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Originally Posted by daboss
if you're ultimately looking for it to be paid, i suggest you don't make it free initially... if you do that, you'll be swamped with thousands of submissions... many of which would be your potential customers... also, if the site has thousands of outbound links, each sub-category gets less attactive for submission later...
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These are good points but with some hard work, you can offer free submissions (with paid as well) and not get too crowded in your categories and sub-categories. You just have to spend alot of time creating cats and moving listings around and other maintenance.
For ex., take the Web Directories categories on most free (or paid for that matter) directories. WAY too crowded. Sometimes in the hundreds and new sites get placed on page 27 or something!

This is because the webmasters don't take time to try to create as many unique sub-cats as possible to keep the listings per page down. Take a look at this Web Directories
category on one of my sites. Problem solved, and everyone is happy. Also the paying customers are happier, since the people buying featureds all want be in just one category.
And as far as offering free listings taking away from the paid listings, I haven't found that to be the case. Most of the people that are willing to pay for a listing will still pay even when free is offered, for a faster and more guaraneteed review.