The cost of freeYou'd be amazed at the number of startups that was shutdown this year. While many may claim it was due to low user adoption, the real truth behind the closure of many is due to little or no monetization.
The web is fast moving from the free model and I see it getting endangered. Honestly? Startups are 'costly' and should generate revenue. It takes a lot to maintain server farms, bandwidth, those thousand codes, users, publicity, etc not only in resources but time and personnel. Been there, done that. Even if there is enough funding from investors, at some point they start getting expectant.
Startups should stop been shy about making money. Its business afterall and part of the objectives (if not primary) is being profitable. If your service is good enough, users will pay. If your one shot is ads, do. Ads are complicated though. Except well strategized, the ROI (Return On Investment) can be low. And please, make it simple, damn related to content and unobstructive. We all hate obstructive ads, right? Freemium is a great model. If you can, do consider it.
I'm really starting to have a 'use fear' about web services that don't in anyway generate revenue. This blog is hosted on Posterous but what assurance do I have that they don't wake up one day and say they are closing down? Tumblr too.
"The problem I have is when companies’ business model is free only. And then they
say, “We’ll figure out how to make money later.” As if there’s going to be this magic switch they can flip…If you’re not practicing making money, you’re not going to be able to flip that switch and
just know how to do it really well." - Jason Fried (http://37signals.com/svn/posts/2636-the-things-you-do-more-often-are-the-things) PS: RIP delicious, you will be missed :(