Ask HN: How would you grow and monetize a free image hosting site?

Greetings Hackers! I'm about to inherit a free image hosting site from a friend (like TinyPic). Traffic is in the 120K visits per day range. I'm wondering what your ideas would be for growing and monetizing such a site? Right now, it's slowly growing organically and monetization happens through a few AdSense units on the site as well as 'Premium' accounts which give the user more bandwidth and space.

Given that there are hundreds of competitors in this space, is that the best approach to hope for? I've thought about trying GumGum but worry about losing traffic to the competition. I'm looking for other creative ideas or tips. Thanks!