Ask Slashdot: How can Free Web Service Recoup Costs?

Trixter asks this question, which might be helpful to any of you out there that might be looking to do something similar: "I'm planning a huge, free, online resource, and am just looking for a way to recoup any operating costs; I'm providing the server out of my own pocket, but would like advertising to pay for the bandwidth each month, with any additional profits going into upgrading the server hardware and bandwidth, ad infinitum. Just how do you make money on the web with a free service?"

Comments

History -

[Tsk]

My Web page is hosted by a free web space provider.

It started has a student project and bandwith was supplied by the Uni - then the Uni said no more so it went with a commercila provider with a large announce .

Then Sun gave a machine and users gave disk and other hardware to support the site. It was not enough so the guy running the machine (which give free space for 30000 users) had a great idea.If you wanted stats for your web then you had to add a cgi script that would show a ad banner

So you should :

1. Try to find free bandwith for the beginning
   
2. Then find advertisers
   
3. To get monthly revenues build up a barnes and nobles or amazon library (then the only thing you'll need is traffic )
   

Ludo

Advertisers don't come running...

[Pengveen]

I think the main thing that people are forgetting when they suggest advertisements is that people don't advertise on a page that has no hits- and without a page that has already been online you don't have the hits. Classic chicken and egg problem- you don't have a site without the money to start it and you don't have money without the site to generate the hits. I agree with the person who suggested a small business loan. Get the site started. Then get advertisers to get it up to profitable.

Then again there is the web cam.....

Look at traditional media

[KimBoolina]

Well well well, an Ask /. question I can actually help with! (help, of course, being a relative term....)

I work for a "free" newspaper for a good sized city in Florida. "Free" is only applicable to our business in terms of what our consumers think...they can pick up the paper and read it without paying for it, so we offer a service -- providing content for readers to enjoy -- for free. (okay, it could be service or it could be a product...but you get my point)

However, the paper itself is not free. On top of my salary (the most important check cut here, I do believe!), there is the salary of six other employees and the very expensive printing costs. The company itself does over $1 million a year -- not huge, but respectable for a small business. And every penny of our operating budget is paid for by our advertisers.

The lesson here is that advertising CAN support a "free service." I'm not going to blanket this example to cover Web services (there are plenty of horror stories out there), but just because an media is new does not mean it is not effective. What you need is a business loan to start with and a couple of reputable sales people on your staff. Then start talking numbers -- do research into recent studies concerning people's online habits, do marketing samples, do it all.

If this paper had just started printing one day with the hopes that advertisers would see how great we are and then pay us for ad space, it would have folded in a week. A lot of market research went into this, plus a fair number of financial backers. The upshot: the paper is free, and my paycheck clears the bank.

I think many people involved in the Web/Internet industry are too swift in disregarding the business lessons of the past. Stop thinking in terms of "new, unknown, untrusted high-tech commodity" and all the economic mystery that goes with that vision and go back to square one: it's just a service you are providing. Someone has to pay for it. Period. Look around you at any -- ANY -- company in your town providing a free service, and analyze how they do it without folding.

And then go from there! Good luck.....Pax....

Advertising

[Christopher Thomas]

The following approach should work, but requires venture captial.

• Plan your service in detail and sign up advance customers. For a free service, this will just be accounts created before the service is up.
  
• Take your detailed plan and customer list and make a business plan. Make sure that advertising revenue is in here.
  
• Get venture capital. This should be do-able with the business plan and list of advance customers.
  
• Start up the service without the banner ads. Put placeholders in where they would be.
  
• Run the service for a month or two, keeping track of usage statistics and signing up new users. Track how the number of users grows over time.
  
• _Now_ go out to potential advertisers. You have a service that already has many users looking at what could be their ads; this is a strong bargaining position. You know what your costs are because you've been running the service for a couple of months. You know how many advertising slots you have. You know how many hits you have. This gives you the gross advertising revenue that you need; price the advertising slots accordingly.
  

If your service isn't up and running, it is the advertisers who control how much they pay you for the banner ads. OTOH, if the service has a solid customer base, you can ask for whatever you want (within reason). Best of luck.

Need mucho impressions

[drake]

I run a free football pool web site (here).

We offer cash prizes and t-shirts to the weekly winners during the football season. Our revenue is solely based from advertisers and sponsors.

We use Flycast for our banner advertising. We were getting around $3.50 net CPM from them during the season for doing very little work on our part. We also had weekly sponsors that paid up to be included in our weekly emails and to have an ad on *every* page.

I suggest you create the site with advertising holes in place, and then hunt down your advertisers/sponsors. This takes a lot of energy, make sure you have someone who has done cold calls before doing this.

Also, gainging page views is best done by swapping a portion of your advertising with a partnering site.

Good Luck.
-Don Drake