Upstart start-ups: Lessons for small fry taking on big fish

Have you signed up for Ello? In September thousands flocked to the new invitation-only social network that quickly became known as the “anti-Facebook” platform, with requests for invitations peaking at 40,000 an hour, according to Paul Budnitz, one of the founders.

But why would you want to join yet another social network when there are already more than enough time-sinks in the form of Facebook, Twitter, LinkedIn, Instagram, Pinterest and Google+? Ello’s USP is that it has pledged never to sell adverts, nor to sell your user data. To underline that commitment, in October it became a public benefit corporation, which legally binds Ello to its pledges. As of October, according to Budnitz, the social network had some 1m users, with another 3m on the waiting list.

However, the excitement around Ello seems to have faded, with concerns ranging from the fact that it has now secured nearly $6m in venture capital funding in two rounds, to disquiet over the lack of privacy options (which have since been added to the site) and irritation about how flaky it is to use.

Ello’s launch provides some useful lessons for any start-up. The first is that it is very difficult to disrupt big, established players. Ello is just one of many networks that have appeared over the years that offer something different to Facebook and Twitter.

There have been three significant attempts to challenge Facebook and Twitter: Diaspora, App.net and Google+. None has been successful. Diaspora is the most interesting: it was set up as an open-source, distributed platform. Rather than being run centrally by the owners, anyone can host a node, or “pod”, on their own servers, which means anyone with the technical knowhow could set up a pod for their own group or family. Those who just want to hang out on the network can sign up to someone else’s pod. Rather than seeking venture capital funding, Diaspora raised cash via Kickstarter, the crowdfunding platform, and much of the development work on the codebase is done by volunteers.

With just over 1.1m users Diaspora has a respectable user base, but is never going to challenge any other network. Neither is App.net, a Twitter-like service that was set up when Twitter decided to limit access to its application programming interface, which allows programmes to interact with the platform. Instead of being free to use, app.net set up a paid subscription plan, hoping to attract users who prefer not to share data about their activities with aggregators and advertisers.

That has sort of worked, in that App.net passed a significant hurdle when it announced enough people had renewed subscriptions for the network to be profitable and to continue. The bad news was that the renewal rate was not high enough to employ anyone. In a blog post in May, Dalton Caldwell, one of the founders, said: “We are making the difficult decision to no longer employ any salaried employees, including founders.”

The biggest of the post-Facebook flops is Google+, which many Google users disliked because until recently the company required users of its other services, including YouTube and Picasa, to link those accounts to a G+ account. Google+ claims some 1.15bn registered users, but it appears the numbers may be pumped up by people using YouTube, reviewing apps on Play or uploading their images to Picasa. The number of active users is more like 343m, according to Statista, an online data portal. That is a respectable number but a long way from being a Facebook killer. And if not even the mighty Google can disrupt Facebook, anyone smaller should ask themselves why they think they can.

Another lesson any start-up should take from Ello is to pick your time to launch carefully. Ello popped into the limelight at around the time Facebook announced it would require users to stick to their real names, thus setting off protests from privacy campaigners, the lesbian, gay, bisexual and transgender community and others.

Facebook has since backtracked on that pronouncement, but concern that people who use a false name would be “outed” drove many to have a look at Ello, which does not require you to use your real name. It might be a coincidence that Facebook’s move sparked such a surge of interest in Ello, but others have suggested the burst of publicity around Ello at that time was a deliberate move to lure drag queens and others who prefer to use alternative names away from Facebook.

However, that threw up another problem – and another lesson for start-ups. Ello has now implemented privacy controls, but they were not in place as the new users flooded in. The lesson here is: be ready for your users.

Ello makes it clear it is still in beta development, but functionality remains flaky. It is not easy to find your way round, the user interface is poor, there is no search facility, so it is difficult to find your friends, and some things simply do not work. At the peak, Ello had to suspend new sign-ups because its servers could not cope with the load. As a result some people turned away. A quick poll of my friends revealed several only signed up to get their preferred user name.

Can Ello work? Maybe, but I doubt it. It plans to make money by selling additional functionality, such as allowing you to control two accounts from one sign-up, which in some ways makes it more like an app with in-app purchases. But the founders are vague on what features it will add and how much they will cost. I also predict that while it will not actually sell ads, brands will be able to pay to boost their content: actual ads are not the only way to spread your message.

Getting users and keeping users is a challenge. Ello is a good case study in how to gain traction – and how to annoy and drive away users. Any start-up should keep an eye on it.

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From A to B: apps that work out a way

Meet Me Halfway
Android, free

An excellent idea that could be better executed. Put in your starting point and the other person’s starting point and the app will highlight a driving, cycling or walking route and flag up possible meeting places near the midpoint, which you can filter to include eateries, bars, casinos, hotels and shopping malls.

The app’s fatal flaw is that it does not offer a public transport option, and adding addresses from your contacts is clunky: you have to scroll through to find the right one. Those irritations aside, it is a useful companion both at home and in unfamiliar cities.

Here Maps
Android (beta)
Windows Phone, free
here.com

Nokia sold its handset division to Microsoft, but it has retained its mapping division. Its excellent mapping app, which includes turn-by-turn navigation, has so far been exclusive to Windows Phone but it is now available in beta for Android.

Maps are available offline, so once you have downloaded a country map, you do not need to keep data roaming on, saving a fortune in mobile costs. The interface is a matter of personal taste: I prefer it to Google Maps. Nokia is due to release a version for iOS, too.