The Menlo Park, Calif.-based company sent a notice Monday to its 4 million active customers, saying it plans to charge new members an estimated $10 per month to cover costs. But the company said it would offer existing members a "meaningful discount" if a high percentage of people indicate an interest.
"Our members are part of the company and have a voice," said Homestead Chief Executive Justin Kitch. "It's important to involve our members because they've been such a valuable part of our success, and we believe that's the best way to run a company."
Homestead could become one of the first site builders to add fees, but it would join the ranks numerous dot-coms that have already gravitated toward charging for services that were once free. Variety.com, Salon.com and Britannica.com are just a handful of publishers that have recently unveiled plans to charge for access to formerly free content.
Homestead said current market conditions play into its decision to move toward a subscription model but that it had been planning such a switch for some time.
"This is just something that has allowed us to move more quickly and in a more bold way," Kitch said. "We just didn't feel it was something we needed to wait around for; we wanted to be the first. We wanted to lead the charge."
Founded in 1997, Homestead helps people build Web sites through two main products, dubbed Homestead Professional and Homestead Personal. Homestead Professional, which launched in April, is available to small businesses, nonprofits, government agencies and anyone else who wants to build a professional Web site. The company charges $29.99 per month for that service.
Homestead Personal, however, has been free. When the new fees are applied, the company plans to continue a free version with limited features, such as sites restricted to three pages, limited customer support, and only 8MB of storage space.
The paid service, however, would include a new version of SiteBuilder, an option to remove Homestead branding from Web pages, a new graphics library of more than 800,000 images and 25MB of storage space.
Nielsen/NetRatings analyst Peggy O'Neill said that from a financial standpoint, Homestead's move is "commendable" because it's trying another revenue source that is more predictable than advertising. She said Homestead might pressure its competitors into offering similar for-pay services, but it could also push existing customers toward still-free rivals, such as GeoCities.
"In the short term, people will have a reaction to this and Homestead will definitely get hurt," O'Neill said. "The first one to be out there will probably take some heat."