The quiet death of Ello's big dreams

Excellent, balanced post.

We’re at the end of a grand experiment of “you can take VC money and deliver a tech with new values, one that people want.”

The only people still claiming you can just haven’t run out of their last funding round… yet.

We have 20 years of evidence on what tech businesses can be built on the Internet that make money. It’s narrow and mostly can’t solve the problems that remain.

The escape hatch is always subscription revenue.

It’s true you can build a unique business on unique values for a unique community.

But it’s a long slog in the MicroSaaS world where anyone can & many will straight up copy you - forever.

X.com is probably the only & last experiment on whether switching to subscription rev is achievable at scale. Looks pretty clear so far that it’s not.

This might seem a negative outlook, but it could be quite positive if founders know & accept it.

The secret is out now that, mostly, founders make the same amount of money in the same amount of time whether they go the VC or bootstrapped route (when it’s a winning business).

There will always be opportunities for finance-backed cartel-busting mega runs.

But if you are a founder that cares about anything - anything - the route that gets you there is founder control, patience, and a customer base that pays.

Why can't you take VC money and run the business the way you want? They can't force you to do anything. Sure they can pressure you, but if you have ownership and they have a minority stake, you can do what you want. Ello could have stopped at any time. Why did they raise 5 million only 6 months after their first round and another 5 million 6 months after that? What were they spending their money on? I don't see how this would have worked if they hadn't taken money

X.com is probably the only & last experiment on whether switching to subscription rev is achievable at scale. Looks pretty clear so far that it’s not.

I don't know. X showed that you can fire ~80% of your employees and the product could still exist. Not only exist but push product at a faster pace. In the last year you got editable comments, subscriptions, revenue sharing, blue checkmark for sale, alternative check marks for govts and org, culling of old accounts, API restrictions, forcing people to put parody identify themselves, longer videos, just to name a few off the top of my head. I noticed more large changes in the last year than the last 5. You don't need a lot of people to run a SaaS company and you can cut a lot of bullshit. And all tech companies are coming around to that conclusion.

Maybe if Ello had raised only a few million and kept around a dozen employees or so, it could have succeeded.

> Why can't you take VC money and run the business the way you want?

Because taking VC money let's you defer the revenue question. And by deferring it, you then have to bait-and-switch the users.

Let me be clear. It's OK to get startup money. Businesses need capital to get going. But revenue should be the original business plan.

In other words, who is paying for this site, and how? Ello ruled out advertising and data sale - that's fine, but that leaves subscriptions, donations, premium features, whatever.

For a "regular" business, each wants to become sustainable, its important to become profitable ASAP. The team is focused on revenue, keeping costs down and so on. Once it can pay expenses and salaries it can run forever.

The obvious revenue here is subscriptions. Income rises with expenses. But of course if you charge you'll grow slowly. So you start free, which means customers will rebel later.

(Anyone see parallels to Open Source companies here?)

VC money allows you to kick this can down the road. Small angel investment? Sure, no problem. You still have majority control. But if you are using that money to pay salaries, then it'll quickly run out. If you don't have enough revenue, you could just close up, but you dont, you go get a series A. Then B. Then C and so on.

The implication is you are selling equity. One day that investor equity exceeds 25%. A round or two later it's over 50%. You've lost control. (And I'm assuming all the founders are in agreement all the time - in reality one wants to cash out, and joins the investors camp well before the 50% is reached.)

So, you can grow slowly, and sustainably. Or you can take money, grow fast, and "hope".

But make no mistake, when you sell -equity- you are selling control. You are selling your right to dictate "principles". That is -what- you are selling-.

Since you are selling to people who are in it for the financial return, the end result is like night following day; inescapable.

If you want to build a business on principles, not profit, you HAVE to answer the revenue question first.

But depending on agreement, founders can have much more voting power than investors, regardless of shares they hold.

Absolutely. You can look to raise money on any terms you like.

You may not be able to find investments as easily though.

Or you may have folk throwing money at you. What do I know...

If you want to build a business on principles, not profit, you HAVE to answer the revenue question first.

From Wikipedia:

"Business is the practice of making one's living or making money by producing or buying and selling products (such as goods and services)."

X showed that you can fire ~80% of your employees and the product could still exist.

Most fired employees weren't producing profit. Most were censoring, making politics or concerned themselves with corporate bureaucracy, drawing charts and making presentations.

You say that, but the company valuation and revenue fell through the floor, to an extent that everyone can tell, even though the reporting burden is much less now the firm is private.

Maybe some of the activities you decry as censorship and corporate bureaucracy have more to do with the bottom line than you think?

Maybe if Ello had raised only a few million and kept around a dozen employees or so, it could have succeeded.

I doubt it. It seems like a poor product market fit. I think there aren't a lot of creators willing to pay to have a small social network just for them. They won't probably be active users even if the small social network was completely free.

I think there aren't a lot of creators willing to pay to have a small social network just for them.

They might, if you pitched it as a professional network - LinkedIn for Creators.

You can’t raise much VC money with ownership and a majority stake in this climate.

You’re a budding social network. You need corporations to pump money in and you need user growth. Who is running your sales and marketing teams for free?

Twitter hasn’t launched features of note since the Elon takeover that weren’t visibly in development before the takeover. Unless you count an $8 Boolean flag as a meaningful feature.

YouTube and Hulu did it very successfully. Twitter has just done it in a really stupid way, because their management values politics over the actual business of running a social media platform (moreso now than before, but still very much before)

X switches to subscription exactly because politics forces them to, by trying to scare and shame advertisers.

Once subscription revenue is enough, scare and shame won't work and politics won't have anything to do with the future of the business.

I’m not sure you understand what advertising cares about. They care about reach and brand value, both of which have dropped for Twitter. “Politics” is a component of brand value, but it’s got nothing to do with reach, which is falling through the floor.

But equally “politics” doesn’t explain the drip in brand value, either. The FIFA World Cup has _dreadful_ politics, advertisers don’t care because it’s still a great brand with a huge reach.

Musk is rich and connected enough to be able to ignore commercial reality for a basically unlimited amount of time, but I seem to recall you were arguing elsewhere on this thread that company owners should only care about the money a company makes.

“Politics” is a component of brand value, but it’s got nothing to do with reach, which is falling through the floor.

I think reach was falling because of political pressure.

I seem to recall you were arguing elsewhere on this thread that company owners should only care about the money a company makes.

I was arguing that the goal of a company is to generate profit. That should be the goal. If business owners do that or don't, it's up to them. And I am not arguing that Musk does a good thing if he doesn't have the profit as the objective.

I'm not sure what mechanism you're ascribing to reach falling due to "political pressure". Who's exerting this pressure? On whom? Why am I still using the site despite being a dyed in the wool leftie?

You say a company should have the goal of generating profit. According to what moral imperative?

You say a company should have the goal of generating profit. According to what moral imperative?

According to market economy, not to a moral imperative.

Honestly think at this point I should recommend hbomberguy’s video on “Woke Brands”.

https://m.youtube.com/watch?v=06yy88tLWlg

I’ll appreciate his politics are way to the left of yours and he’s making this point for a left wing audience, but the TL;DR is: a lot of what you’re perceiving as politics here is literally the market economy acting to maximise profit.

His perspective is that _left-wing_ people shouldn’t be conned into thinking this is about anything other than profit maximisation.

Complaining about the advertisers leaving X is true "leopards ate my face".

Politics has been a significant part of Twitter's success, driving relevance & audience size. Politics was fuel for growth and Twitter was influential partially because of it's openness. The moderation was there because being a relatively balanced & hate free spare without too much controversy was essential for the majority of advertisers.

To reverse those parameters and turn it into a walled garden of Musk-like right wing edge lords that increasingly promotes right wing edge lord content that significantly reduces its safety for advertisers and then complaining that it's purely down to other people making the advertisers flee requires some major cognitive dissonance or a very blinkered world view.

Musk's aim for X.com is to make it an everything app, which is obviously impossible if it does not appeal to almost everyone. As an owner he has every right to make it into a smaller, politically homogeneous message board but he shouldn't simultaneously complain about the very obvious & easily predicted effects of that.

im sure that sort of stuff is on there, but all the stuff my friends and i see on there is memes, and Id guess thats representative of most of the 20s age userbase. We didnt notice any change during the buyout or rebrand except some different meme recommendations for a bit.

There are a lot more ads between my memes now though. It hit a critical density where we dont use it anymore. 40% ads

So to summarize, you have stopped using twitter because of ad increases since elon took over?

But if you are a founder that cares about anything - anything - the route that gets you there is founder control, patience, and a customer base that pays.

Most successful founders, from Edison to Gates and Bezos went in the business to make money, not to change the world. Changing the world for better or for worse is mostly a side effect.

The goal of a business is profit, not ideology.

You’re all over this thread but I think you need to read it a bit more carefully. There’s no reference to any belief system in the post you’re replying to, there’s an assertion about expected profit and control.

You can disagree with that assertion, and indeed have on another thread, but within the context of the assertion the poster is correct.

I think you’re wrong to even think this is about “ideology”, which is presumably a set of beliefs you are against. It applies as much to _variance_, which 100% is something a founder should care about.

The post I replied to, was talking about founders that care about anything. As opposed to founders that do not care and are in it just for the money.

That's how I read it and you have the right to disagree. That's why we are on a discussion forum. To share ideas and speak our minds freely, regardless if we agree or not.

I hope you have fun tracking and counting my posts and it represents a good spending of your time.

How much profit does Amazon make these days again?

$26 billion (Q4 2022 through Q3 2023)

The founders themselves could also lose interest over the years if the website isn't as popular as they hoped, and it's still a slog.

The founders themselves could also lose interest over the years if the website isn't as popular as they hoped, and it's still a slog.

Rather: the founders are lying and deceiving if they talk about their great vision and its importance for mankind, if in reality they are just looking for popularity, and are eschewing the slog.

That's one scenario. There are others.

X.com is probably the only & last experiment on whether switching to subscription rev is achievable at scale. Looks pretty clear so far that it’s not.

Twitter could. MuskX can not.

Twitter Blue was a total flop before Musk. I'd bet Twitter's subscription revenue has grown astronomically (although not nearly enough to make up for $1.3 billion in stupid debt payments and a $3 billion shortfall in advertising revenue)

Twitter blue was launched less than six months before Elon started his takeover bid. It’s hard to call a six month old niche product a flop. I’d bet that subscription revenue has grown astronomically because the business strategy pre Musk was advertising based instead of subscription based.

He destroyed the advertising business, and is trying to make subscriptions work.

I think Substack is a pretty clear example of subscription model working well. There's also Patreon that is doing very well.

I wouldn't discount YouTube Premium and Twitter subscriptions. They don't cover the majority of users, but are a viable option if you (like me) can't tolerate ads.

They're both companies that help others monetize their content, Substack is still quite small and Patreon has stumbled a bit recently trying to justify it size and value:

https://finance.yahoo.com/news/patreons-valuation-dropped-70...

Few web businesses have a truly huge minimum efficient scale.

For those that do, it's huge. For those that don't, it's quite small.

And for the small ones, Wordpress or similar powers their laundromat. A good small business. As you say, one that takes effort to run. Stripes the banks POS, perhaps someone has some mid scale in Tide sales in the middleware SaaS, there can be a franchise that doesn't fully adapt to how many socks Vs fur local customers have.

But think laundromat. Local restaurant. Which are fine businesses.

We’re at the end of a grand experiment of “you can take VC money and deliver a tech with new values, one that people want.”

This is an extreme position. More likely, we are seeing repricing occur. There are still worthy, venture backable ideas. Probably less of them than in the past.

“you can take VC money and deliver a tech with new values, one that people want.”

Well you can... just that there's no guarantee that the 'people who want' will also want to pay enough, on average, for it to be sustainable.

Regarding the subscription revenue, it's doable, but you kind of have to start with it, not pivot to it mid-game, because that way your whole company and infrastructure is built with what the subscription model can bring you. I think many of the tech companies are just too big for the product that they manage.

We have 20 years of evidence on what tech businesses can be built on the Internet that make money. It’s narrow and mostly can’t solve the problems that remain.

People will also want to invest their money into what they think/believe will be the future. My guess is that internet/IT is complex enough that most people don't understand it and see it as “magic” and because it's “magic” who knows what's possible, might as well pour in millions.

But as you've said, the reality always catches up to the truth.

The secret is out now that, mostly, founders make the same amount of money in the same amount of time whether they go the VC or bootstrapped route (when it’s a winning business).

I pretty much doubt it is the same amount of time. And I doubt the same percent of businesses survive nevermind win.

I'm a participant in a community that explicitly refuses money from outside its membership. If that means we can't grow fast, or have fancy digs, so be it.

The reason for that, is to avoid having influence from outside. Even "angel" investment can be problematic, as the "angel" has the ear of the leadership.

I have found that even well-meaning outsiders can have highly destructive influence, because they don't understand the culture and they aren't the ones on the hook, if things go pear-shaped, as opposed to the ones that have a real, personal, stake (like all those Ello users, who lost so much).

It’s very interesting and telling that most of the technology that connects us does not have us as a customer, or a financial beneficiary. One of the key aspects of technofeudalism is the extractive nature of most of our platforms.

Because given the choice it seems many people prefer free with ads to paid?

I'm just thankful that mobile phone networks haven't switched to a "free with ads interspersed into your texts" model yet.

(Of course there are still ads in my texts, but at least those are officially spam rather than network endorsed.)

This is an argument for standards. You can switch messaging clients. Platforms own you.

Yes, and ̶G̶m̶a̶i̶l̶ email is such a successful example.

Imagine if the progenitors of email thought to require e-stamps, say a thousand emails for a buck. There's a parallel universe where 'Email co.' is a major tech player comparable to Google. Not sure it's a better universe, but bears consideration.

I remember a joke (or conspiracy theory) from the 90’s that the US Postal Service wanted to charge people per email.

Maybe not USPS but it would be okay to pay for it somehow to make it harder for scammers, spammers and other harbingers of ruin.

This effectively does exist https://www.jpay.com/PEmessages.aspx

In the late 1980s, I worked for a company that wanted to do exactly that.

It was an X.400-based nightmare, and never took off.

It is. I switched away from Gmail; many have.

Same, but I realize that nearly everyone I correspond with uses Gmail, so Google has all my emails regardless. (Ok, they don't get my transactional email, since those are usually sent through something like Sendgrid, but... yeah.)

Same, but I realize that nearly everyone I correspond with uses Gmail, so Google has all my emails regardless.

I know some very privacy-focused person (a friend of mine) who will stop being willing to be in contact with you (or being your friend) if you use an email address at one of these big spying email providers to write him an email.

So, it is just a matter of being consequential.

It is always so tragic to me that, for over a decade, I would have paid for Twitter. But by the time they rolled that out, enough had changed that there's no way I was going to pay for Twitter.

Market timing is hard.

Actually they tried. WhatsApp fucked them up.

Literally in a span of months SMS usage went the way of the dinosaur.

That's a customer choice. Metafilter charges money and there are others that do as well.

The issue is that without funding a projects velocity is low and that can frustrate the community.

Everyone says they are on board with supporting the little guys, until they hit bugs and start complaining.

if we lived in utopia the software could be open source, so that everyone who wants a feature can contribute. Best would be when it can easily be self hosted

Sometimes -- those times when you're breaking entirely new ground with a thing, when you're starting with just a vague vision of where the thing might go -- slow is better. Slow gives you time to understand the effects of what you've already done and the possibilities that affords.

I guess it depends on whether you're looking to achieve something unique and truly new, or just "get rich fast".

and how much do you know about the internal workings of that community? how much do you know about it's "future"? how transparent is it about how much time top level management and leadership are investing and how they are compensated for it? how much do you know about the financial sponsors of the members of your community?

Actually, a whole lot.

But that's a story for a different venue...

Even the supposedly indie anti-social social media outright violated their own manifesto. Is it any surprise that we're skeptical of the big promises of a bright future that corporations make all the time?

I'm curious to know if anyone has evidence of a post similar to this but for a company with a (so far) happy ending.

I'm interested about the public benefit corporation part here. Did the PBC status wind up changing anything at all here? How does a PBC sell itself or get acquired? How is a PBC supposed to terminate or wind down? If they violate their charter as Ello may have, who exactly enforces it or file a lawsuit, and what is their compensation?

Nobody should trust my opinion, I am not an attorney, let alone one specialized in this area.

In my understanding, a PBC is effectively the same as a for-profit company with regards to these sorts of things. Unlike a non-profit, a PBC has stock, which it can sell, so that's how it would get acquired. I believe that there were even some PBC SPACs back when that was fashionable.

If they violate their charter as Ello may have, who exactly enforces it or file a lawsuit, and what is their compensation?

The only real thing a PBC does is change "shall maximize shareholder value" to "shall be managed in a manner that balances the stockholders’ pecuniary interests, the best interests of those materially affected by the corporation’s conduct, and the public benefit or public benefits identified in its certificate of incorporation." See here for Delaware: https://delcode.delaware.gov/title8/c001/sc15/

So it would look like any other shareholder grievance against management in form.

Where in that document are you seeing that non P.B.C. corporations are required to maximize shareholder value?

This document only talks about PBCs, so it wouldn’t be in this document. I am using that phrase because that’s how people refer to fiduciary duty (and similar things) when speaking generally. Obviously there is a lot of complexity in the rules around corporate governance.

People do talk about the fiduciary duty to maximize shareholder value when speaking generally. They are wrong.

There are only two fiduciary duties in this context: the duty of loyalty and the duty of care. A director of a corporation owes no fiduciary duty to maximize shareholder value.

Sure. I find it easier to use the same words everyone else uses in informal contexts even though there is obvious complexity and is not fully accurate.

I think the point is the term is not so much 'not fully accurate' as 'actively incorrect' and should avoid being repeated as it leads to a false perception of how corporations actually work (or at least, it leads to an inaccurate idea of the origin of their behaviours).

More PBC vs non-profit info[0]:

Benefit corporations are neither nonprofits nor hybrid nonprofits. Benefit corporations are for-profit corporations that need to consider stakeholders, morals, or missions in addition to making a profit for their shareholders. Nonprofits can't be benefit corporations, but they may create one. Due to the public benefit purpose provisions, expanded fiduciary duties of administrators, and extra shareholder rights created within the model benefit corporation laws, this structure may be helpful to operate and scale the earned-income activities of a nonprofit.

[0] https://www.upcounsel.com/public-benefit-corporation

When ICANN was in danger of violating charter, CA AG was the one who enforced on them.

I suppose if the PBC was in debt then it could sell its assets, such as the Ello site, to pay its creditors and then dissolve.

I would have said bandcamp, until recently

Itch.io continues to be great, for now

In a slightly broader manner, free software forking has been working out reasonably well: When the original branch goes off the rails, others can take over from a previous "known manageable" point. Forking leads to fractioning the user base but kinda, that's the point.

Makes me think about how Bluesky is also a Public Benefit Corporation and took $8m in funding.

Those who don't learn history are doomed to repeat it, or whatever the saying is.

"History Does Not Repeat Itself, But It Rhymes"

- possibly Theodor Reik [1]

I expect Bluesky to make their own mistakes.

[1] https://quoteinvestigator.com/2014/01/12/history-rhymes/

This is the quote I believe: "Those who cannot remember the past are condemned to repeat it" - George Santayana

[1] https://en.wikipedia.org/wiki/George_Santayana

Yes, but I like the other one better.

Ah I assumed you were correcting me, apologies.

That, mixed with "there's a sucker born every minute".

I mean Bluesky is founded by Jack Dorsey, who made a fortune for shareholders with his last social media company by conning an idiot into paying way above market value for it. Of course it'll be hard to make that particular lightning bolt strike twice, but it's not like he doesn't have a good track record.

Dorsey is not involved anymore; he technically has a board seat, but he deleted his account, and does not appear to care about BlueSky anymore.

conning an idiot into paying way above market value for it.

That idiot, how you call him, bought the user base and the market position of Twitter. Either he has a plan to make it profitable or he doesn't care, as long as he doesn't loose too much money.

For investors anyhow. It could be argued that he ransomed his users.

I don't think Bluesky was launched with a manifesto, so the user expectations are different.

That, and the fact that the lifespans of new social networks appear to be getting shorter and shorter with each new generation. If Bluesky were to disappear in a few months, the general reaction might be "Oh no! Anyway, what's next?"

I figured I’d publish a short list of things Ello will never do:

...

2. Tolerate hate. Ello has many tools, some visible and others not, that help keep this network positive.

Geez, it's hard to take anything said as authentic with a statement like that. How can you talk about things without "hate"?

"I hate shoveling snow." "I hate terrorists." "I hate this political candidate." "I hate Taylor Swift music."

I was head of technology for another "make a better world" social network, and we approached fostering positivity as a practice of encouraging constructive interaction and discouraging _destructive_ interaction.

In other words, being directly abusive toward others was obviously destructive and discouraged, but disagreement, even when quite strong, was great, as long as everyone involved maintained a level of basic respect when interacting with each other.

There's also a big difference between vehement dislike of a distant thing, concept or person, especially if one can express their reasons well, and using slurs or advocating violence or harm. I imagine here they used 'hate' to stand in for 'hate speech', but not being in their minds - I really don't know.

Advocating violence is straight up illegal (in the US).

Slurs is a very specific behavior.

---

So...that's a very permissive approach FWIW.

We did, early on, get flooded by people who migrated en masse from another social network who - for lack of a better phrase - equated 'freedom of speech' with a right to post 'shock-and-awe' content just to get a rise out of others. They'd been run out of the other one and decided to try to take over ours.

Those of us running the site had a _lot_ of long philosophical discussions about what to do, but we ultimately realized that posting disturbing content with intent only to provoke wasn't constructive, and we had the right to define what type of community we wanted to foster.

So we booted the shock-jockeys out, and then went to an application-only process that lasted from 10,000 until about 100,000 users (that's a lot of hand-reviewed applications!) - and you know... I could still sleep at night after that, because it wasn't about stopping any specific cause or idea or viewpoint. (Indeed, a few came back, reapplied, and rejoined as constructive members of the community after that)

IMHO, there's a place for provocation, but only if there's a point to it - a message to be communicated. Random photos of animal heads in a jar with no commentary or explanation? Not so much.

I guess I thought of us as rather selective due to the application process, but as I think back, the application process actually allowed us to accept a much broader array of viewpoints, because our goal was always aimed at intentionality and constructive interaction.

How about "I hate reductive hackernewses who fail to engage constructively with the discourse and instead turn to gotcha language that 9-year-olds think is terribly clever"?

He's right though. "Not tolerating hate" is a paperthin principle, that would stand up to as much scrutiny as everything else Ello stood for, in hindsight. re, it was all bullshit and the warning signs should be called out as such so we know next time someone tries to bullshit us.

Sure, great example!

It's universally known that that means things like racist imagery/text content, not content like "I hate cake" or Tswift.

It's universally know that this means whatever the speaker wants it to mean, whenever the speaker wants to mean it.

I started building an open source private blogging system[1] when my first kid was born, and it eventually evolved into the skeleton of a social network--but fully decentralized using RSS and self- (or paid-) hosting. I concluded the only way for a network to actually avoid selling out was for there to be nothing to sell. If I give away the software, and don't control the network then there is no need for users to trust me. It continues to be an interesting journey as a side-project (not raising money means I'm still working a day-job).

[1]: https://havenweb.org

Most of these platforms will never reach "popular" scale.

You need to think about the killer article or feature.

You need to think about the killer article or feature.

Well, no. I think the point is kind of that they don’t.

Then they will never get popular.

They avoid it getting so popular such that the audience does not grow faster than the ability to cater to the expectations from new users. Finding niches works out pretty well where they do and for longer periods of time with a lot less friction.

FYI, clicking the "Try the Demo" button doesn't do anything for me in Chrome or Firefox.

Well that's awkward. Thanks for the tip--fixed now.

it is an interesting idea. Setup and migration should be very simple (install and done). Otherwise not many people will go that route. With other federated services, it is usually almost the same as with a private platform. Most of the users will be on a single server.

maybe there is a fitting product to be found. first thing that pops to mind is hardware. Something like a tiny home server that works out of the box. Could go the piratebox route (a single website wifi hotspot) could have it do something mesh networking. perhaps stick a webcam on it.

I'm a recovering founder after winding down my startup a couple months ago. I've been thinking about getting back on the saddle and in service of that, meeting with folks who could be potential co-founders.

One of the first ~5 questions I ask is whether they want to bootstrap or go down the VC route. Because they are very different paths, with different levels of pressure and mostly importantly, expectation.

You _have_ to know that from the outset, else it's just trouble.

Bootstrapping social tech ain’t easy. Expectations that this tech is free, plus the immediate need for support and safety for general populations mean that it’s very different than say, B2B SaaS.

Bootstrapping social tech ain’t easy. Expectations that this tech is free, plus the immediate need for support and safety for general populations

Start with and focus on an audience that has different expectations than the general population.

Remember when The Face Book was for college kids only and GMail was invite-only? That's how to start.

These are indeed possible examples.

Good points - social communities have less of an autopilot component than b2b SaaS.

Social networks don't seem to be a great business idea regardless if you want to bootstrap or get outside money. And regardless of monetization model.

Which path do you want to go with in your next startup?

Leaning venture backed.

I wonder if it's possible to take the Wikipedia model (open source, non profit entity) and use that to build a social network.

I always thought it would be cool if every NPR/PBS station also ran Fediverse nodes of mastodon or whatever the Fediverse version of Facebook is. Would provide a public-funded option with more transparency

Yeah, I like the federated idea, but I think it had its chance when Elon took over Twitter and they never managed to capture the exodus of users in any significant way. The barrier to entry was just too high (but they have taken great steps to reduce the complexity).

Well my experience with Mastodon has been that it's almost entirely tech people who are joining mastodon for the technical novelty. If every NPR/PBS station launched a social network concurrently, then people would quickly find other people on the platform to connect with

The BBC started running their own instance as an experiment, and it seems that they will not keep it running: https://mstdn.social/@isleofmandan/111775751771437531

Deleted

Wikipedia is special in that 1) it's very cacheable so the infrastructure costs are low and 2) it's not too expensive in terms of development since I assume people don't expect many features.

It also has a better charity story, because "summarizing the knowledge of mankind" seems a tag more lofty than a social network.

(Even if that's not the case...)

Like WT Social?

https://en.wikipedia.org/wiki/WT_Social

https://wt.social/

I remember when tech twitter (or at least Node.js twitter) tried to migrate to Ello for like a week.

A pretty good portion of my social network moved, myself included. But it fizzled out really quickly and we all ended up back on Twitter.

Every once in a while I'd still get a notification from Ello that someone had followed me. It was always a porn bot, but the email notification was still nostalgic. A part of me is sad the site died.

I remember when something-something twitter tried to migrate to Threads for like a week.

And to Mastodon before that.

Remember when tech Reddit tried to migrate to Lemmy?

A hardcore handful of people migrate await from the Death Star and stay migrated (maybe a couple hundred medium accounts, and 1 or 2 bigger ones), but everybody else trickles back onto the Death Star eventually.

The only thing that works to get people permanently migrated away is complete enshitification of the existing platform (i.e. Digg effect). Partial enshitification isn't enough.

Twxttxr is getting pretty close now - maybe in some ways surpassing Digg in awfulness.

Specifically the massive level of pornbot traffic, and algorithm changes that seem to be intentionally surfacing posts to adversarial users who will then go on the attack.

The porn bots are pervasive and easily identifiable programmatically.

That they persist must mean that X wants them to persist.

am I the only one that has not seen porn bots or had replies from them on Twitter? I see this mentioned as a huge problem, but are users in general actually seeing this?

Some of those definitely stayed on Mastodon. Mastodon had a semi-successful transition. Small but stable in the medium term.

Mastodon and Lemmy do feel different to me, because of the decentralization.

They are providing a foundation that gets built upon with every migration wave, and I think it’s plausible that they will eventually break into the mainstream.

Put another way, the fediverse is the first alternative that doesn’t need to “succeed” in order for development to continue. It’s a bootstrapped model. And so it can grow quietly, work out the usability kinks over time, and be ready to absorb users whenever they get fed up with the centralized platforms.

"The only thing that works to get people permanently migrated away is complete enshitification of the existing platform (i.e. Digg effect). Partial enshitification isn't enough."

The Digg effect only worked because the majority of users were tech savvy and hated advertisements. The average user just accepts ads for the most part.

Most people don't care about the freedom of the platform, who's running the platform, or the technology behind it. They only care about: Can I easily create an account? Are all my friends, family, people I want to talk to there?

No amount of manifestos, bills of rights, public benefit designations, PR campaigns, taking VC funding, not taking VC funding, not selling out or whatever the hell else we want to talk about can make up for one simple fact – a company needs to bring in more money than it costs to run. Ello tried for 8+ years but could not manage to do that.

This post is focusing solely on the VC funding aspect and proclaiming it as the cause for failure but ignoring the fact that Ello was dead in the water regardless of it. The company had no users and no business model. Heck a reasonable amount of ethical advertising may actually have done some good for the community and helped the product survive.

I often wonder about the long tail of small startups that must exist with minimal operating costs, down to a single VM, Django backend and SQLite database, that are still operating but not recieving updates because their owner is focused on something else, but which still make a hefty profit because of the domain knowledge baked in or something. It seems to me like the sustainable winning combination is domain expertise + moderate programming skills.

Can you give us examples of such startups?

Also, the founders of Elo were creatives, not programmers. So they couldn't throw a microSaaS on a VM, forget it and go write the next microSaaS, rinse and repeat.

No, that's why I asked. Where are they? What are they doing?

These are called lifestyle businesses.

There are tons of them out there.

You can do a lot with a small VPS and a fixed amount of bandwidth.

Find something that 100 people will use for 5 bucks a month. IF your bills are paid and you have a day job, that's some nice pocket money.

The closest thing I can think of is patio11’s Bingo Card Creator. But he moved on to… venture funded payments processing.

I think, though, the people who can and do bootstrap small businesses like that don’t necessarily hang out here. The site is literally VC-owned, after all.

I mean Mastodon exists, each instance requiring just a small amount of funding to keep the lights on. There is also Tildes, which I think is a nonprofit registered in Canada.

It depends on what your aim is. Had Ello followed a proper nonprofit structure from the start, they could have continued indefinitely with a small staff and volunteers maintaining an open source code base and handling moderation. It would not necessarily be easy, but it would be doable.

They didn't though, and the fact that the original CEO later got into into NFTs and now something-AI maybe shows he was something of a bandwagon-jumper. Back then everyone wanted to be the next Facebook, so that was what he jumped into.

Ello tried for 8+ years but could not manage to do that.

Ditto. Retrospectively it seems a fiasco from the start. I wonder why investors bought it and Talenthouse.

Maybe investors in the first round were hoping to find some suckers in the future and offload the "business" to them.

But what about the final buyers? Didn't they smell anything wrong? You got to ask how did they make the money they lost on Elo / Talenthouse in the first place.

Just a reminder:

If you are not paying for the product, you are the product.

The internet culture birthed from the early days of the internet "Everything is free", seems to have captured a whole generation who simply have no concept of cost and value.

Vid.me is another start-up that comes to mind: Youtube sucks, has too many ads, and sells your data. We won't have ads, won't sell your data, and will host all your content.

It made it four years before investor cash dried up and they said goodbye.

It's hard to relate it to scale, is why.

A sandwich costs $5 everywhere, and a car costs $30k everywhere, because that's just what those things cost to make.

It's relatively difficult to look at a web service and determine whether its running costs are normal guy hobby money, rich guy hobby money, or no seriously this won't last six months without VC money.

Decentralised and P2P systems run themselves, but it's hard for them to maintain a centre of gravity without offering something specific, and given that the network itself can't produce value out of thin air, it's probably not coincidental that the ones best able to maintain gravity are offering stuff stolen from elsewhere.

Decentralized systems still need ongoing development and maintenance.

That's exactly it. I'm not sure what about software in particular makes people think that it can exist without funding. People have no problem paying for a physical product, but virtual products are hard to justify for some reason.

A large part is that the marginal cost per copy approaches zero. It was hard enough to charge for software when it came in a box on a store shelf, now it has to be wrapped in a service.

Sometimes you’re still the product if you pay for the product.

(YouTube, Uber, Airbnb, etc…)

There are numerous cases in which paying customers are also the product, most notably any captive-market advertising situation: transit, air travel, hospitality, cable and streaming services, telecoms (wired or wireless), and more.

The truth is that a profit-maximising business will seek revenue opportunities where it can, and if that means selling both services, on a single-instance or subscription basis, and advertising, it will do both.

Advertising-only or advertising-dominated businesses have a strong tendency to degrade faster and far more prolifically than those with mixed-model funding (I still find The Economist's three-legged revenues stool fascinating: subscriptions, advertising, and Economist Intelligence Unit bespoke consulting and research services, each roughly 1/3 of total revenues).

Paying alone, however, is a far-from-sufficient condition.

If you are not paying for the product, you are the product.

That's a fun quip (and often correct) but the world needs a way to run this kind of project. Community? free? transparent? etc, etc.

And I think this issue is not just about "free systems", culture changes and day to day corruption creeps and destroys everything. Even die-hard for-profit institutions (where entire branches might go rogue on their own objectives.)

Taking investor money means users will required to pay, one way or another.

Without an explicitly capped profit, I can't see how this doesn't eventually lead to exploitation of the users.

I would like to see a donation/optional subscription model with tiered features as is seen in Patreon/Kickstarter etc. with the distinction that the tiers are community wide instead of being bound to the individuals donating.

Display an income bar. If it drops to zero the servers turn off. If it drops below 1 nobody can post. If it is above 1 you have Direct messaging, above 2 you have more features, etc. Keep the communication clear as to what is being provided and how it is being paid for.

Most people won't pay, but if nobody pays there is no service. Its survival would depend upon providing a service that satisfies enough people to sustain the support. This certainly wouldn't be as lucrative as a exploit the users model, but the idea is not to make a fortune, but to simply run a sustainable enterprise.

Income bar / donation thing sounds extremely stressful and precarious if you're paying anyone a salary.

Capped profit is interesting since it doesn't limit the business model, just the likelihood of enshitification.

Running a startup AT ALL is extremely stressful and precarious if you're paying anyone a salary. 90% of startups die in flames. Stress and danger are table stakes, I would think.

absolutely, i'm very familiar with that stress. but committing to a donation only business model for a product you're giving away for free is playing the startup game on ludicrous mode.

Display an income bar. If it drops to zero the servers turn off. If it drops below 1 nobody can post. If it is above 1 you have Direct messaging, above 2 you have more features, etc. Keep the communication clear as to what is being provided and how it is being paid for.

This is a fairly normal way to run old-style forum hosting - I remember forums that would display a bar for "this month's hosting costs" or a "hosting costs are paid until [date], donate now!"

Without an explicitly capped profit, I can't see how this doesn't eventually lead to exploitation of the users.

I don't see what difference capped profit would make. Exploitation of users doesn't usually happen during the starry-eyed "this is going to be a billion-dollar company" stage, it happens in the "is there anything we can do to keep the lights on for another few months and maybe turn it around" stage.

IMO the problem isn't investment per se, it's debt, in a broad sense: spending money now that you're expected to repay in the future, and then struggling to repay it. There are bootstraped, sustainable organisations operating in this area similar to what you're asking for, e.g. Dreamwidth. But those are never going to be able to "blitzscale" or market themselves to the same extent; marketing almost by definition involves spending money now that you hope to recoup in the future, at which point you've already sown the seeds of your ruin if that future revenue doesn't materialize.

I would like to see a donation/optional subscription model with tiered features as is seen in Patreon/Kickstarter etc. with the distinction that the tiers are community wide instead of being bound to the individuals donating.

Discord has a bit of this. Each 'server' can be 'boosted'. Boosted servers have access to more emoji slots, better audio/video quality for calls, and larger file upload limits.

    Most people won't pay, but if nobody pays there is no service

Wouldn't this be at risk of Bystander Effect?

> I would like to see a donation/optional subscription model with tiered features as is seen in Patreon/Kickstarter etc. with the distinction that the tiers are community wide instead of being bound to the individuals donating.

Can you rephrase this as;

"I'd like to see a model where I can pay a lot, and thus allow 10 other users for free" ?

How about something along the lines of "it costs $10 per useful per month to make the platform sustainable. A subscription is $100. When you subscribe you pay to keep 9 other users on a free account."

In other words, my question is, are upu in the 10% paying for everyone, or are you in the 90% getting it for free?

I felt sad for the guy. It’s awful going through life never believing in anything.

Being an idealist is fine, but being a dick is not. This article took on some personal schadenfreude after I read this line.

There was definitely a certain amount of "I told you so" vibes, but I don't blame the author. It appears that he was attacked by a lot of Ello founders and fans for raising some cautionary notes. And as it turns out, he was right and they were wrong.

We would all like to have a model where users don't get charged money, and yet are not the product. But I haven't seen a model that works to date. In some cases, I don't mind my personal date getting sold; in other cases I pay money because the service is valuable. But I certainly make backups since I don't assume that even when I pay $$$, that the company might not go poof in the night....

I believe GP was referring to the Ello founder Budnitz, who said that line, as the "dick."

I agree. He was responding to perfectly justified -- and accurate -- criticism by saying how sad it is to be a person with such views of the world.

Yes. The author of the article knows how to write enjoyably.

The CEO he was quoting is the subject of my schadenfreude.

I haven't seen a model that works to date

IRC. NNTP. SMTP. XMPP. HTTP.

It's just that nobody wants to work on protocols anymore. Ever since the world's richest was suddently a computer guy, no one wants to work on anything without a business model that includes taking complete control over what is built. A product, if you will.

In the background, there's always some geeks slaving away with new protocols and federated models. That will not become mainstream, not in our current society. But societies change over time. There is always hope.

Protocols, not products, people!

> But I haven't seen a model that works to date

Sure you have. Amazon grew without giving stuff away for free. Customers paid (just below market rate) from day 1. This demonstrated the -convenience- of ecommerce. It had revenues from the first sale. Yes, it spent mountains of VC money on marketing and development, but -not- on just buying stuff for you so you think it'll be free forever.

Uber is the same, although it's less clear that users will pay gor what a ride really costs. (And their margin makes it attractive for competition)

In both cases though there us revenue from customers from day 1. You can wind prices up. It's really hard to "go from free to paid".

Hah, same here. That line jumped out to me as a big toxic red flag.

The quotes further down from users who suddenly lost all of their content were sad to read. It sucks how often regular people get burned for taking tech companies at their word.

It's funny, the author went out of their way to give the company the benefit of the doubt...but they come across extremely arrogant and sometimes vitriolic. I wouldn't have been so positive

After leaving Ello in 2016, Budnitz returned to his Kidrobot roots with the launch of Superplastic in 2017, a vinyl figure company that expanded into NFTs and the metaverse in 2022, raising a total of $68M in seven rounds of funding, led by Amazon. Superplastic appears to have abandoned its NFT projects last year as the market cratered, and Budnitz stepped down from his CEO role in September, replaced by the former president of blockchain gaming company Dapper Labs. They are now focused on “synthetic celebrities” and AI influencers.

This is the game. Raise money, steal it, let the company go to the dogs.

I am often jealous of the people who make huge sums of money grifting investors, but the thing is I care too much about what I do and I’d be bad at pretending I don’t.

The flip side is I instead love what I do and I’m very proud of my work, which I don’t think someone could really say if they’re shilling crap like plastic toys and NFTs. Or maybe they could say that, but I never could. Grifting is just not for me.

I used to work in public service (in chronological order, ranger, social security, LLC incorporation and radio spectrum licensing and management) before jumping into software with glee.

And I have the exact same thought about providing software for government and other large organisations.

The number of "solutions" my public service employers paid millions for, that didn't fucking work properly or reliably is mental.

I'm really not sure how contracts keep getting signed by big organisations that don't impose massive penalties on providers for failure, but it they do. Or the sister org that finally had enough and wanted to switch providers, and had to go to court in order to be even be able to pay a large amount for the IP rights to the source code of their system, because they'd signed a contract that let the provider retain IP, and the provider really liked that sweet sweet taxpayer money for buggy bollocks. So naturally, when they contracted HP to maintain the system they ensured that the contract retained IP ownership for their org.

Haha, no, I'm kidding, they let HP keep IP rights on changes HP made, and later on had to fight HP in the courts so they could pay HP for the source to switch providers again after getting sick of being charged $2K (USD) by HP to update the text of a single link on a website.

And I keep thinking that I'd very much like to be in the market of earning millions by providing broken software to people making big decisions who aren't competent enough to jump to private sector, broken software is easy.

But then the guilt of stealing taxpayer money kicks in (it's not legally stealing, but morally, it's stealing. As the saying kinda goes, any great criminal needs a great lawyer, a great accountant, and a corporation), as well as the guilt of professional ethics.

(What's the old joke about software ethics? An ethical programmer would never write a function called destroyBaghdad, they'd write a function called destroyCity and pass Baghdad as a parameter.)

But look at Birmingham Council in the UK, bankrupted by shit software and Oracle's fearsome legal team. The entire fucking disgrace that is Horizon (although being fair to Fujitsu, nearly all of the evil was on their customer's side, it was only aided and abetted by Fujitsu employees lying in court).

In my country, IBM sued our government (and won) because IBM wanted to be paid even more for not delivering a massively expensive and broken project to the Police (INCIS), more recently our Education dept spent $180 million on a payroll system called Novopay (they also paid the provider Talent2 to administer payroll with it) that was terribly broken and underpaid some teachers (and perhaps more egregiously, slightly overpaid some teachers, then the provider would eventually realise and demand the teacher repay the overpayment be returned in full in a short timeframe or debt collectors would be brought in, and threats of civil litigation or criminal complaints were used to pressure them) to the extent that teachers had to go on strike to get the government to take it seriously.

Eventually the government took back the admin side of it, and then gave Talent2 another $45 million to get the system working, and are still paying them to maintain it today.

The idea of being in a market where delivering badly broken software leads to you getting paid another 25% of the upfront cost to get it actually working, and you don't get fired, is wild.

I suppose there's a reason that Oracle and similar are described as law firms that incidentally write software, but damn, they make crypto grifters look like complete amateurs.

And I'll begrudgingly admit that Oracle et al are selling a product with actual utility at least, as opposed to NFTs which I'd call digital tulip bulbs, but that is mean to tulip bulbs because they can at least be used to grow flowers.

I've seen 0 use cases for NFTs / ICOs that aren't gambling/unhinged speculation (usually with some fraud involved to make Number Go up to suck in the rubes), or just good old fashioned direct to the consumer fraud dressed up in complicated jargon.

CEO Harry Stonecipher, a cutthroat corporate operative who liked to say, “You can make a lot of money going out of business.” - https://jacobin.com/2024/01/boeing-malfunction-ceo-pay-stock...

Grifting is more lucrative than ever!

I thought this recent article was so insightful: https://news.ycombinator.com/item?id=39014737

Has anyone ever considered that social networking is just a bad business model? It's something that everyone wants to use, expensive to run but nobody wants to pay for.

Mastodon and ActivityPub prove another funding model can work even up to millions of active users. There are plenty of criticisms people have for them, but they're beside the point: it works.

Who is funding Mastodon servers?

The people who use them. Some are funded in part or whole by the person running it, but most still have a Patreon or something like it.

Right. This thread should be talking about Mastodon FAR earlier. I do not care AT ALL that VCs can't figure out how to make money from social media directly; if anything, I expect that. It shows that there's nothing particularly intelligent (and maybe perhaps even useful) about VC money.

There are other models. Lots of them. We've seen a ton of them work to various degrees.

Now, Mastodon is probably the right model for social media. I wish folks here could get their collective heads out of VC-money-land and realize this (presuming one thinks that there is utility in social media, which I do.)

And much like the internet itself, there's even money here as well.

Ask Eli Lilly. If they had signed on to something like Mastodon, where they could be their OWN source of truth, perhaps they wouldn't have had their "Insulin is free" moment.

Except that a lot of these companies have multi-billion dollar valuations currently...

social networking is just a bad business model

I think Meta is doing pretty well...

That's a name I haven't thought of for several years.

I wonder if Fediverse, Blue Sky, etc will catch, or if it'll end up in the same boat. Threads too (yes it's backed by Meta, but G+ had Google behind it ...)

There's a couple of key differences between Google backing Google+ and Meta backing Threads.

1. Meta's entire business is social apps, and Google's is not. There are strategic differences in approach as a result. 2. Google+ was an attempt to disrupt Facebook's rise at the height of Facebook's popularity. People _liked_ FB then - so trying to get them to switch to another product was harder. Threads shipped during a time of volatility with Xitter and is poised to capture more of that audience as Xitter continues to decay.

In terms of how things will change in the space over time, Threads choice to support ActivityPub will probably mean good things for the Fediverse in general, at least in the short term (3E notwithstanding), and could ultimately serve to be the arbiter that kills BlueSky and the AT Protocol.

G+ also tried (was told to?) show relevance to other Google products by becoming a universal and mandated discussion thread mechanism. It wasn't ready. Got the totally expected blowback.

In contrast Meta isn't trying to Threadify everything. The addition of ActivityPub is an experiment that should be run in Threads.

Another thing is people weren't just meh about G+ but because of the 'you now must use real names across our properties, yes, including youtube' message people were actively hostile to it.

Additionally, Google never seemed to be able to answer why someone should use Google+ in lieu of Facebook except that it would be very nice for Google if people would.

Whereas threads has the obvious benefit of attempting to grow while Twitter is self destructing.

The reason I feel confident in the Fediverse's longevity is that it's independently hosted. If BlueSky ran out of money tomorrow and shut down its servers, BlueSky is gone. If mastodon.social ran out of money and shut down its servers, the Fediverse would continue.

There would be pain if mastodon.social failed with zero notice. People would lose access to their accounts and would need to find a new server where they'd be starting over. Some may have backed up their contacts, but most wouldn't. If mastodon.social gave a couple months notice, people could migrate to other servers. given that mastodon.social is the largest server, there would be some growing pains as other servers worked to accommodate new users, but it's possible for the Fediverse to continue.

Note, I'm not saying that the Fediverse will be incredibly popular. I'm simply noting that there's an amount of resilience. Once Ello's owners ran out of interest or money, that was the end of Ello. Even if others had a huge interest in seeing it continue, there was nothing they could do. Even if the Fediverse doesn't "catch" by your definition of catching on, it has caught on for enough people who have moved there and will remain there.

That's why I feel happier in the Fediverse. It feels like something the community controls. Sure, I don't run my own server, but I possibly could in the future and there are enough people running servers that I don't feel beholden to any one entity. It just feels like something that can stick around - even if the cool kids aren't interested. Enough of us like it and we'll keep it going even if some of us become disinterested in it.

the genie that is the Fediverse (based on interoperable and open web protocols) is impossible to place back into its bottle.

"But a little digging shows a much more predictable source: they took a $435,000 round of seed funding in January from FreshTracks Capital, a Vermont-based VC firm that announced the deal in March."

People forget (or mostly never knew) that Ello was a Vermont thing.

I once spitballed with a certain VC at FreshTracks Capital about an idea I had, which lead to him running off with it and burning millions of dollars making it into BRIDJ, which shut down a few years ago.

People forget (or mostly never knew) that Ello was a Vermont thing.

True, but a little misleading. The majority of the co-founders of Ello, plus nearly all of its staff, were based in Colorado.

Source: I worked for Ello.

Well now I have to ask - what was it like inside the cauldron? Any learnings you took into your next step?

It was my favorite job I've ever had. It was intense in the best way. I didn't have much contact with Budnitz, but the other 6 founders showed such a strong passion for the community, it was impossible for me to not to come to work excited.

I'd say most of the negative stress I felt was from knowing that the user base was growing faster than we could fill in feature gaps that would keep folks engaged. I felt like we couldn't quite catch up, and by the time the money started running out and interest started to wane, it was too late.

A few learnings:

- 7 founders is a lot. I don't want that to sound like a criticism, it just means the company is going to feel a bit different vs a more classic 2 or 3 founder setup.

- Positive feedback loops within a tight team of highly skilled people has a huge impact on getting more stuff done. That's how I would characterize the engineering team, and it was one of the highest-performing teams I've ever been a part of.

- Don't build a startup on a custom, in-house UI framework ;)

That last bit - why not? What is wrong with an in house ui framework.

I have built many of them to good effect.

I'm not sure why this post focuses so much on the angel investment. There are probably 10 reasons why Ello failed, starting with the fact that bootstrapping social network userbases is hard, and ending with users won't pay for social networks. None of these are directly related to the fact they built the site with investor money and not volunteer hours.

I think it’s fair critique for the post to focus on the VC (not angel) investment — the expectations of VCs and pressure to deliver a profit could easily have been a significant factor in the decision made by the CEO to focus on substantial revenue growth.

But did they ever even cover their costs? If a business is stable for its current size, and then VCs push you to grow and that kills the company, then yes, that company was killed by VC pressures. However, AFAIK, ello never made much money at all, which is the most proximate reason they failed.

They are imo directly related. Seven people working on ello means it's hard to understand, even on ramen salaries, how that costs less than $1m a year once you fully burden those salaries, buy office space, buy hosting, etc.

So they've set themselves up from the beginning to spend more money than they make, and everything downstream flowed from that choice.

If they had to be cash-flow breakeven from the get, they would have to have charged users. ie built a completely different product, with a different audience.

Social networks and marketplaces are the hardest things to get going

*centralized and siloed social-networks

Federated, standard and decentralized network just live by themselves :)

That doesn't make sense. Federated social networks have the same hard problem as centralized ones: social networks require people.

The part that's hard is the people, not the technology. Centralization and federation have nothing to do with it.

That's one of the things that makes Ello's story a bit sad. It started out as a community of people that had this natural gravity, and the early community was admirably dedicated to the experiment.

Anyone wanna place a bet on how likely that an order from here would be delivered?

https://ello.threadless.com/designs/white-ello-shirt/mens/t-...

I ordered one yesterday as I wrapping up the post, and it was already shipped early this morning.

Considering that the order would be fulfilled by Threadless (an Actually Good™ company) and not by Ello, why do you think you wouldn't get the tee?

I've got 5 on it, DM for Venmo when you get your shirt or 10 weeks have elapsed since purchase.

This post is a long-ass “told you so” and honestly, I’m here for it. I too had an Ello account and thoroughly enjoyed its minimalist nature.

VC money really seems like the beginning of the end.

VC money really seems like the beginning of the end.

For a lot of businesses, raising VC money is a mistake because rapid growth just isn't the right strategy. VC is expensive - you give up a lot of equity every round and are betting that your ever shrinking slice will be bigger because the whole pie grew faster. That is a very tough target to hit.

You’d think everyone would understand this by now.

Just one more web boom please, say 4.0 with AI.

The article somehow states that money from private equity and venture capital is poison that will kill new companies and harm the public.

I wonder how you can grow a company without outside investors? Either you are a very rich founder or you can try to grow it organically but very slowly. If you attempt to do the later you'll find yourself in a position where is very hard to succeed, moreso if your company doesn't do anything new and the competition has lots of cash to succeed.

If you are in a internet business, you either charge users for the service or sell ads. Until now there's no better proven way to monetize.

If you intend to charge users for the service without selling ads, then you can do it regardless of how the money came to finance the business.

In retrospect, it seems like a bad business prospective from the start, with low potential. Had the potential been better, VC wouldn't force them to sell ads and wouldn't have tried to exit the business so fast.

I wonder how you can grow a company without outside investors? Either you are a very rich founder or you can try to grow it organically but very slowly. If you attempt to do the later you'll find yourself in a position where is very hard to succeed, moreso if your company doesn't do anything new and the competition has lots of cash to succeed.

Hard is fine. The point is, taking VC money makes building the company (you wanted to build) straight up impossible.

Turns out building companies is very difficult. If the first thing you do is sell out, perhaps you don’t have what it takes.

Hard is fine. The point is, taking VC money makes building the company (you wanted to build) straight up impossible.

What if you and the venture capitalists are on the same page and have the same goals?

Or what if you keep control, have a good money making plan and you don't ask for funding just to pay expenses and acquire unpaying users but use those funds for growth?

Isn't that arguably what Ello thought they were doing?

I think people imply too much evil-intent with funding rather than understanding the mechanics of it. If you take money from an investor you have an obligation to them to make a return on that money in a finite time frame. The VC has LPs who want their money back in a finite window, so paying tiny dividends over 10 years to see a return on capital and some profit just doesn't work. Building a low-margin, profitable business does not return that investment.

So if you understand the mechanics behind it and have a reasonable path to return, say at least 5x the capital in 5 years (they want more obviously) then VC may not get in the way of your mission. But you have to ask yourself the hard question and be honest in answering it: "Can I return this investment five fold in five years without harming my customers/users/business/etc.?"..

Ethical obligations go in multiple directions.

[edit to add] Obviously there is also a fair amount of dihonesty and ill-intentioned greed out there as well, but that isn't the driver.

Thank you for the clarification

have a reasonable path to return, say at least 5x the capital in 5 years

Your definition of reasonable is not the same as mine.

I know that nobody is purporting to have the answer, and I am definitely not trying to suggest that there's anything wrong with the conclusions drawn here--quite the contrary, actually. But, if VC funding is clearly a bad way to go about things, then what is the best way to structure and fund an organization built around a network or service that is primarily in the game of serving user-generated content and providing social networking and chatting services?

VC funding has a lot of problems. Funding via advertising is similarly fraught with peril, maybe worse, especially the most lucrative stuff. You can fund things by selling premium content or features, but this too is rather tenuous: if you are say, SoundCloud, one of your primary customers is inevitably going to be artists, who themselves are by and large not rich.

Not to mention, no matter who you focus your monetization on, $1 is infinitely more than $0, and monetizing useful features or access to content will inevitably lower the overall value of your platform. This is presumably part of why advertising is so enticing: end users don't have to "pay" anything. Sure, advertising isn't literally free, but users do not have to set up a payment method and take money from their account and send it to yours, which is a massive difference, and massively increases accessibility.

Then there's stuff like crowdfunding. Platforms that let you do one-off funding campaigns like Kickstarter or Gofundme, or platforms that let you do monthly subscriptions in exchange for "rewards" like Patreon or FANBOX. There even is a platform that is partly funded by monthly subscription payments (Misskey.io) and although I'm sure it is a relatively small part of the funding (at least I would certainly assume so) it still seems to have been successful nonetheless.

And that's just funding. What about structure? Becoming a non-profit or public benefit corporation is seemingly not any kind of sure-fire way to avoid trouble, as can be seen here. While I don't know exactly how the legalese works around a lot of these topics, it feels like these measures simply don't do enough to prevent corruption or at the very least, undesired future changes in direction. You want a company to have autonomy to carry out its vision and try to survive in the process, but you don't want it to compromise its core values in the process. Is there anything you can do legally and/or socially to provide better assurances?

This is very frustrating because I think a lot of us see the sad state of the Internet and want to do something, but it's hard to work towards it because you can also see a graveyard of good intentions gone horribly awry. There's all kinds of attempts to work around it, but as a wise man once said, "Mo Money Mo Problems". It seems that the temptation to exploit things always manages to find a way around your safeguards to prevent things from being exploited. Just to beat a dead horse even more, remember the last time you were excited for a Google product announcement, like say, GMail? I'm not saying they were ever a charity or intending to be... but it's hard to not see the painful way in which values that were once hard-fought slowly fade away. Somehow, eventually, everything becomes rent-seeking, a game to see how much money you can get back from an investment. One would hope there is a way out that doesn't involve a very painful upheaval of society, but over time it's getting harder and harder to believe it.

True. I’m working on a project to answer some of these questions and consider innovations that might have an alternative outcome. We hope to make it a collaborative project with wiki-like tendencies. To me, figuring out how to create technical social infrastructure that does not inherently have anti-social incentives is one of the most important problems of this moment.

Day to day corruption is a problem. And if we had a solution, it would be known (the concept of bug bounties goes in the right direction, perhaps). I think this is a fundamental problem and research opportunity with the legal forms for institutions and staff incentives.

Even "winding down" doesn't necessarily need to be a problem. It's all in the "how" it's done.

I thought this was a fantastic post. I think it really dovetailed with what I've been thinking a lot about recently regarding my disillusionment with tech (or, rather, with big tech companies).

I think everyone should understand (and, honestly, repeat daily) that in our modern capitalist system where never-ending growth is an expected requirement of any company that has ever taken outside funding, it is simply an impossibility for a company to have any kind of durable values that conflict with that growth-at-all-costs requirement. It's as much of an impossibility as the sun rising in the west, and we should stop any pretense that it's not. Enshittification is inevitable.

Nearly every tech company starts out similarly: an absolute laser focus on users and their needs, because that is how you first grow. At some point, though, all of that fruit is picked, and you then start going into features that are "user neutral" but that make money, until finally you chip away at features that look like they can be user neutral in the short term ("We A/B tested and nobody minded one more ad!"), but the long term effect is that you've completely destroyed your founding ethos.

For example, it's easy to pick on Google these days because it's, well, so easy. Their total about face from a company that was nearly universally loved by engineers to one that, if not loathed, is at best seen as the "next IBM" is so obvious. E.g. Google got huge originally with a world-first search engine by not "selling out", by not masquerading ads as organic search results. Now when I search for any remotely commercial term the entire first page is ads that are nearly indistinguishable from organic results.

It's not just Google, though. Apple loves to crow about user privacy, but it's hard to square this "value" with their insistence that anyone on iOS who uses iMessage to talk to anyone on Android gets 0 encryption (oh, and if even a single Android user is in a group chat, nobody gets encryption).

I don't think that makes any company "evil", but it does make it somewhat sociopathic in the sense that there can ever only be a single goal: growth at all costs. The sooner we all recognize it means we can treat all companies with an appropriate level of caution. One final note related to this, is that this is one reason I'm not really a fan of PBCs as mentioned in the article. PBCs are a smoke-screen. As the saying goes, "Follow the money". When push-comes-to-shove you'll also see PBCs compromise their "values" the second growth starts to be at risk.

Yes, this is a tech thing in particular. You don't see VC being raised for a plumbing company, they'll get an SBA loan or bootstrap. They don't need to grow 10x every year, if the owners can pay their bills and send their kids to college they're happy.

And plumbing is such a constitutionally important thing: having hot, running water and not having feces in your house is so much important than seeing what that guy from high school is up to.

I think the issue lays with how high-variance tech is due to the scale: either it is marginally profitable at a massive scale and is worth billions of dollars, or you have something that is unprofitable at any scale and is worthless. It's like there's all of the sudden (in the last 15 years) become an appetite for throwing fortunes onto a roulette table (which may be giving better odds than a lot of VCs).

Two things here.

One is that the marginal cost of software(1) drives this pattern of winners and losers. The first user of any software costs an enormous amount of money to actually write the software and deliver it to customers. The 100th user costs basically nothing once you have 99 others. And the millionth user (or billionth) user costs basically nothing as well(2). That in turn means that having a billion users is a lot more profitable than having a million users, which means that if you have a billion users you can afford to do things that the million user system can't- e.g. free webmail and a really good free internet browser, just to name two things picked completely at random and not having any particular company in mind.

The other point is explaining your comment about the "last 15 years": tech's dominance (really, growth's dominance) is really an artifact of zero-lower-bounds interest rates from the 2008 financial crisis. If interest rates are zero (for discounted future cash flow computations) then I am indifferent about a dollar today versus a dollar in 2075. So someone who can argue that they have a 5% chance of being worth a trillion dollars in 2075 is worth a lot (0.05 * 1T=50 billion) when interest rates are zero, but if interest rates are high (or even, honestly, normal- like 2-3%) then that money is discounted heavily and the growth story doesn't matter as much because dollars today are worth a lot more than dollars in 2075. So if interest rates are zero, future growth will dominate the stock market (which was why 'tech' did well) but when interest rates are more normal, different companies can dominate the stock market (where the fundamental valuation of a company is, roughly, the expected value of future cash-flows discounted to the present).

1: Delivered by the internet- physical media distorts this a bit and behaves more like normal retail goods.

2: Exceptions for certain points in the growth curve where some key system falls over and needs to be rapidly replaced, e.g. storage or compute or whatever, but outside of those it's very cheap growth. Plumber company growth is limited by the number of trained plumbers you can hire- you can only have 1 plumber make so many house calls in one day- but software just replicates at zero out to infinity (again modulo some key systems which can't handle the load).

Early on in Ello's life, possibly year 1, I interviewed for a job with them - back when their office was basically one floor of a residence, and all the engineers pretty much worked at a single dinner table packed with monitors. I probably scored the interview because of my previous experience as CTO of a startup social network for people who wanted social change (which we sold to Gaiam, and that's how it eventually died a few years later, but at least I ended up in the Denver/Boulder area).

Anyway, the code test part of the interview involved pairing with another engineer on a small portion of the ello User model (their application was built with Ruby on Rails at the time), and I remember being rather underwhelmed by what they asked me to do, at least in terms of whether it provided a decent test of my abilities. I ended up sending a follow-up email expressing that, along with numerous polished samples of other project work.

They ended up passing on me, but I stayed a member of ello for a while longer because I thought the idea might have promise. Maybe I left too early, but I eventually ditched it because... there was no "there", there.

I liked their general idea, but... they could have done so much more with it, even with a small team. As it was, I left before ello ever got out of its "tumblr clone with way too much empty space" phase - if it ever did.

RIP

They ended up passing on me

Sounds like a win for you.

I don't see why Ello didn't just turn into a Pinterest + Etsy + DeviantArt hybrid.

Let artists show off work, let them seem their art/products, take a percentage of the sale as profit.

Maybe that's a bad business model for a social-media-first platform.

Yeah, I don't get it.

Be a marketplace, and charge commission.

I'm amazed by the number of people who trust websites like this with their memories/diaries etc. I mean, I understand why, there's an expectation when you start with these sites they'll be around forever - most people don't have the time, the knowledge or the desire to "do it themselves" - When livejournal was all the rage I decided to do it myself with Postnuke, then (and still!) Drupal. Going on 24 years now. That said, LiveJournal is still going, but owned by a Russian company I think, and it could turn off tomorrow.

I guess the flipside is, if I die tomorrow and then there's a PHP error on my website, no one's ever going to know how to fix it. So my memories and diary entries die as well. My "fix" for that is to export the ~2400 diary entires every few months into one massive PDF file.

Edit: I understand why this is being downvoted, I just want to clarify that I didn't mean the opening sentence to read as if people who trust 3rd party websites to their hosting were silly/dumb, though I realise now that's how it scans. What I should have said was "It's very unfortunate and a sad state of the current Internet that people trust websites like this..."

That is the main takeaway from all these. The lesson is not that venture capital ruined it. But that eventually, at some point, either the founder or circumstances change the thing. The one permanent here is that it's bit on a digital network. By definition not permanent. And so people run into this again and again and still don't believe that XYZ might be next.

But it is, XYZ is their business platform, their social media network, their journals, their photo hoster, their "lifetime membership", etc. I ran into this all the time with clients. They would worry about what happens to their consultant, but never to their infrastructure.

So for businesses: have a plan B, and have usable archives / backups. And for individuals, have a plan B, and have usable archives / backups.

this post is a bit of a "nyah nyah I told you so", but since whoever was running Ello did not give any heads up to users a way to get at their content, they just allowed the thing to buzz into the ground and they shut off all communication, they deserve it.

Oh wow, I'd totally forgotten about Ello. They were never going mainstream with that yuppie aesthetic

HN is just doomy-doomy-doomy today. Sad.

Replace "Ello" with "OpenAI" except OpenAI is not being silent about the changes.

Well done article. Interestingly with every ending comes a new beginning: https://www.ello.com/

This ^Ello (yc w20) is giving life to a much larger dream. Awesome team combatting child illiteracy with artificial intelligence.

oodbye

defunct social networking services, a list from wikipedia:

https://en.wikipedia.org/wiki/List_of_defunct_social_network...

Money is the energy for a business. With it you employ people to build, market and sell the product, rent real estate etc.

Most startups die out of either running out of money or running out of will to continue (due to founder fallout).

Money may be made up numbers, but what you can exchange it for is very real.

People buy things they value.

So if Ello dies, did they build something valuable? Valuable enough that it could sustain itself long term.

It's a shame that it's completely lost, they had some interesting layout conventions and it was kind of fun to browse images even in the later days.

The network never really caught on, but there was some good work being done there.

My dream is of one day being in position to borrow some 5, 10 mil, if not more from some bank, VC, whatever. And then manage to somehow.... mismanage it, burn the money. And then get away from all the troubles by filing bankruptcy!

Yes, this has ever been my wet dream growing in a country that didn't have the notion of personal default and until only recent years. Where mobs were chasing oneself if he had any debts to like... anyone. I really envy you guys burning VC capital on "dreams", while others have to solve the complex "differential equation" of markets and competition and planning, and you know managing things properly to be sustainable without external injections.

Our story is very sad, your story is a dream indeed.

Looks like Archive Team didn’t manage to get anything before it disappeared :(

I'd joined Ello early[1] on and watched its journey with interest, frustration, and ultimately sadness. That included an on-site visit in October 2015, which was genuinely enjoyable. I'd largely written off the site around 2018 when it was sold and information on either the status of the social benefit corporation (SBC) or new ownership was exceedingly scarce. Andy Baio's account corresponds strongly with my own.

The community was small (I'd estimated total accounts at perhaps 10--15 million, and actives at roughly 1% of that, generally confirmed during my visit), but vibrant in its own way, and as with numerous other social networks, I miss numerous connections I'd made there, though a small handful have resumed at the Fediverse. There really were some notable gems among the group I connected with, including Paul Mason (journalist, briefly), poet Trenton Lee Tiemeyer, authors Ksenia Anske and Bruce Sterling, SVG guru David Dailey, and others.

Most disquieting was how Ello died with neither notice to its members or commentary elsewhere. TFA here is among the very few accounts I've seen of its demise. (I've written a few times about it at the Fediverse myself.)

The other concern, going far beyond Ello, is how little protection or guarantee either its manifesto or SBC status ended up providing. Going forward, I'm going to give similar attestations vanishingly slight weight.

Having participated in online communities since the late 1980s (Usenet, mailing lists, Slashdot, Google+, Diaspora*, Reddit, Ello, the quite short-lived Imzy, amongst others), I'm reminded of the song "dumb ways to die": there are many ways for a social network to die, most of them depressingly uncreative.

The flip side is that it's also difficult for a social network to survive, let alone thrive, and survival. Commercial pressures from every thing I've seen worsen this, though even noncommercial / non-ad-supported sites may see failure modes.

Of the best communities I've encountered:

- Early Usenet, when access was strongly predicated on academic affiliation.

- 1990s-era mailing lists, most especially those focused around Unix / Linux and Free Software topics. (Broader-appeal mailing lists ... tended to function poorly.)

- Google+, in patches. The fact that the social network wasn't ad-dependent, and had strong representation from the tech community were strengths, and some of the best engaging online conversations I've had were from there. Diaspora*, though vastly smaller, saw a substantial portion of my G+ community engage there and had similar dynamics which also made for some good discussions, though not quite as often.

- The Fediverse. Not quite as rewarding as G+, but I strongly suspect it will prove far more enduring.

- Hacker News. As with G+, not directly intended as a revenue-generating platform. Not as good as it could be, but far better many other options, and astonishingly consistent over a very long lifetime (approaching 20 years), which would beat out Usenet by quite a margin.[2] I'd chalk up HN's durability to a few factors: unsexy tech and appearance, stellar moderation, solid design principles, and a viable founding cohort and active community. There are of course criticisms of the site and I've made a few myself, but relative to much the rest of the Net, still running strong.

________________________________

Notes:

1. The Internet Archive has some captures: <https://web.archive.org/web/*/https://ello.co/dredmorbius>

2. Usenet's birth date was ~1979. By 1999 it was well past its sell-by date, though not completely dead.

I did not use, or even hear of Ello, but I am sad to see this story play out.

What is more sad is that this exact story has played out hundreds, thousands of times with slight variation.

I don't understand how the people involved cannot see those patterns. Cannot see the history. Cannot see beyond the current moment.

I'm really not sure if it's greed or self-deception or ambition or something else entirely.

For a similar, but different story:

Some time back, a game development studio called Harebrained Schemes was created from passionate individuals in the Shadowrun and Battletech community - founders who had been involved since the early tabletop days. They rebooted Shadowrun with 3 new games, and in 2018 used Kickstarter to create Battletech, which is loved by the community and has an active modding scene.

Then, immediately following the success of BT, they sold out to Paradox. Paradox is not a terrible publisher in the grand scheme of things. But that sale did change HS's priorities. They were prevented from making another Battletech game, because frankly it's a more niche product with older fans. It does not have 'mass market appeal'. They instead made Lamplighter's league, something that clearly they did not have their hearts in.

In the end, it flopped, HS had massive layoffs and now was let go by Paradox. We will likely never get another game from them. There will never be a Battletech 2.

It's so frustrating. They had passionate individuals and a loving fan base and GREAT games, and they threw it away.

What amazes me, is why would anyone sane pay to buy such a business?

Why did Talenthouse buy Elo, and more important why did some investors buy Talenthouse?

Have no one saw any sign of a very bad investment?

So they had 7 people to pay, and also pay for hosting, rent, equipment and utilities. That means at least 1 million per year.

How were they going to do it without outside funding if the creators subscribing weren't paying at least that amount? Ask for donations on Patreon?

So Marx was right! Capital is bad. All enterprises should be owned and ran by the state.

Would things have been different if they hadn’t taken funding? It’s impossible to say. In all likelihood, it never would have been built in the first place.

But if it had, I doubt it would have ended like this.

If it had I doubt it would have lasted as much.