Ello is demonstrating something important - you can now undercut "free with ads" on price. How much, per user, does it really cost to run a social network now? Not much. Hosting is so cheap that Atlantic will rent you a full-time virtual machine for $0.99/month. Ello's actual computing cost is probably less than that.
Selling ads is expensive. A majority of Google's headcount is ad sales reps. The main search engine, a few years ago, was developed and run by about 90 people, I was told by an ex-Google employee. Google probably spends far more running the ad side of the business than the search side.
Craigslist has 40 employees, and they've been able to crush the newspaper classified advertising industry. They charge for a few categories of listings. That's enough to keep them going.
At some point, users sense that there are too many ads. Myspace went there when they had a revenue drop and tried to make up for it by increasing the ad density. Big mistake. Myspace usage went into a screaming dive and never pulled out.
The big ad-supported web-based businesses are fighting Moore's Law. What they do is getting cheaper, but their price, in terms of ad density, isn't going down to match. That makes them vulnerable. There's hundreds of billions in market cap out there just waiting to be destroyed.
The overall sentiment of your post is correct...you can run a social network cheaper than FB if you're not concerned about profit(note that PBC is still "for profit").
> How much, per user, does it really cost to run a social network now? Not much.
That's a broad brush.
> Hosting is so cheap that Atlantic will rent you a full-time virtual machine for $0.99/month.
If you're serious about uptime/failover/any sort of SLA this figure is totally meaningless.
> A majority of Google's headcount is ad sales reps.
Because they produce the revenue :)
> The main search engine, a few years ago, was developed and run by about 90 people
Their salaries are minuscule compared to the millions/billions it takes to keep the datacenters that serve search running. Not to mention that the 90 people figure doesn't(can't) include things like network engineers, hardware engineers, capacity, provisioning, monitoring, cloud infra, etc. There are LOTS of supporting actors that aren't directly on the "search" team.
This is the beauty of technology. The size of the engineering team does not scale linearly with the size of the userbase. e.g. you can have a relatively small team of engineers write code that is used by billions of people. In contrast, a sales team will scale linearly with revenue. More sales people = more revenue, all other things being equal. Thus you see large sales headcounts at these companies pushing ads to people.
Selling ads is expensive. A majority of Google's headcount is ad sales reps. The main search engine, a few years ago, was developed and run by about 90 people, I was told by an ex-Google employee. Google probably spends far more running the ad side of the business than the search side.
Craigslist has 40 employees, and they've been able to crush the newspaper classified advertising industry. They charge for a few categories of listings. That's enough to keep them going.
At some point, users sense that there are too many ads. Myspace went there when they had a revenue drop and tried to make up for it by increasing the ad density. Big mistake. Myspace usage went into a screaming dive and never pulled out.
The big ad-supported web-based businesses are fighting Moore's Law. What they do is getting cheaper, but their price, in terms of ad density, isn't going down to match. That makes them vulnerable. There's hundreds of billions in market cap out there just waiting to be destroyed.