Ask HN: How do free sites become self sustaining? | Hacker News Reader

Ask HN: How do free sites become self sustaining?

34 pointsSkywing16 comments

Hi all,

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.

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.

Why are these sites appealing to investors and how do they become a self sustaining, or even profitable company?

Thanks!

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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!

@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!

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.

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.

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?

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...)

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.

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...

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

Chris Anderson wrote an entire book about this: http://www.amazon.com/Free-Future-Radical-Chris-Anderson/dp/...

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.

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 ...

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).

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.

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

Get alot of VC money.

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