OPINION7 October 2014

Ello Ello: premium vs freemium in social media


“Your social network is owned by advertisers. Every post you share, every friend you make, and every link you follow is tracked, recorded and converted into data. Advertisers buy your data so they can show you more ads. You are the product that’s bought and sold.” So says the introductory text on the new social network, Ello.

Ello is an invitation-only network that promises to keep your personal information private. And crucially, Ello offers no advertising – which it claims is “a tool to deceive, coerce and manipulate.” Instead Ello claims it is “a place to connect, create and celebrate life.”

So how is this Utopian social network going to make money without advertising? With so many people already on social networks and enjoying the ability to do so for free, why would anyone seriously consider paying for the privilege? Rather than being ad-supported, the financial model for Ello is to get members to pay for add-on features, such as apps that enable group conversations.

So the big questions Ello’s arrival poses are:

  • Do consumers value their privacy enough to protect it by paying for it?
  • If they are willing to pay, what price do they attribute to ‘privacy’?
  • How can Ello best represent this through the suite of benefits they intend to sell?
  • Will this premium / freemium that exists for apps, and that has been used successfully within social media and messaging in Asia with networks like WeChat, work for Ello in Western markets?
  • And crucially, does social network advertising annoy enough people that they will move to another one (and convince all their friends and followers to do the same)?

GfK research show that 81% of people in the UK are more likely to give their business to companies they trust to use their data appropriately; 71% are less likely to use companies that they know have their data when they didn’t provide it directly; and 47% of people don’t understand what sort of data these companies capture. In total, almost nine in 10 people in the UK ( 87%) want more control of their personal data.

When I think of the potential market size for Ello, I am left wondering how they will differentiate themselves suitably, and if they will get enough scale to build communities. In terms of socio-demographics, is there an audience not already being met by Facebook, Twitter, Instagram and Pinterest? I’d say that every age group and social-demographic group is represented across current social media offerings, which suggests Ello’s audience is even more about attitudes, behaviours and cultures than we’d normally give social networks credit for.

Do people care enough about privacy to pay for it?

Sure, some people will feel strongly enough about avoiding advertising and protecting privacy that they will pay, but has Ello established the reach and prices they will need to sustain their network – or indeed the network they appear to be becoming? Looking at the offer so far, I’m not convinced, so it will be fascinating to watch over the coming weeks to see whether its reported growth curve continues.

An eventual lack of scale shouldn’t mean we view Ello – or any social network – as a flash in the pan: being ‘social’ is as much about small communities as it is the larger, more homogenous groups any network will drift towards when it becomes mainstream. As marketers and researchers we should pay attention to this as a reminder that some communities desire independence and individual treatment, and these can’t always be defined by socio-demographics.

What does this mean for market research?

Crucially as researchers, this should prompt us to look more closely at our business approaches. Market research has for a long time operated via a compensation model: you give us your opinion and we’ll pay you some money. But with growth in wearable technology like Fitbit and GPS sports devices, and countless apps managing domestic energy and lifestyle matters, we are getting used to data collection and are increasingly aware of the value of that data and its potential for third party monetisation. This is not a space that’s being ignored by business or consumers, and it’s something market researchers need to be more forward-thinking about if we are going to avoid being left behind in a change of consumer attitude.

There will always be a rejection of the mainstream from some minorities. From a research point of view, I don’t think Ello has the scale to directly concern us, though if it continues its growth curve, this may soon change. More likely it will plateau at a point where it has attracted the majority of its available market, who recreate their communities within it.

Thinking more broadly, the rapid rise of Ello brings to the fore two key messages. Typically we focus on socio-demographics, but Ello shows us that when we’re thinking about networks and connections, we have to think beyond these towards attitudinal, behavioural and cultural segmentations if we are to really understand consumers. Furthermore, if we are to sustain our ability to understand them through market research, we need to evaluate more modern methods of value exchange that give people what they really want – and that may not always be the small cash sums we are used to.

Would you rather your partner gave you a voucher for £100 or a thoughtful present costing £90? Perhaps one day incentives will include benefits like curated content and increased privacy.

Richard Bussy is a digital consultant at GfK.