I can recommend that you check out Fred Wilson’s presentation titled “Does information want to be free”. I agree to his vision on the subject and personally believe in the business model he puts forward at slide 13 called “freemium”:
- Give away the baseline product for free
- Generate network effects/data value with the free model
- Monetize with advertising
- Upsell a premium product with a subscription model
Best existing example to my opinion is Flickr. What do you think?