Every once in a while, you hear about a “business model” built upon a free product or service, with no reasonable thought given to how the business will be profitable. You know at once that this is going to end in failure, fast.
There are a few very successful businesses that have been created on the basis of a “freemium” – a core service provided at no charge. Skype, Facebook and Twitter are prime examples. All such businesses have one thing in common, though: they all have very lucrative sources of revenue surrounding their core offerings. Also, these companies are attractive to investors not so much because of their revenues, but because of the enormous number of loyal users they have amassed.
You might not realize it, but there are (or have been) many, many, many free online services that most people have never heard about, and never will. They are all failures, in terms of making any sort of profits. The majority of them were probably launched on their originator’s fond hopes of “earning money on banners.”
Before you launch, you should have a very specific and exact plan for generating revenue with a site, whether your core offering will be charged for or not.