Ello Raises $5.5m While Banning Itself From Ever Taking Ads

The ethical social network has used a legal manoeuvre to ensure it can never sell user data or display adverts



Ethical social network Ello has registered itself as a public benefit corporation in order to ensure that it can never display ads. Having raised $5.5m from venture capitalists in its Series A funding round, the new legal status commits the company to abide by its ethical principals.

Ello was founded in March 2014, but exploded in September this year when Facebook’s decision to crack down on users with fake names sparked an exodus from the site.

Formed as a private network for a small group artists, Ello distinguished itself from the competition with a manifesto for users which declared that “you are not a product”, and promised to safeguard personal data and refuse advertising.

Having achieved viral success in September, the site grew by tens of thousands of users a day, but within weeks, the search traffic had dropped back off, leaving some to declare it a fad. Benefit corps are also required to have a positive impact on society and the environment, according to the Benefit Corporation information centre. The status has been employed by a range of ethically minded companies, including food and clothing manufacturers, as well as charities.

Despite its new status, Ello has raised almost $6m from Colorado-based venture capitalists Foundry Group, according to Betabeat. But in an effort to ensure that its users don’t accuse it of selling out, Ello has turned to a little-known but increasingly popular legal framework to bind itself.

Registered as a “public benefit corporation” in Delaware, the status lets firms draw up a legally binding charter of incorporation to limit their activities in the future. In Ello’s case, it is now legally barred from ever running adverts or selling user data, and nor can it sell to another firm which will.

“Ello’s explosive growth over the past few months proves that there is a hunger to connect with friends and see beautiful things – without being manipulated by ad salesmen, boosted posts, and computer algorithms that don’t always have our best interests at heart,” the company states in its manifesto. “On an ad-driven social network, the advertiser is the customer and you’re the product that’s bought and sold.”

Ello founder Paul Budnitz told Betabeat’s Jack Smith IV: “We really cannot be forced by our investors to break the basic principles.”

Whether the cash injection will be enough to tempt back users remains to be seen. In early October, Facebook apologised for its real-name policy, winning back many of the users who had ditched the site for Ello.

“I’m beyond thrilled that Facebook has offered a genuine apology and agreed that our real names are the ones we make for ourselves,” said the drag queen Lil Miss Hot Mess, one of the affected users, at the time.