“With your permission, you give us more information about you, about your friends, and we can improve the quality of our searches. We don’t need you to type at all. We know where you are. We know where you’ve been. We can more or less know what you’re thinking about.” —then Google CEO and current Executive Chairman Eric Schmidt, to The Atlantic in 2010
Internet companies know more about you than your therapist, priest, and bae combined. Because we want our devices to anticipate our needs, and because we want to communicate with people for free, we’ve allowed companies to collect, analyze, and share data with third-party advertisers. Emails sent, photos uploaded, pages “liked,” places checked into, and pictures swiped are all data points, and they add up. The more information we fork over, the more personalized and convenient our online experience becomes. That’s until the pattern of data-driven ads crosses the line from being convenient to creepy, like when location-based ads alert us that we’re most definitely on the grid, our whereabouts and activities recorded. And, as the 2013 Edward Snowden leak revealed, since 9/11, this practice has turned Internet companies into data honeypots too tempting for the government to keep its hands out of.
Two men want to show Silicon Valley there’s a different way to run and operate a company. Paul Budnitz is tackling social networking with Ello, an ad-free company that skyrocketed in popularity in September despite still being in beta. Aral Balkan is building Ind.ie, an independent company comprising a network of services that connects users and lets them share content with whomever they want. Neither company will sell data. But both men still need two things: you and your money.
Paul Budnitz, a lanky, soft-spoken, 47-year-old entrepreneur, has conceived a number of “stupid ideas” (his words). The son of a nuclear physicist and a social worker, Budnitz grew up in Berkeley, Calif. He sold illegal fireworks as a kid, coded safety analysis software for nuclear power plants as a teen, and hacked MiniDisc players for Minidisco, a company he sold when the iPod was released. In 2002, while he was living in New York, he turned one stupid idea—high-priced toys for adults—into Kidrobot, which is now famous for its designer figurines. He sold the company in 2011, turning his attention to another stupid idea: selling custom titanium bicycles that range from $2,500 to $8,000 a pop. (Turns out, people dig stupid. According to Budnitz, sales have been “modest but brisk.”) When Budnitz grew tired of seeing tailored ads in his social media news feeds, the idea for an ad-free social network wasn’t far behind.
Created in March 2014, Ello exploded in late September, when Facebook kicked drag artists off the network for not using their real names. Word spread on Twitter that Ello let people use any name they wanted. From there things moved quickly—the company received tens of thousands of sign-up requests an hour. Though it then lacked the server power to bring them all in, it now has over 1,000,000 users with more waiting for an invite (you currently need one to join). Its seven founders and their investors are trying to keep Ello alive without using advertising, or monetizing data. Its manifesto tells would-be users that other social networks are owned by advertisers and that users are a product that is bought and sold. The “Anti-Facebook” had arrived. But Budnitz isn’t a fan of that nickname or the association. Facebook is an advertising business, he says, not a social network. Ello’s headquarters are on the second floor of a sleepy business plaza in Burlington, Vt., a city surrounded by snow-kissed green and yellow evergreen trees. It’s about as far as you can get from the cradle of Silicon Valley within the lower 48. Coincidentally, Vermont has no billboard advertisements—the state banned them in 1968.
The company’s logo, a black dot with a white emoji-styled smile, was designed to be “evil-looking,” says co-founder Todd Berger, of the Colorado-based design firm Berger and Föhr. In a sense, this eyeless face signifies Ello’s turning a blind eye to advertising money. And there’s enough of it to make Scrooge McDuck jealous. For the first quarter of 2014, revenues from Internet ads reached $11.6 billion. That’s a 19-percent increase over the same period in 2013, according to IAB Internet Advertising Revenue Report figures. Instead of generating revenue from ads or selling the information it collects, Ello plans to use a “freemium” model where users buy custom features for their profiles. This could be anything from exclusive emojis designed by a popular artist, to wallpaper animations, for a few bucks. Social media, à la carte.
The freemium model is not without its problems. It’s come under fire for the predatory ways apps like mobile games seek to get users to make trivial purchases. Apple recently tried to distance itself from the phrase by replacing “Free” in the App Store with “Get.” Budnitz assures that Ello will not bother users with push notifications reminding/harassing them to buy, buy, buy.
Start-ups like Ello can be examples to social networks of the changes they need to make, says Adi Kamdar, a consumer privacy issues specialist at the Electronic Frontier Foundation. Shortly after the drag artists and LGBTQ members were removed from Facebook and bounced to Ello, Facebook eased off its “real name” policy and apologized. Still, Ello gained popularity at a time when Internet users are losing trust in the corporations that handle their data. A recent Pew Research Center survey says Internet users’ most trusted form of communication is—wait for it—the landline phone. Slightly more than half of those surveyed said they were willing to share personal information with companies to use services for free, but 91 percent said they “agree” or “strongly agree” that consumers have lost control over how personal information is collected and used by companies.
While the publicity Ello received in September was a blessing of sorts, the site walked onto the global stage a little green. Its users and critics were looking at an unfinished product. As of this writing, there aren’t options to make individual posts public or private. There’s no private messaging option either, though Budnitz says both are on the way. Ello does collect data, like location and referral sites, but the company says that a user’s IP address is anonymized before it’s stored, making it difficult to trace back to any one person. All users have the option to opt out of sharing this data at all. The site is minimal in design. Many of its options—like whether a user is OK seeing NSFW content—are limited to either “yes” or “no.” Because there are no ads, a profile is truly a blank canvas. This isn’t the first time Budnitz, a minimalist who says he doesn’t own things he doesn’t use, has done this. During his Kidrobot days, he sold completely white figurines that people could decorate. Fortunately Ello’s audience is made up of creative types who make it colorful.
"Ello’s manifesto tells would-be users that other social networks are owned by advertisers and that users are a product that’s bought and sold."
A graph with a curved gray line shaped like a “7” stretching from top to bottom is displayed on a large screen. A group of about a hundred dots are spread across it. Aral Balkan, 38, looks out at his audience at the April 2014 The Next Web Conference in Amsterdam. “How many of you know what this is?” he asks in an American accent, though he grew up in Kuala Lumpur, Malaysia. He paces down the stage, in the small black tee and dark blue jeans he wears at many of his talks. He clicks a remote and an arrow points to the center of the line where the dots are absent. “That is the point that Facebook knows that you have started your next relationship,” he says, “whether or not you have explicitly told Facebook that you have started [it].”
“To really understand the ramifications of why this is important,” he continues, “we have to understand how our relationship to our technology has changed in the last 30 years.” The message: Your data is revealing more than you think it is. He calls his talk “Free is a Lie.”
In November 2013, Balkan, who lives in Brighton, England, launched Ind.ie, a company that’s set to offer an alternative to the popular Internet services that he calls Spyware 2.0. Its first Internet products, Pulse (a cloud synchronization service), Heartbeat (a social network client), and Waystone (a tool that connects users so they can interact on Heartbeat) are set to be publicly available in late 2015. They’ll create a network Balkan calls the “Indienet,” which avoids running data through a middleman. The system won’t have any central point for the government to dip into, and users will have their own personal cloud that they can share, delete, or take somewhere else. Their data is theirs. The catch: Users will eventually have to pay to use these services, instead of using them for free in exchange for data. That way you know you’re the customer, not the product being sold, Balkan says, echoing Ello’s manifesto. His most ambitious plan may be the Indie Phone, through which his company will take on the smartphone market dominated by Apple and Google. It won’t be ready until 2016. A recent prototype looks like a thick iPhone with slanted sides.
Like Budnitz, Balkan sharpened his computer skills at an early age. When he was 7, his father gave him an IBM computer and told him he could break it. He eventually came to the States to study at American University in Washington, D.C., helping develop a K–12 online school in 2000. “The things we make affect people’s lives quite profoundly,” he says. “Experiences are all we have. Our lives are a string of experiences. I started focusing on design because I realized experiences can be shallow, they can be superficial, while simultaneously enfeebling you in the future.” Balkan’s philosophy is that if companies want to do a social service, they should be easy to use, beautifully designed, and free and open. “Free and open” means that whatever changes they make to their source code (their DNA) can be analyzed at any point. Ind.ie’s services will operate like this (its code is available to view on its site), which means that someone can use that code to make a competing company. That doesn’t faze Balkan. “Free and open means you don’t have to trust me, you can verify it yourself,” he says. “The only systems that you can trust are the ones you don’t have to trust.”
The Snowden revelations ignited Balkan’s interest in alternative services to major Internet companies and ways to protect privacy. Google isn’t evil, he says, and he doesn’t advocate abandoning those services without an alternative, since that would involve disconnecting from the modern world. (He’s on both Facebook and Twitter.) But don’t ask him to vouch for their business model. “I don’t want to contribute to platforms that treat people like products to be sold,” he explains, “I want platforms that treat people like people and sell products.” The government was able to obtain private data from companies because of loopholes in surveillance laws introduced after the terrorist attacks of 2001.
Though the leaks happened more than two years ago, there’s still debate on how to manage surveillance in the face of terrorism. In November 2014, Senate Republicans blocked the USA Freedom Act that would have restricted the amount of data the NSA could collect in bulk. It didn’t cover every aspect of government surveillance, but privacy advocates and Internet companies—including Google, Microsoft, Facebook, and Twitter—backed it. Laws either at the federal or state level will shape reform. Congress is prone to sluggishness, so states have already taken action. Montana, Oklahoma, Texas, and California have passed their own privacy laws.
To fund his company, Balkan turned to crowdfunding through the Ind.ie website. (He didn’t want to risk his donors’ data with Kickstarter.) As of mid December, he’s raised more than $100,000 from more than 1,500 donors. So far, he’s “bootstrapped” by selling a home for £80,000 and using his own finances to pay for the project and three employees. He faces some competition on the smartphone front: Blackphone, a privacy focused smartphone, launched at the end of 2014. The money he’s raised so far doesn’t seem enough to build and manufacture smartphones, but Balkan is convinced he’ll pull through. “We’re in this for life,” he says.
He’s adamantly against using a common option that could get him millions more in funding: venture capital. When a start-up accepts venture capital money, it’s not a donation. The company must have a business plan, or an exit strategy—which may span years—that’ll give the investors a chance to get a good return on the money they put up. This usually comes from selling the company, or going public, which can change its purpose and philosophy completely. “If you’re going to build an alternative, you can’t lose control of the social mission,” says Balkan. “We’re so focused on the Silicon Valley way of doing things, this toxic business model. There are people who come into the industry today who think that having a start-up and getting venture capital is the only way. It’s a failure of imagination why people with resources [greater than ours] have not done this.”
"The only systems that you can trust are the ones you don’t have to trust."
Like Ind.ie, Ello knocks data mining and praises beauty, but its manifesto lacks Ind.ie’s call to stay independent and free and open. When Ello had its publicity push in September, technologist Andy Baio bashed the company—on its own site—for not openly disclosing that it had taken $435,000 from Vermont venture capital fund FreshTracks. “Unless they have a very unique relationship with their investors,” he wrote, “Ello will inevitably be pushed towards profitability and an exit, even if it compromises their current values.” Balkan, who was consulting with the apparently like-minded folks at Ello, publicly announced his departure in a critical blog post.
Staying ad-free and not selling data looked like a pipe dream for Ello. The company was either going to use ads because of pressure from investors looking for a return, or sell to a company that would. Ello then made that initial investment look like grade school lunch money when it took in an extra $5.5 million from several VC funds. After accepting the money, Ello’s founders and new investors signed a legally binding charter to become a Public Benefit Corporation in Delaware. It says that Ello can never sell ads or user data, and if they do sell, the buyer cannot either. But even this isn’t airtight: Company shareholders can change the standards as long as they get a two-thirds supermajority vote.
“We don’t know how else to prove to people we won’t sell ads or collect data,” says Seth Levine of Foundry Group, which contributed to Ello’s recent round of investments.
“There’s no secret plan,” Budnitz says. “We’re telling you everything that we’re doing and you can decide if you want to use it.” He maintains that they do have a “unique relationship” with investors—they are his friends and neighbors who share his vision. He turned down VCs whom he didn’t know. Though he won’t give numbers, he says that Ello is big enough that it can sustain itself as a business. “If we do bad things, it’s social, people will talk about it.”
There are challenges for both Ind.ie’s and Ello’s models. These aren’t the only ways to fund a start-up (revenue-based financing is another). Depending on who you ask, each has its advantages—but the existence of each shows there’s a need for a reworking of the major business models of the Internet and the way data is used.
Lawmakers have to get involved. “We need proper judicial precedent to make sure our privacy isn’t safe because a company wants to make it safe, it’s safe because that’s the law,” says Kamdar. Protecting information is a balancing act between law and responsibility. Companies must be good custodians of data. The White House must pass laws that protect law enforcement from forcing the companies to hand over information without a warrant.
The media is doing a better job of reporting companies that have suspicious policies. Tech publications widely criticized Uber’s 6,000-word policy, which says that it can keep users’ names, emails, credit card numbers, and geolocation data even after users have terminated their accounts—for as long “as needed to comply with [Uber’s] legal and regulatory obligations” or for “other business reason[s].” Critics warned that the longer this information is stored, the greater the chance it’ll be spied upon. It’s important that companies make clear what they do with data and give users the option to remove it permanently.
“Each individual has a duty—especially since we’re living in this connected age—to be aware of the landscape and these changing norms, and envision the Internet they want in the future,” Kamdar says. “They need to understand the long-term consequences of this much data being collected.”
Snowden helped illuminate what’s happened under the web’s surface, and now, before reports of surveillance or overbearing data collections fade into the static of everyone’s lives, is the time to do something about it. The Internet of the future—the Internet your children will inherit—is being written.
Budnitz and Balkan believe what they’re doing will grant us more control over our digital lives, regardless of the differing business philosophies they’re relying on to get there. They’re confident a better, safer, Internet is on the way. It’s up to you to decide if the price you’ve already paid is enough to join them.