors who definitely did want the start up to make money for them—that maybe ads weren't such a bad idea. About two years later, Twitter had ads. Today, it has tons of ads, and more coming.


All that said, Ello is going to have to make money at some point. (Remember: the biggest lie the internet ever told is that everything all the time would be free.) And who knows how it'll do it. Wenger, for one, thinks the company could steal a page from Github and charge for private groups. "That's a great example to pay for privacy," he said. "If I were Ello that's what I would try first."

Of course, we've seen plenty of social networks embark on the quest to provide a useful service to millions of users without the annoyance of ads, and we've seen a lot of them fail. Either they go under because they can't keep paying their staff, or they cave to pressure, and try to come up with some sort of ad product that doesn't look like an ad. Some might say this process has already begun for Ello. But that doesn't mean that Ello's going to break its promise.


Image via Ello