I have been thinking in the future about offering a "free hosting soulution", but im really not sure if it is worth it, i mean right now we offer a very small, limited free hosting account but it is only good for 3 months, just to kind of let the users test us out if you will.
On one hand, if we were to offer free hosting. We would have alot of users, and we might could make a little money from adverts. And might even get some biz by putting a This Site Is Hosted Free by SafeguardHosting.com ad on every page
But then again, its alot of hassle, it isnt cheap, Sure we would have alot of misuseage. etc etc etc.
You can have something like a 90 day money back gurantee! if you offer 90 day money back this way, it is kind of free if some one wants to use and have their money refunded for a particluar puprpose, and if they dunt ask for refund it is good for you. 90 day is not common, instead of going totaly free you can offer this and eventually end up with serious customers who are willing to continue after 90 days.
I run a free hosting site. I used to do it all on my own but now I moved to a partnership with 0catch instead to let them deal with all the crap
The issues you are up against
1) fraud and illegal activity - imagine the worst possible site you will get those and worse
2) constant abuse by clients
3) threats of constant lawsuits - fbi at your house possibly
4) if you offer any type of email people will abuse the service in some way
Now as far as profitablility - free hosting alone will not pay it's own costs - high paying advertisers will not take your site into their programs. The only real way to make money is to offer upgrades of some sort so the paid users can make up for all the freeloaders
I'm not saying it's good or bad - it can certainly get you a lot of traffic offering a free hosting service - but the abuse you have to keep on top of it 24/7 or you will be targeted as a safe harbor for abusers. If you can somehow take out the "anonymous" factor then you will curb a lot of the abuse..