For Meetup, charging its users was the key to growth.
The New York company, founded in 2001, helps people find each other online. Meetup.com users can join groups based on specific interests, hobbies or a geographic location. Groups then schedule real-world activities.
The service was free, and lots of people signed up. They created and joined groups. But only about 2 percent of those groups were holding regular events. The vast majority were dormant. That was a problem for Meetup because its revenue came from charging fees of the places where groups met, such as bars or restaurants. To grow, Meetup needed more groups to meet more often.
"It was really easy to start a meetup," says Brendan McGovern, the company's co-founder and CFO. "But people would find this group and then nothing would happen."
McGovern and Meetup co-founder and CEO Scott Heiferman were concerned that users would lose interest if too many groups were inactive. They wanted the website's group organizers to care more about attracting and keeping members and scheduling events.
They also needed more reliable revenue but didn't want ads on the site that would annoy users.
Their solution, in April 2005, was to start charging group organizers. Fees range from $12 to $19.
Many of the inactive groups dropped out.
"There was a backlash with lots of groups' founders, lots of angry emails," McGovern says. "It was hard to hear all that negativity, but we stuck to it and survived."
Within the year, half of Meetup's groups were active. The company's revenue more than tripled, to about $1 million. And it kept growing. Last year, revenue came to $15 million, and Meetup had 200,000 active groups. About 100,000 users meet per day, on average, McGovern says.