It's not terribly expensive to provide a place for people to share links and conversation on the internet. However, if you provide the service for free, you don't have a sustainable business model.
Social aggregators with few people tend to draw few people. Therefore, asking for people to pay for the service upfront is a sure way to keep your community small (i.e. Metafilter and Something Awful).
Popular aggregators are usually subsidized in one form or another. HackerNews is subsidized by Y-Combinator, and Reddit was subsidized by Y-Combinator, then Conde Nast, and now 50M of VC funding. Less popular and newer aggregators like Hubski are usually subsidized by sweat equity.
If you run a social aggregator as a business venture where the plan is to become very profitable, then at some point you are going to have to change the deal that you initially made with your community. This is primarily due to the following reasons:
1. If you charge users up front to use your service, all things being equal, they are more likely to use one that is free, especially if an up-and-coming one offers something new and compelling.
2. If you charge your users by selling their information and views to advertisers, then your service is beholden to those parties that buy the information and views, and this results in motivations that take priority to the user experience.
For these reasons, starting with VC funding is a poison pill for social aggregators, as the profit pressure runs contrary to the conditions and patience necessary for community building and early growth.
The Hubski team has been talking about revenue for some time now. Hubski does not cost much to run, however we do put in plenty of sweat equity. At our last meeting, I asked the team whether or not Hubski was a business. After some discussion, we realized the question actually is: Are we planning on running Hubski for profit, and if so, how much?
Currently, Hubski is legally a Limited Liability Corporation. I suspect that it is useful for Hubski to exist in a legal sense, however, I am not sure that a LLC is the best definition.
We all would be willing to work on Hubski full time and to draw large salaries from revenue generated by the site. That being said, Hubski does not exist to be a business. Hubski exists to fill a space in this world. We feel that Hubski is worthwhile.
We are going to introduce a means to generate revenue from our users soon. Most likely, this is going to be a simple donation mechanism. We may also be changing the legal structure of Hubski to better reflect our vision for it.
We would love to hear your thoughts on these matters, as they will influence our decision making (as they always do).
/decloaks
Hubski is a de-facto cooperative. The content of Hubski is of, for and by its users such that the commentary and discussion of any external link is usually of greater value than the external link itself. Therefore, the content producers, the artisans, the attraction of Hubski is its community, not its leadership. Leadership, then, can be seen as the officers of a mutual benefit organization rather than as vendors serving customers.
Cooperatives do not function by donations, at least not in the traditional sense. Donations are best deployed in unidirectional situations where no reciprocation is expected or implied - earthquake relief, food drives, etc. For more bidirectional situations, such as church tithing, public broadcasting support, benefaction of the arts, etc, the organization generally reciprocates any donations with an in-kind gift to foster ownership and affinity - logo swag, limited edition merchandise and the like.
Hubski is substantially more interactive than the average NPR station and far more dependent on its users for its offerings than any church. That you're posing the question this way underlines your recognition of this. I believe a donation system will not benefit Hubski in the long run for the simple reason that donation allows one to "wash their hands" of their commitment to the problem when the continued maintenance and success of Hubski is the responsibility of all those who use it. Team Hubski has shown itself to be exquisitely sensitive to the desires of its userbase and offering a token "shut up and take my money" approach is likely to focus attention unduly on money. On the user side, things become "you have my money, do what I want." On the owner side, things become "we don't have enough money to do what they want, we need to panhandle."
If I were Hubski I would investigate cooperative charters. Shareholders are generally permitted votes and steering on a per-share basis, as well as the election of officers. These offices may or may not have the power to govern fundamental business decisions; often they function more as ombudsmen within the community. Fees for membership are determined via open calculation of operating expenses and necessary budget and any dividend at the end of the fiscal year is either divided amongst shareholders or paid forward into the next year's operating expenses. Shareholders often enjoy special privileges such as discounts on goods and services, preferential tech support, etc.
I would also investigate restructuring as a B-Corp or similar. Although largely symbolic, BCorps do provide a useful halo effect as well as encoding "don't be evil" into the DNA of the entity. There may also be tax advantages and municipal incentives depending on the site of incorporation.
/recloaks