Just finished re-reading this article by Jason Fried of 37signals.com, which included this 30 min. talk by David Heinemeier Hansson (cofounder of 37signals and creator of Rails) at Startup School 2008. Great common sense advice about starting a business.
Despite the popularity of the freemium model among internet startups (grow a user base fast, charge nothing, get VC funding, think about monetizing later, better if we get bought for a huge sum of money on the way), David argues that one of the most basic way to have your company turn a profit is charging upfront for the service your company provides. Target 200.000 paying customers instead of 1 million free subscribers. Focus on giving an excellent service to those customers.