Techcrunch posted this article about Hot or Not, a dating site set up in 2000 by James Hong and Jim Young out of their house. They never took outside funding. Over the years, the founders made $20 million. The site was taking in $600,000 per month in revenue (advertising and paid subscriptions). But last month, they decided to stop charging subscriptions because the other dating sites were giving away access. In an instant, their monthly revenues vanished.
Hot or Not’s story is not an unusual one in the online services space. The decision to turn it into a free service is a brave one, but it was necessary. I doubt they could have made this decision so easily if they had more personnel, high fixed costs and outside investors.
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