Brand new social networking site Ello - touted as the ad-free alternative to Facebook - is confident that its promise of a non-intrusive social network will be sustainable.
The site, developed by seven designers and programmers, went live in August with just 90 users. Featuring a minimalist design, Ello has spurred internet buzz despite lacking many of its established rivals' features.
In an interview with CNBC on Tuesday, founder Paul Budnitz described Ello as a "simple, beautiful, and ad-free social network" that will "never sell user data."
Budnitz said the platform's main features will remain free, and the site will sell "special features" that users can consider adding to their accounts, such as video games and services.
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But analysts CNBC spoke to are doubtful about the sustainability of this model.
"They first have to show they can make a profit this way. Coming up with a stream of features people will pay for and not find annoying has always been a very difficult path," Rob Enderle, principal analyst at Enderle Group, said in an email to CNBC. "Eventually the features may look more like fixes for things that should have worked in the first place, and the model [might] collapse."
Even though the freemium model has met with skepticism, Ello has been able to find financial backers, raising a total of $5.5 million in additional funds to grow its business. But that's a drop in the bucket compared with other recent tech deals, such as Facebook (FB)'s acquisition of ad technology firm LiveRail earlier this year reportedly for $400 million or valuations of revenue-less home-design website Houzz at around $2 billion.
"It was all about the control of our company and also the right amount of money with very little dilutions. To me, it's better to choose the right deal, not just the most money," Ello's Budnitz said.
Others have struggled to make a freemium model work. Videogame developer Zynga (ZNGA), at one time the top gaming company on FaceBook and creator of the popular FarmVille, has repeatedly disappointed earnings expectations after its initial public offering (IPO) in 2011 proved a dud. Most of its players don't pay for its games and some analysts have estimated that less than 2 percent of its monthly unique users are cash contributors.
Facebook-killer?
Four-month-old Ello has been dubbed the "anti-Facebook" and the "Facebook killer" for its stance against paid advertisements, and Budnitz believes his network can attract more users based on its features.
"On an ad-based social network, the customer is the advertiser and the user is the product being bought. But at Ello, we design features that we and the users want to use. We never had to think of advertisers and for that reason, Ello is just better," Budnitz said.