The freemium hosting business model

tl;dr Will most smaller hosting plans be free in the future? We are not quite sure, hosting is about resources, someone always has to pay for them.

Congrats to our PaaS colleagues at AppFog. They recently announced GA (general availability). The big news was the pricing. They offer a generous free plan. You can really run your website/service for free there. They claim that this is similar to hosting as the emerge of Gmail (with some Gigabytes of storage vs Hotmail with some Megabytes) was to free mail. It's true: Gmail changed what we expect for free from a free mailing provider (I know a lot of freelancers who use an e-mail address from Gmail - even for their business). But can this model be applied to web-hosting as well? Imagine that you want to run your eCommerce site or some other serious business - would you really trust a free service for this? They don't know who you are, they just got your e-mail address and they won't guarantee for uptime (everything for free comes without a guarantee). So you can't claim for availability. You don't have support. And you don't know if this free is going to be free forever. Probably I am a bit jealous of the great new offer. Of course we will have a free plan as well. But it won't be that splendid. We are not funded, so we don't really have a marketing budget. We are bootstrapped. And just like 37siginals, we don't believe in losing money to gain clients. And a PaaS isn't just software. It's about hardware resources. And those need to be paid. Our underlying infrastructure provider AWS is not giving us anything for free (in fact they offer a 10% discount starting at 250,000.00$). So it's not only that our free customers use our software and hosting environment with automated failover, easy deployment and whatnot that we have build for free - they also use the infrastructure for free. Some people say that cloud computing will reduce costs for hosting. That is true, but even in the cloud there are servers and hardware somewhere. Computers are getting more capable but electricity is not going to be free in the near future i guess. Of course we don't have a GeoCities business model where you could have free hosting in return for ad banners on your site. And of course our clients will not be the product here, we won't sell their data. Like in any other freemium model, our paid plans will have to balance the costs for the free plan. We give a piece of the pie away for free, because we want to show everyone how cool our service is and also because everyone else is doing so. We calculated very carefully what we can give away for free and we hope that we can loosen some limitations in the future. Our free product will be about development. It will be more than just a trial, it will be something you can really work with. We are proud of it.