Vin Crosbie's 1% solution

Vin Crosbie describes how sites that convert from free to paid revenue models are lucky to convert only 1% of their users to subscribers. That sounds about right. It’s roughly the same response rate as a direct mail solicitation. It’s probably not too surprising, considering that in both cases, you’re sellling to a highly-qualified audience — at least if you choose your lists well.
So, if you think you can get $20 per year from a subscriber, you would need $20 rev/sub/year * .01 subs/user = $.20 rev/user/year to make up the difference. You’d only need twenty cents in advertising revenue per user to make this work. The number might even be lower, because your subscribers are likely to come from your heaviest users, who will generate the most ad revenue.
Of course, this assumes you’re able to sell advertising on your site. The irony is that if you’re pretty sure you can sell your content, you probably also have the kind of audience advertisers will pay for: affluent, focused, engaged and motivated.