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In a previous article about Ello, I wrote:

There is, in short, nothing to stop Ello from doing what Facebook does whenever they make a significant change to their Terms of Service: presenting users with a dialog box next time they sign in, saying, "These are the new rules, by checking this box, you are agreeing to abide by the new contract which you're not going to read."

After the story had been filed, I had a second thought and wrote to Ello's PR department, asking:

Why not just make an irrevocable commitment in the TOS, to remain privacy-friendly, or ad-free, or whatever else it is that Ello wants to promise users? Something like, "This is a binding, irrevocable commitment that cannot be modified in future updates to the TOS." That wouldn't make the venture capitalists happy, but it might address some of the concerns of the users.

Coincidentally, just as I was sending that email, Ello was issuing a press release announcing that they had re-chartered as a Public Benefit Corporation (PBC), bound by a charter which is intended, precisely, as an irrevocable commitment not to run ads or sell user data.

However, as user WWJohnBrowningDo pointed out in the previous story's comment threads, the Delaware law defining a "Public Benefit Corporation" states that the charter can be modified, or the PBC status nullified, or the company bought out by another entity not bound by the original charter, with the approval of a 2/3 supermajority of shareholders. (Go here and scroll down about halfway to the section beginning "Notwithstanding any other provisions of this chapter." It's also called out on the site about benefit corporations that is linked in Ello's press release.)

So, my non-lawyer face-value reading of the situation is: Previously, Ello could only change its policy and run ads with the approval of 51% of shareholders, and now 67% is required. That's an improvement but hardly an eternal guarantee. Either way, the majority could be achieved if enough of the original founders and shareholders give in to temptation, or if the exit-hungry venture capitalists get enough seats on the board to outvote them. (I ran this past a few Internet privacy lawyers to ask if there was any more nuance to it than this -- in particular, whether a company could make a "binding promise" in their PBC character, then toss it out with a 2/3 supermajority vote and get away with it. They said they had no idea.)

So, even if a PBC charter is not an irrevocable promise to remain ad-free, perhaps we can give them credit for trying to make such a promise, to the maximum extent legally possible. Or did they? This is just off the top of my head, but: What if they had said, "To each user signing up, we promise that if we ever start running ads or selling user-specific data or otherwise violating this charter, we will pay $1,000 to each affected user."

Now that's no longer merely a "charter" but is now an actual obligation to an outside party. And a contractual obligation to an outside party cannot be nullified by a 2/3 majority or even a 100% majority of shareholders. (Imagine: "All shareholders in favor of canceling our agreement to pay back the money we borrowed from FooBarBank, raise your hands.") On the other hand, this depends on whether a court would find the contract to be enforceable.

Regardless, even if Ello never voted to rescind their charter, another potential loophole is that the charter contains no formal definition of what constitutes "charging for advertising". Ello's stated business model is to offer optional special features that users can pay to use. But conceivably they could add paid features which essentially amount to the ability to advertise to other users, such as the ability to send mass messages to thousands of recipients. (I doubt Ello would do anything as crass as to let you spam thousands of random strangers. However, in most social networking sites such as Facebook, you cannot even mass-message thousands of people who are in your Facebook friends list. That's the kind of feature that some Facebook users, and some Ello users, would presumably be willing to pay for.) Or Ello could charge extra to have a special "badge" appear next to your name, or your company name, in search results. Or, like CouchSurfing.org, they could offer to "verify" your identity by charging $25 to a credit card in your name. And if the paid features really do remain Ello's sole source of revenue, then their developers may find themselves under subtle pressure to degrade the experience for regular non-paying users, while offering increasingly attractive perks to the paid ones.

Aral Balkan, one critic of Ello's venture-capital cash infusion, told me pointedly: "Their original statement smacked of misdirection. 'Look, we just got over $5M in additional venture capital but don't worry about that because...' I still don't trust them, sorry. They're closed source, centralized, (currently at least) free to use, and they've just taken an order of magnitude more VC after the influx of users they experienced. It sounds like typical Silicon Valley fare to me. If it looks like a duck and quacks like a duck..."

I don't think it's a matter of "trust" -- I have no reason to doubt that the founders behind Ello are good people -- but when you dangle millions of dollars in front of someone, they can find rationalizations and loopholes that are consistent with their vision of themselves as a good person. And of course since hosting the Ello platform will cost money, if they don't make enough of it back from selling paid features, they will eventually make the kind of passive-aggressive announcement that is issued routinely by formerly free or ad-free services: "Look, we either have to start raising money somehow, or the service has to be shut down completely." And then regardless of how most people respond, they can say after a few days, "We have received an outpouring of support from users who said they would be willing to view ads as long as it keeps the service alive" (without saying what percentage of all user responses expressed this sentiment). Then the ads go up (I'm calling it thirty-six months in advance: some pundits will grandiosely refer to this as "destroying Ello in order to save it"), and then we're back to Facebook all over again.

In a previous article about Ello, I wrote:

There is, in short, nothing to stop Ello from doing what Facebook does whenever they make a significant change to their Terms of Service: presenting users with a dialog box next time they sign in, saying, "These are the new rules, by checking this box, you are agreeing to abide by the new contract which you're not going to read."

After the story had been filed, I had a second thought and wrote to Ello's PR department, asking:

Why not just make an irrevocable commitment in the TOS, to remain privacy-friendly, or ad-free, or whatever else it is that Ello wants to promise users? Something like, "This is a binding, irrevocable commitment that cannot be modified in future updates to the TOS." That wouldn't make the venture capitalists happy, but it might address some of the concerns of the users.

Coincidentally, just as I was sending that email, Ello was issuing a press release announcing that they had re-chartered as a Public Benefit Corporation (PBC), bound by a charter which is intended, precisely, as an irrevocable commitment not to run ads or sell user data.

However, as user WWJohnBrowningDo pointed out in the previous story's comment threads, the Delaware law defining a "Public Benefit Corporation" states that the charter can be modified, or the PBC status nullified, or the company bought out by another entity not bound by the original charter, with the approval of a 2/3 supermajority of shareholders. (Go here and scroll down about halfway to the section beginning "Notwithstanding any other provisions of this chapter." It's also called out on the site about benefit corporations that is linked in Ello's press release.)

So, my non-lawyer face-value reading of the situation is: Previously, Ello could only change its policy and run ads with the approval of 51% of shareholders, and now 67% is required. That's an improvement but hardly an eternal guarantee. Either way, the majority could be achieved if enough of the original founders and shareholders give in to temptation, or if the exit-hungry venture capitalists get enough seats on the board to outvote them. (I ran this past a few Internet privacy lawyers to ask if there was any more nuance to it than this -- in particular, whether a company could make a "binding promise" in their PBC character, then toss it out with a 2/3 supermajority vote and get away with it. They said they had no idea.)

So, even if a PBC charter is not an irrevocable promise to remain ad-free, perhaps we can give them credit for trying to make such a promise, to the maximum extent legally possible. Or did they? This is just off the top of my head, but: What if they had said, "To each user signing up, we promise that if we ever start running ads or selling user-specific data or otherwise violating this charter, we will pay $1,000 to each affected user."

Now that's no longer merely a "charter" but is now an actual obligation to an outside party. And a contractual obligation to an outside party cannot be nullified by a 2/3 majority or even a 100% majority of shareholders. (Imagine: "All shareholders in favor of canceling our agreement to pay back the money we borrowed from FooBarBank, raise your hands.") On the other hand, this depends on whether a court would find the contract to be enforceable.

Regardless, even if Ello never voted to rescind their charter, another potential loophole is that the charter contains no formal definition of what constitutes "charging for advertising". Ello's stated business model is to offer optional special features that users can pay to use. But conceivably they could add paid features which essentially amount to the ability to advertise to other users, such as the ability to send mass messages to thousands of recipients. (I doubt Ello would do anything as crass as to let you spam thousands of random strangers. However, in most social networking sites such as Facebook, you cannot even mass-message thousands of people who are in your Facebook friends list. That's the kind of feature that some Facebook users, and some Ello users, would presumably be willing to pay for.) Or Ello could charge extra to have a special "badge" appear next to your name, or your company name, in search results. Or, like CouchSurfing.org, they could offer to "verify" your identity by charging $25 to a credit card in your name. And if the paid features really do remain Ello's sole source of revenue, then their developers may find themselves under subtle pressure to degrade the experience for regular non-paying users, while offering increasingly attractive perks to the paid ones.

Aral Balkan, one critic of Ello's venture-capital cash infusion, told me pointedly: "Their original statement smacked of misdirection. 'Look, we just got over $5M in additional venture capital but don't worry about that because...' I still don't trust them, sorry. They're closed source, centralized, (currently at least) free to use, and they've just taken an order of magnitude more VC after the influx of users they experienced. It sounds like typical Silicon Valley fare to me. If it looks like a duck and quacks like a duck..."

I don't think it's a matter of "trust" -- I have no reason to doubt that the founders behind Ello are good people -- but when you dangle millions of dollars in front of someone, they can find rationalizations and loopholes that are consistent with their vision of themselves as a good person. And of course since hosting the Ello platform will cost money, if they don't make enough of it back from selling paid features, they will eventually make the kind of passive-aggressive announcement that is issued routinely by formerly free or ad-free services: "Look, we either have to start raising money somehow, or the service has to be shut down completely." And then regardless of how most people respond, they can say after a few days, "We have received an outpouring of support from users who said they would be willing to view ads as long as it keeps the service alive" (without saying what percentage of all user responses expressed this sentiment). Then the ads go up (I'm calling it thirty-six months in advance: some pundits will grandiosely refer to this as "destroying Ello in order to save it"), and then we're back to Facebook all over again.

At the end of September, "FacebookDragQueenGate" fell from the sky like a gift from the gods to the founders (and venture capital backers) of the Ello social network. The company promised not only to remain ad-free and to allow drag queen stage names, but even stated that they planned to allow pornographic content (something that received relatively little press, compared to the ad-free model). But critics such as Aral Balkan wrote that once Ello received venture capital funding, the backers would inevitably pressure the company to change its relationship with its users in order to make money. In an interview published in Forbes on Monday, Harvard Business School professor John Deighton was blunt: "The board will need to monetize the membership in whatever fashion ensures a profitable return of capital for the venture fund’s investors. So my advice, if they believe Ello is still viable by then, is to buy out [Paul Budnitz, the idealistic founder who came up with the 'no ads' idea]."

There is, in short, nothing to stop Ello from doing what Facebook does whenever they make a significant change to their Terms of Service: presenting users with a dialog box next time they sign in, saying, "These are the new rules, by checking this box, you are agreeing to abide by the new contract which you're not going to read." If Ello succeeds beyond its founders' dreams, then its ad-free nature might start to hinge on its founders all turning down buyout offers of tens of millions of dollars to stick to their ideals -- hardly a sure thing. Or the VCs might get enough seats on the board that they can outvote the founders and render their objections moot.

As Joshua Kopstein writes in an editorial for Al-Jazeera America, what really would have changed the game would have been a distributed, decentralized social network. I already wrote two pieces arguing that a distributed social network could work, and how -- a protocol that allows users to create profiles, "status" posts, groups, events, and other familiar social networking features as "objects" that live on their own server, but that can interact with users' profiles hosted on other servers. I don't want to re-hash all the details here, but the short version is that there seems to be nothing about social networks, as we currently use them, which would require all of the data to be stored in a single centralized system. In a distributed protocol, you could host your profile with any hosting company, and users could "subscribe" to updates from your profile, as well as the ability to receive invites to your events and your groups, and direct messages from you. Think RSS feeds, but with better support for well-defined objects like "event invites".

If your profile were linked to a domain name that you own, then if your existing hosting company ever deleted your profile (or threatened to), you could simply move your profile to a new hosting company, the same way that any person or company can currently switch their domain name between hosting providers. This, obviously, would instantly render moot any one company's policies about "real names" (or porn, for that matter) -- all you have to do is find at least one company, anywhere in the world, whose policies are permissive enough to host your profile, and that should be possible for all but the most extreme or illegal content.

This also renders moot all the worries about profile hosting companies trying to amass tens of millions of users and then stabbing them in the back, by changing the terms of service to allow them to sell user data or stuff unwieldy ads down their throat. When users can switch seamlessly between hosts, no one host is going to be able to "charge" more than the going market rate for hosting a profile (where "charging" could be in the form of monetary payment or displaying ads to the user). How much would it actually cost to host a profile for the typical user these days, complete with all their photos and status updates? It's hard to know, because other than university professors, nobody really has personal webpages any more, after they all went to MySpace and then to Facebook. But since the old days when people did actually host their own personal pages, hosting and serving data has gotten really, really cheap. For the average user, with a few hundred photos and a few hundred friends looking at them, $1 per year might be enough. Maybe they'd just have to watch one of those ads once a year that Youtube puts in front of a Beyoncé music video, and that would cover it.

Unfortunately, to many people the concept of distributed social networking is linked with the failure of Diaspora, the most ambitious attempt to create a decentralized protocol to compete with the likes of Facebook. But Diaspora didn't fail because the idea lacked merit; it almost certainly failed because people asked the same question that they asked of any other upstart Facebook competitor: Why should I join, when all of my friends are on Facebook instead? Of course people might reasonably asked the same question about Google+, but when Google launches a product, people join because they know the quality will be decent, they know that probably some of their friends will join because of the Google brand, and they know people will be buzzing about it anyway so they want to join in order to see what the big deal is.

And that brings up the story's second moral: Despite what you may have heard from your cousin who just read The Fountainhead, the products that are the most successful are not necessarily the best, by any objective measure; rather, they're usually the ones that had major backing (Google+) or were the beneficiaries of a staggering lucky break (Ello). Diaspora didn't take off, because it didn't have either one of these.

And since you cannot manufacture a lucky break, I continue to believe that the last best hope for truly free social networking -- with minimal censorship, and ads and costs kept to a minimum by market competition -- would be for a major player like Google to launch a social networking protocol, and to set up themselves as the default host for new profiles, but allowing the protocol to interoperate seamlessly with profiles hosted elsewhere. Either that, or if the system is launched by a startup or a nonprofit, make sure that you have a host of widely respected luminaries or organizations standing ready to help promote it -- if the EFF and the BoingBoing guys endorsed a new social networking system as the future of Internet freedom, people would join because it would seem uncool not to. As long as the product itself is functional, just have the right connections lined up when you launch it. Because that's what matters, and don't let the deluded ghost of Ayn Rand tell you otherwise.

1. Sell user-specific data to a third party
2. Enter into an agreement to display paid advertising on behalf of a third party; and
3. In the event of an acquisition or asset transfer, the Company shall require any acquiring entity to adopt these requirements with respect to the operation of Ello or its assets.

While that might turn off some potential revenue flows (the company says it will make money by selling optional features), as the linked article points out, it hasn't turned off investors; Ello has now raised $5.5 million from investors.

1. Sell user-specific data to a third party
2. Enter into an agreement to display paid advertising on behalf of a third party; and
3. In the event of an acquisition or asset transfer, the Company shall require any acquiring entity to adopt these requirements with respect to the operation of Ello or its assets.

While that might turn off some potential revenue flows (the company says it will make money by selling optional features), as the linked article points out, it hasn't turned off investors; Ello has now raised $5.5 million from investors.