October 3, 2014

Subscription Based Social Networks?

There's a new player in the social networking space that is looking to position itself as the "anti-Facebook", that is, they claim they will never sell advertising on their platform.

Screenshot of Ello.co

The social network is called Ello and currently they claim to receive 40,000 requests an hour from people wanting to sign up. Signing up is by invitation only at the moment.

Social Networks such as Facebook earn revenues by allowing advertisers to target their user base. Ello plans to earn revenue either via a subscription based model where users pay a fee to use the platform (like Netflix) or by asking users to pay to unlock more premium features (like LinkedIn and Spotify). 

There are people skeptical if this business model will work with social networks. I'm impressed that Ello is at least willing to try. To me, I believe it will boil down to user experience and product. If Ello can provide users with a better experience then what they currently have on Facebook, then they have a chance to succeed. If they merely mirror Facebook's current offer, just without the ads, I believe that Ello will not have a strong enough offer and will be boxed into a niche. A lot of people have a high tolerance for advertising and unless Ello comes up with a truly unique offer, people will resist switching. A social network is only a strong as the people who sign up for it. Without any friends signing up for it, a social network is not really, well, "social". 

This has the potential to be game changing but we must remember that Facebook not only has very deep pockets, they also have a history of constantly adapting to and innovating around the changing habits of its users. You can be sure that Facebook is watching this development closely.