Thursday, October 23, 2014

Are Ello investors crazy? And will the anti-Ello get tsued?

While a few people are already yawning about Ello and saying that it's so last week, others are starting to take notice.

If you've managed to avoid all talk about Ello, this is a software service that espouses principles similar to the marketing-free folks that I complained about several years ago.

Basically, Ello is defining itself in the negative, by saying that it will not do things that Facebook does.

Does Facebook clutter your feed up with advertisements? Ello won't do that.

Does Facebook sell its data (it's not YOUR data, it's FACEBOOK'S data) to others? Ello won't do that.

In fact, the BBC notes that Ello is really serious about this.

A social network promising never to sell user data or incorporate advertising ... has also become a Public Benefit Corporation, which prohibits its current and any future owners from breaking that promise.

However, that's not the main point of the BBC article. The main point of the article is to note that Ello has received US$5.5 million from investors.

But if Ello isn't selling ads or data, then how are the investors going to make money?

"There are 'freemium' successes like Linked In and in gaming. Ello is taking a unique spin on this," said Lee Bouyea, of Fresh Track Capital, one of the platform's new backers.

And while Bouyea also notes that Fresh Track Capital is in this for the long haul, you still have to wonder if micropayments alone can fund a company.

Take LinkedIn. Yes, LinkedIn is able to raise revenue from a freemium model. In the fourth quarter of 2013, it had $88.1 million in revenue from premium subscriptions. However, that was only part of its $447.2 million in fourth quarter revenue. $113.5 million of LinkedIn's revenue came from ads - something that Ello has said that it isn't going to do.

So where did the rest of LinkedIn's revenue - $245.6 million - come from?


From LinkedIn's perspective, "recruiting" refers to people who are offering jobs, and people who are looking for jobs.

From Ello's perspective, what does "recruiting" mean?

This is where the people who are yawning about Ello may perk up their ears, because there's an even newer service that is on the horizon - launched two days ago.

Tsu, which launched on October 21 with $7 million in funding from Sancus Capital Prive, is divvying up its advertising proceeds with its users. Yes, you heard it right. Their model is predicated on paying YOU for actively posting on their platform and inviting your friends to do so as well.

Note that "inviting your friends" part. Over the last couple of days, I've seen a couple of Google+ users urging me to join Now THAT'S recruiting. I guess you could say that Tsu is the anti-Ello.

And Ron Callari is not impressed:

To understand the payouts a user is supposed to receive on Tsu, it’s kind of analogous to a multi-level-marketing model, sometimes derogatorily referred to as a “pyramid scheme” a la Bernie Madoff.

Perhaps I'm reading a little too much into Callari's attitude, but when you mention Bernie Madoff in connection with a business, it's usually not a compliment.

However, Callari does note that users don't have to make any investment themselves. They just agree to split the proceeds between themselves, Tsu, and the people who recruited them in the first place. Whether this will pass legal muster I don't know; tsu's FAQS are silent on legalities, and I couldn't find Tsu's terms of service.

And for what it's worth, Callari is on Tsu himself. But I'm not going to link to him, because I'm not getting a cut.

Wonder if Callari is on Ello...
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