Option number on is we release a free version with limited capabilities and a upgradable version from $.99-$4.99. This isn't the desirable route because the more users we have on our network, the better it will work. We want to encourage anyone and everyone to join.
Option number 2 (the route we will take) will mainly consist of monetizing businesses who want to use the platform. Much like Snapchat, this will consist of sponsored content, geo options, and other business-centric features. This option will require us to scale quickly, but I am pretty sure it is the route we are going to take.
For the first few months we are going to bootstrap it and focus on user experience and not focus on monetizing users at all. As we scale and grow our user base we can start focusing on things like that.
I completely and undoubtedly agree with everything you are saying, but just because it hasn't been done before doesn't mean it can't.
We are fully aware there will be a day where we have to stand on our own tow feet, and we will be ready when that day comes.