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Jim drinks Tequila, and James drinks vodka. Yesterday, they celebrated the fact that there 6 year old company, Hot or Not was not going to make $10,000 per day anymore. If that doesn’t interest you, I’ll put it in larger terms. Hot or Not averages $5 million per year in revenues from subscription based services. Instead, they sought after another revenue model, giving up $5 million per year to start at scratch to entertain themselves with an online advertising based model.
Hot or Not is an online photo-rating personal service started by two guys who run the operation out of their living room.
There are other social networking aspects to the site, such as chat & messaging. The site was built in only a few days and today has over 12 billion votes on potentially hot or not people. Today, Hot or Not can be considered one of the top relationship building or even dating websites around, although I don’t think it was meant directly for this…..other than Jim & James to meet girls.
Some of the reasons James Hong states that they have opted for the “Free Model” for their business:
- Free is the “Big Expansion” - Hot or Not is not small anymore, however, “FREE”
- Their goal was to have the site free for its users
- The online ad model is backed by actual commerce versus VC money
The founders started charing for the site as a way to maintain a living, online & off. Users were charged a fee for the Meet Me I think overall, this is a very risky move. However, it will only make sense if the users add more content to the site & become extremely active. The key in motivating users is to incentize them to bring in additional users of the services. The goal would be to double the current membership load and create a stronger sense of community with the Hot or Not members. As for the $10,000 in daily revenue, I would not have given it up directly, but allocated those resources into other web properties. I sure could have used Hot or Not’s help as a sponsor! But, if the $10,000 in daily revenue could have been used as an incentive for other non-paying members or even paying members to bring in new users, or have some sort of revenue sharing model would probably bring more brand loyalty to the service. However, maintaining the “Free” culture is a growing trend, but the question is, will advertising dollars “always” be there? But giving up $10,000 per day? I ask myself now, what were they drinking! 
What would you have done?
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