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Businesses Privacy Social Networks Your Rights Online

Can Ello Legally Promise To Remain Ad-Free? 153

Bennett Haselton writes: Social networking company Ello has converted itself to a Public Benefit Corporation, bound by a charter saying that they will not now, nor in the future, make money by running advertisements or selling user data. Ello had followed these policies from the outset, but skeptics worried that venture capitalist investors might pressure Ello to change those policies, so this binding commitment was meant to assuage those fears. But is the commitment really legally binding and enforceable down the road? Read on for the rest.

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.

This discussion has been archived. No new comments can be posted.

Can Ello Legally Promise To Remain Ad-Free?

Comments Filter:
  • by Anonymous Coward on Tuesday October 28, 2014 @02:24PM (#48253357)

    Man, this guy sure does have a lot to say about a lot of things, and for some reason is allowed to use Slashdot as his personal blog.

    • Re: (Score:1, Troll)

      by i kan reed ( 749298 )

      I've got opinions too. Like that your opinions about people sharing their opinions are dull.

      • by Anonymous Coward

        I've got opinions too. Like that your opinions about people sharing their opinions are dull.

        Your opinion is wrong.

        How can an opinion be wrong?

        Because it assumes that I have a problem with everyone sharing their opinion, when in reality, I only have a problem with Mr Why-Use-One-Word-When-You-Can-Use-One-Million Hassleton sharing an opinion.

      • by gmhowell ( 26755 )

        I've got opinions too. Like that your opinions about people sharing their opinions are dull.

        You're saying what we're all thinking when we read your opinions.

    • Yes, they can legally promise that (it is not illegal to say that they promise that).

      No, their service is not legally bound by that promise forever. There are many instances and eventualities that could change it. And probably will if they get sufficient market share.

    • by dysmal ( 3361085 )

      If opinions are like ass holes and everyone's got one, Bennett must have a goatse size ass hole with all of his opinions!

    • his favorite topic is of course, himself

      http://en.wikipedia.org/wiki/B... [wikipedia.org]

    • How is this different from any other opinion columnist?
  • what the fuck is Ello? And why this is news?
    • there were two stories on ello last week, one this week...

      I think it's news because most of us have abandoned Facebook, but aren't living socially on Google+, so there's VC money being tossed around like popcorn to try to create the next safe haven where early tech adopters like us will congregate. (And yet, somehow, we're still here on Slashdot...despite BH.)

      • Facebook still has almost a billion active users. Pretty good numbers for an "abandoned" social media site.

  • Shut up Bennet (Score:5, Insightful)

    by Anonymous Coward on Tuesday October 28, 2014 @02:27PM (#48253407)

    please ?

  • by Anonymous Coward

    finally I can make an opinion about something again.

  • by Anonymous Coward on Tuesday October 28, 2014 @02:29PM (#48253445)

    Shut the fuck up.

    Sincerely,
    Everyone in the Known Universe

  • Microsoft could infiltrate the FSF and issue a GPL 4. All those GPL "OR ANY LATER VERSION" are at the whim of the FSF being a benevolent organization in the future.

    Conspiracies are hard to pull off.

    • > All those GPL "OR ANY LATER VERSION" are at the whim of the FSF being a benevolent organization in the future.

      There are quite a lot of people, myself included, who released software while GPLv2 was current and feel that FSF went a little bit evil with v3. Even to the extent that I agree with Stallman regarding bad patents, I don't think it's right to retroactively pull that into a copyright license. To me, that's precisely the same as if he'd added "you lose your license if you vote Democrat". Democra

      • by t_ban ( 875088 )

        There are quite a lot of people, myself included, who released software while GPLv2 was current and feel that FSF went a little bit evil with v3. Even to the extent that I agree with Stallman regarding bad patents, I don't think it's right to retroactively pull that into a copyright license. To me, that's precisely the same as if he'd added "you lose your license if you vote Democrat". Democrats may or may not be a bad thing, but Stallman doesn't have a moral right to impose his views regarding political

        • The default is "or any later version". Quoting myself:

          > I allowed for "any later version" to allow for _revisions_, adjustments, to the wording. I didn't do that to allow Stallman and friends. ..

          I can't unrelease 15 years of work - that was all released under the GPL license, including provisions in case the wording of rhe license needed to be clarified to account for different legal terms in different jurisdictions or something. That actually happened- some of the legal terminology doesn't mean th

          • The FSF has never made any secret of its stances on software freedom, and GPLv3 is in accordance with those. GPLv3 was also written with an extensive and publicized comment period, and the comments were read and addressed (of the two I submitted, one was fixed with a change to the license, and one seems to have inspired a FAQ entry). I don't see why GPLv3 would be surprising to anybody who was paying attention. You may not like some of the changes, or the finished license (Linus Torvalds thought it not

  • by Anonymous Coward

    Where did this joker get his law degree from?

    • DeVry, like 99% of the people here.

      Did you see the one where he advised telling cops everything? Pure gold.

  • by MouseR ( 3264 )

    A social network is only social if it lets people in.

  • Yeah, sorry, Bennett, but there's no way that someone can be bound to a promise when they're not getting anything in exchange. Contracts require consideration or an exchange of obligations... If Ello isn't getting anything in return - subscription fees, payments, etc. - then how can they be legally required to fulfill a promise? And if the users aren't giving up anything, what are our damages when they breach that promise? Our hurt feels? Our increased skepticism and distrust for organizations in the future
    • by Anonymous Coward

      Sorry, what they're getting in return is a larger user base - the people drawn by that very promise.

      Of course, just as Ello can't be forced to keep it's promise, there's absolutely nothing that will keep users from leaving the instant Ello breaks their word. And since Ello plans on making money otherwise by withholding various options and services, people will quickly abandon them when they're not getting #1 service - and still being spied/sold out on top of that.

      Can Ello be brought to court? No, probably n

      • There's still problems there, because the information lingers.

        If a website offers certain services, it's free to offer things under certain terms, and I'm free to use them or not. No problems there. However, I may be providing the website with personal information I don't want to become public. If the site changes ToS and uses the personal information in ways it had promised it wouldn't, I have no legal way (in the US, anyway) of removing that information.

        Presumably, Ello wants to make a strong priv

  • by nimbius ( 983462 ) on Tuesday October 28, 2014 @02:34PM (#48253527) Homepage
    First: Can someone get Bennet a fucking livejournal. Jesus Christ.

    Second: yes. yes it can. By becoming a B corporation it can make ad-free high security social networking its mandate, but should it run aground of shareholders and explicitly the legal definition of a corporation (that it continue to provide increasing profits yearly) it can become a co-operative where the users become the owners. In business this is called a poison pill and is often coded into the sale, merger, or buyout in such a way that it cannot be avoided. If there were a takeover, this option would kick in and as owners, the users could decide they simply dont want ads anymore. as a majority minority stakeholder, the users would crush the board.
    another option is to open-source everything. Not just BSD, but GPLv3 or Affero. GPL codes forkability is a land mine that no corporation wants to step on. Ello will have to provide continually excellent service and listen to its customers, or forks of the project will begin to take root (mysql, dokeos, foswiki for examples) and bury the host company.
    • the legal definition of a corporation (that it continue to provide increasing profits yearly)

      That isn't the legal definition of a corporation (and good thing too, since most corporations don't continue to provide increasing profits yearly).

  • Nope. the likelihood of them remaining ad free is about the same as not seeing any more Bennett Haselton navel gazing posts about solutions to first world problems.
  • A contractual obligation to pay $1,000 would be about as close to a real 100% permanent guarantee as I can conceive.

    Of course, we really should throw in an "adjusted for inflation"

    • Someone with an actual clue about law already posted that the answer is "no".

      http://yro.slashdot.org/commen... [slashdot.org]

  • Of course nothing is binding. Not even a prenup.

  • by enjar ( 249223 ) on Tuesday October 28, 2014 @02:37PM (#48253571) Homepage

    Read on for the rest ....

    We Can Only Hope

  • by mbone ( 558574 )

    They can always go bankrupt and come back under the same name.

    IANAL and all that, and the fool that has himself as a client is nothing compared to the fool who takes legal advice from Slashdot.

  • If they are bought by an advertiser, they don't have sell the information to someone to use it themselves.

  • by bill_mcgonigle ( 4333 ) * on Tuesday October 28, 2014 @02:45PM (#48253667) Homepage Journal

    Ad-free, no analytics for sale, free-as-in-beer proprietary centralized social network, eh?

    Who is paying for hardware, software, rent, and electricity, investors? When do they get a return? Yeah, yeah, B-corp - where does the money come from?

    Is this a serious venture or a spoof by Facebook to show people that thermodynamics cannot be ignored? Or the Tonika/Disapora* crowd trying to show the value of a distributed system?

    I'm assuming this is addressed somewhere and just happened to be skipped by the press coverage I've seen.

    • ... submit spaz.

      I've seen the "by choosing to buy a feature now and then for a very small amount of money you support our work" claim, but I mean an actual business plan that doesn't depend on occasional contributions - have they ever seen a Facebook data center? The $5M VC money must have some basis, but the "occasional donations" claim does not appear to be it. FB makes money by selling a metric library-of-congress of ads but is largely funded by its public stock, which Ello does not have in play.

      Maybe

  • Can we get over this, please?

    The fact that a supermajority vote can potentially allow Ello to someday run ads still leaves Ello 167% less obnoxious than Facebook.

    Seriously, this reminds me of the 2004 election again, where a draft dodger managed to successfully demonize the war record of an actual veteran. WTF, seriously - Does The Zuck write copy for Slashdot now?
    • The fact that a supermajority vote can potentially allow Ello to someday run ads still leaves Ello 167% less obnoxious than Facebook.

      Sure, it's less obnoxious than Facebook. But, really, what isn't?

      But, as many of us pointed out the other day ... this promise from Ello is essentially worthless, and therefore not really something you can put any stock in.

      It's a vague, empty promise, which isn't legally binding on anybody in any real sense.

      So, it's worth about as much as saying "I promise I won't c*m in your

  • Can Ello Legally Promise To Remain Ad-Free?

    Clearly this is just an attempt to get the userbase up. If completed, and data centres are required, these "promises" will soon disappear.

  • by gstoddart ( 321705 ) on Tuesday October 28, 2014 @02:48PM (#48253701) Homepage

    You've read and regurgitated many of the points which were made in the article about this last week, and which were made by many of us.

    I'm awfully glad we have you to read through the discussions and save ourselves from doing it.

    Seriously, since when do we have someone whose job it is to read and summarize discussions? Are you getting paid for this shit?

    If I can exclude timothy, then why the hell can't I exclude "stories" from Bennett? Because, really ... he adds nothing of value here.

    We've become the fscking Bennet Haselton show lately, and it's pathetic and means the "editors" are even more lazy and useless than before.

    • After this gem [slashdot.org] I learned to > /dev/null anything authored by him

    • My question is why he can't get his own account to post from? Then maybe it would be easier for them to allow us to exclude him? Or maybe "exclude by tag" and then tag it with his name... No luck in /. land.

    • Seriously, since when do we have someone whose job it is to read and summarize discussions? Are you getting paid for this shit?

      Have you ever thought that we might all be figments of Bennet's imagination? That he's actually having the discussion with himself. We might be characters in his novel, or automata running in simulated Haseltonian space.

      I am now going to lie down and listen to at least one Tangerine Dream album.

  • by Charliemopps ( 1157495 ) on Tuesday October 28, 2014 @02:50PM (#48253717)

    Bennett Haselton writes... and writes... and writes some more.

    What he writes may be insightful, I wouldn't know. His essays are so long winded that as soon as I see the unending diatribe my eyes skew into the bedazzled glare of a Japanese kid sent into a Pokemon educed epileptic shock. If I'm lucky, my wife will come along and slip some medication under my tong while carefully prying the crushed mouse from my iron grip.

    • What he writes may be insightful, I wouldn't know.

      The idiotic title is a good indication of his general level of insight.

  • A suggestion... (Score:5, Insightful)

    by aardvarkjoe ( 156801 ) on Tuesday October 28, 2014 @02:50PM (#48253725)

    Can you make Bennett Haselton an editor, so that everyone that doesn't care about his articles can simply exclude them? He's becoming the new Jon Katz -- and Katz was the reason why we eventually got the "exclude by posting editor" feature in the first place.

  • As I understand it a contract is only valid if there is some form of consideration paid and a there is a defined length of the contract. So unless Ello users pay a fee in exchange for the contract guarantee there is no consideration and it would not be an enforceable contract. If the user paid $10 and had an actual contract that stated the ToS for the life of the account then that could be worth something.

    • by Dredd13 ( 14750 )

      Ello's consideration is the content you're allowing them to reproduce.

      The user's consideration is the site they're allowing you to use.

      Not all consideration is cash.

      • I read the ToS and I agree that could be considered to fulfill the consideration aspect though it isn't really worded as quid pro quo. The consideration terms would be shredded in court. It also lacks so far as I can see, a contract duration which is a required element of a contract. They say they have the right to reproduce your content indefinitely as it may be shared with others outside their control, but I don't think it has enough there to meet the standards of a contract. It's fine in my mind, a promi

    • by Anonymous Coward

      Please do not feed teh Bennett.

    • There are substitutes for consideration. The magic words used to hand wave away a need for traditional consideration are "promissory estoppel" or "detrimental reliance".

      I think a bigger problem for the $1000 trick would be that a court might see that as effectively a liquidated damages clause, and find it invalid because it was not chosen as a rough approximation of the actual damages likely to befall the user if Ello started running ads.

  • My curiousity peaks when I hear 'ad-free'. And.. something other than Facebook - anything, really, is a really, really, good idea.
  • It seems that it shouldn't be hard for a lawyer to craft up a change to the ToS for the site that:

    - Grants Ello the right to use/reproduce user content (a normal everyday part of ToS), BUT
    that right does not survive a change to either the corporate charter or the ToS without being positively re-affirmed by the end user.

    In other words, Ello can use/reproduce your posts, like they need to.

    - If they change the charter, users need to re-affirm "yes, you can continue to use my existing content"
    - If they change t

  • The only way that you can make this sort of a promise is if you give up control. For example, in your Terms of Service, you can't have any clause, sadly standard now, that says you can change the terms at any time. You can't have wiggle room in your ToS to allow for either changing the service itself, or just changing the terms. Just think about how rare this is for an "online service," the vast majority are rules by fiat -- you agree to what changeable rules are given to you, or you don't use the service a

  • [Ello's] 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.

    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.

    [...] another potential loophole is that the charter contains no formal definition of what constitutes "charging for advertising" [...] conceivably they could add paid features which essentially amount to the ability to advertise to other users.

    (That was easy)

  • Not a DeVry JD. (Score:4, Informative)

    by Hognoxious ( 631665 ) on Tuesday October 28, 2014 @03:07PM (#48253923) Homepage Journal

    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."

    I know this one!

    Carlill v Carbolic Smoke Ball Company [1892]

  • Once you can schedule events in a workable manner, I would quickly jump ship from FB. The fact that G+, Diaspora, and now Ello didn't have this feature on launch is why I think they all failed.

  • If they decide to add advertising down the road and you don't like that, you could, I guess, STOP USING THE FUCKING SITE.

    • >> STOP USING THE FUCKING SITE

      The reason so much VC money flows into social media is that you're far less likely to stop using anything if all your friends are using it: if you stop using the site you could be left out of real-life social interactions.

  • by Anonymous Coward

    You useless twat.

  • by Strange Quark Star ( 1157447 ) on Tuesday October 28, 2014 @03:23PM (#48254097)

    ... elsewhere.

  • by phantomfive ( 622387 ) on Tuesday October 28, 2014 @03:31PM (#48254215) Journal
    This legal opinion written by a lawyer.

    Oh no, it's actually not. Bennet should learn how to program and then add some value to the world, instead of giving opinions and hoping someone else will.
    • Bennet should learn how to program and then add some value to the world, instead of giving opinions and hoping someone else will.

      He actually can program, but the circumstances of his departure from Microsoft are still rather mysterious to me. Sorry Bennett, "Term. type: Voluntary" and "Term reason: Resignation" don't tell the whole story, especially when you haven't been any more forthcoming on the subject.
  • by Anonymous Coward

    The whole point of converting to a PBC is to place the fiduciary duty to your investors behind your duty to provide a public benefit.

  • 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.

    On Twitter, this "feature" is known as a Promoted Tweet. You pay Twitter some money and they put your tweet at the top of a bunch of people's feeds regardless of

  • Thanks for referring to CouchSurfing. For many years the people in charge of CouchSurfing pretended the project could never be sold out [0]. And that's exactly what happened. It became a B corporation, but actually a C corporation. A Benefit corporation means a little bit more than the B corporation label, but the website Ello is linking to is actually also ran by the same B Labs that gives out "B corporation". I'm sure there's lots of confusion about the whole B/Benefit thing but if Ello really wanted to
    • The whole premise of the question is silly. Any corp could change to any other type of corp with enough work over time. This isn't hard physics. It's human fictional law creations. Easy way is to sell/spin of the ello part to a normal for profit keeping a foundation. Or as the post said, vote to change charters

      Anyways I think their business modal is sound. I would gladly give facebook 20 dollars a year for some extra features. This whole "everything should be free even if it takes servers and p

  • by Anonymous Coward

    Bennett will be struck by lightning...

  • by Reason58 ( 775044 )
    Why can't I block posts by Bennett?
  • Can soylent news [soylentnews.org] legally promise to remain Bennett Haselton free? Yeah, I think they can.
  • Just make a social networking site with no ads, no back alley sales, no access to anyone PERIOD! But you have to pay monthly subscription. Wouldn't you pay for a social networking site like a Netflix subscription for them to guarantee privacy? I would. Somebody patent this and be a billionaire already, chop chop!
  • I'm no lawyer, ;), but the 9th Cir. once allowed an invasion of privacy claim to go forward against the original owners of a an adult website with Privacy Terms that stated none of the members' info would ever be shared or disclosed to third parties. The original owners re-orgniazed and re-incoroporated the business as a new entity and brought in a few new stakeholders...routine corporate maintenance and debt management stuff. Mind you, the company was essentially the same after this, but a member brought

  • Is anyone else getting a nervous twitch about the words "read on"?

    Also, can we just make Bennet an author so we can block him?

  • Ello could just charge people. I don't mind paying for an ad free experience. Slashdot used to have that option but no longer.

    I do pay for LinkedIn, but they are serving up ads today in spite of the $20/month.

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