

Ask HN: How do free sites become self sustaining? - Skywing

Hi all,<p>I come up with interesting ideas all of the time. I was just thinking about one of them, but think it'd only really get users if it were free.<p>This got me thinking about sites like tumblr, posterous, etc. I'm pretty sure most people use these for free, right? I glanced at their sign up pages it looks like they're both free services.<p>Why are these sites appealing to investors and how do they become a self sustaining, or even profitable company?<p>Thanks!
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endlessvoid94
It TOTALLY depends on the type of site/service/product. I'm currently involved
in two very different models:

ThatHigh.com - ad driven, completely free, entertainment. There is no chance
to pay for anything (well, I sell stickers, but that isn't something that
generates much money). This site pays my rent through advertisements.

Djangy.com - Heroku for Python. When we're ready for public beta, it will have
a free version: basically enough to get something up and running. The paid
features are scaling, addons, dedicated databases, etc. There's no way
advertising would work here, for example. The numbers are a little tricky --
only a certain % of apps will be paid, so to break even or reach profitability
means that the paying customers are supporting EVERYONE, which can be
significant.

You can imagine many different models -- Facebook, for example, and twitter.
Then there are subscriptions that give you "credits", and then there's
something like Twilio that you pay for in advance, and then your account is
refilled automatically once it reaches a certain threshold.

This trend of "pay for what you use" has some implications for the
organization providing the value and charging -- namely, your product has to
be ultra-efficient in order to compensate for the fact that your users are
only paying for what they use, even though there may be lots of remnant
resources that YOU are still paying for.

It's definitely getting interesting!

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erikb
@your Djangy thing: I am a Django user and would love to have a Heroku for
Django. But making it for free makes no sense. Make it ridiculously cheap if
you like to, but to pay nothing for something that actually really produces
simple to calculate costs is awkward. I wouldn't use that!

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endlessvoid94
Glad to hear your feedback. This model worked VERY well for heroku; now, the
Python and Ruby communities are different, so perhaps we should examine that.
However, note that it's just one free running app instance. Scaling will
require payment, as will background processes and a host of other features.

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shogunmike
Over time your userbase will form a power law distribution (in terms of
success/scale) and you may end up having to support a lot of free users for a
small minority of paid users.

Folks already pay for hosting now - so why not charge them for all the added
value you provide? This will scale in proportion to your infrastructure
demands.

I'm paying $20/month for a VPS slice that runs my blog. I'm sure there are
plenty of people who'd be willing to pay at that price point for all of the
added value that Djangy will provide, on top of hosting. There's no need to
take my word for it though as this could be validated/tested quite easily.

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JacobAldridge
Several business models come to mind.

This first is advertising, which ranges from MFA (Made for Adsense) pages at
one extreme to Facebook at the other. Free benefits for users come at the
'cost' of being exposed to ads.

Then there are freemium models, where basic services and features are free,
but additional ones cost money. See Dropbox as one example where the value to
a user is increased if there are more users (Metcalfe's Law, though not really
a 'law' as applied here) so the service has a free option, and the ability to
pay for extra utility.

I would group things like Farmville into this area as well - basic utility for
free, pay for additional features, though some of these business models raise
concerns for me in that the free utility is ultimately less than it appears at
first (ie, you can't play Farmville the same way for free forever).

A final option that comes to mind is the ability to leverage the users of one
business into another. Bugmetnot built a large, free user base (indeed, it was
built on the premise that people didn't like signing up for so many damn
websites), but they then developed Retailmenot and successfully transferred
the 'free' community into a 'paid product'. This is the hardest to get right,
as there needs to be inherent value in both service offerings - if you only
build the free with a view to flipping the audience, chances are you won't
create an audience there to begin with.

Any others?

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dclaysmith
So ThatHigh.com is making say $1K a month roughly from advertising. Want to
share some more numbers? How many pageviews is that requiring? Click through
rate, etc.

Anyone else on HN have a pure advertising supported website and want to share
their monthly adrevenue/page views/click through rate numbers? (I'm launching
my "November" Sprint App soon and it's just for laughs and will be ad
supported so wondering if there is any chance it'll cover my beer tab...)

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il
Keep in mind that, except for niche sites, purely ad-supported isn't really a
viable business model.

Even Facebook, which can attract brand advertisers who are willing to pay a
premium, is generating less than $2/year per active user in revenue.

Do the math for your startup.

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fookyong
Free is a fast path to widespread adoption.

With widespread adoption brings the potential for ROI in various ways that
would be impossible with a smaller userbase - not least the classic "get big,
get bought" strategy.

Turning a widely adopted free service into a sustainable, money-making machine
is for the suits and MBAs to figure out after they have acquired said free
service[1]. A lot of the time, they fail and in the process burn up hundreds
of millions of dollars of value (see: Bebo).

I love this industry!

[1]this is satire. although there seems to be a grain of truth to it...

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rhizome
I would say that in that example, "free" is a form of inertia.

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shalmanese
Chris Anderson wrote an entire book about this: [http://www.amazon.com/Free-
Future-Radical-Chris-Anderson/dp/...](http://www.amazon.com/Free-Future-
Radical-Chris-Anderson/dp/1401322905)

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nl
Advertising works pretty well. Basically you should be able to make at least
10c per 1000 visitors (unless you are in a very bad sector).

Obviously there are plenty of other ways too, but as a general rule the more
traffic you get the more money you bring in.

If you shared a few of your ideas people may be able to give more specific
advice.

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trustfundbaby
This is provided only to give you some numbers.

I have a niche site that aggregates news for users in a certain country ...
its not much, but we're doing about $100 a month on about 30,000 unique visits
a month.

I wrote it as a proof of concept for the general idea which I'm going to
parlay into a much bigger/savvy market early next year ...

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justinchen
You can offer your base service for free but offer upgrades such as custom
domains, custom stylesheets, etc. (wordpress.com does a good job of this).

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tommoor
This is also one of the ways tumblr makes money, with premium themes etc.

I am surprised tumblr haven't launched some sort of pro account - seems a no-
brainer.

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greyman
Actually, posterous does have a paid product - you can have custom domain with
posterous blog and register that domain through them for $25/year.

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zoomzoom
Get alot of VC money.

