In a year's time, you could make an absolute killing by selling a $49-$99 DVD service to users who actually kept taking photos. Their photos, turned into a DVD movie, in a nice case with their name on it, etc. (You could outsource this and make a killing on the difference.)
People will buy these not just for their own safekeeping, but for grandmas, to keep for future generations, and so forth.
Actually, mentioning such a product could even get slightly less netheady people to even use your service. You want the comfortably-off soccer moms, grandparents, and so forth, using this product. Can you imagine how awesome it'd be to have had a DVD of a year or two of your grandpa? Big selling factor in here.
The pro account is the best idea. Stay away from advertising, IMO, it looks cheap and turns people off. Personally I absolutely hate advertising and won't use any site with it. And I doubt much would come from the book idea/affiliations.
I would take it nice and slow. Wait until you have some serious users who have put a lot of time into the app. Obviously you and your friends have to catalyse that, looks like you already are which is good. Once you've got some nice multi-month videos to show, and perfecting all the little niggly bits about working with it (which YOU will be doing), try to get some publicity. It would be really helpful if you know some girls who will do it, your digg/reddit/etc-fu will be greatly increased if it's a girl.
Anyway, then start introducing new options. Pro members can get better quality video out - free is just the flash video, pro gets a full on quicktime version. Free has one "stream", pro can have several - they might want to do their cat or family members or something. Free can embed the flash output on their blog, Pro can embed the picture taking app on their website and make a "my blog visitors" stream .. or something.
Pro is $20 once off fee. Get a bit of press exposure and who knows, it could really take off. The Pro account taking pics of their families sounds like it could have real potential. Maybe a family package deal - $50 for a year of photos including a printed book?
Anyway congratulations on the launch, many people don't know how hard it is to take a decently sized project from idea to fully realised implementation and release. It's fucking hard and even more so if you're running on nothing but your own internal motivation. Good shit and well done.
I love ads. And the cash they make. I don't think they cheapen a website at all, and you'd be hard pressed to find that many websites without some form of advertising.
Try them out, and see if they work, and see if your users find them useful, or horrible.
Also do the maths - how many Pro accounts would you need to sell to make the same amount as sticking a couple of adverts up?
Keep in mind that you don't have that much time. More than one RoR bastard will know about your website soon and frankly it takes only couple of weeks of fulltime developement to produce a service like yours.
It's sort of depressing. A year of struggle and ultimate perseverance against the odds... to release something that doesn't make any money. I mean, kudos for sticking with it and refusing to give up, but... now what?
