I plan to start business like DropBox. It's not exactly like DropBox but something similar. DropBox is charging monthly fees for their subscription but my service is total free of cost. It's cloud based (provided by RackSpace) which does cost me some money. I want to know are the Ads my only option to monetize the service to cover up the costs or do I have other options too?
If you think this is not the right place to ask this question, please let me know where can I ask about this.
Technically, DropBox is using the Freemium approach. You have a certain level where it's free, but if you start using more than the average user, you are asked to pitch in a bit.
Dropbox does this with storage space, but there are a lot of ways you can actually track this (Maybe bandwidth is a larger cost for you, charge based on that).
This is one thing that boggles me about so many people doing startups. They have a good idea, and want to start a business around it. But they don't like the idea of charging for it.. At this point, your only hope of ever making money from your idea is if a big company buys your technology to integrate into their systems. But this will only happen if your technology is novel enough to warrant patent-ability. Yet despite all this, investors still flock to these "companies" (I use quotes because a company is formed to make profit from a product. If you're not charging for it, and it's not monetized, it's not a company, or a product really).
So what you need to ask yourself at this point: Do you want to develop a cool technology / idea, or do you want a company. This will determine how to monetize your idea. But honestly, without having a good knowledge of how your technology works, and what your business is doing, we can't really answer your question about how to monetize it. Why not just copy DropBox's model? It's obviously working, why fix it?
the key thing about any business plan is that it will change as you execute it.
As long as you feel you are providing value then you can charge for it and get investors for it. The plan on how to make money who to merge with are details which you will figure it out as time goes by
Dropbox was not the first company to offer their services for online storage. So go ahead.
p.s - I use drop box
Better have good lawyers for a service like that. Dropbox got sued because of data breaches. If something happens beyond your control (with rackspace, AWS, etc) your behind could be on the grill! If you promise its secure and it indeed turns out to the contrary people will sue. Also if some investment banker put his powerpoint on there and its not available for his big pitch you will hear from him!
I think it is a good niche though, people are always joining the internet and will want places to store their stuff. Maybe integrate it tighter with Facebook.