First, I agree on one main point--your site is not a "startup" or even really a "company" at this point. That said, you still very much have a product, and you are actively monetizing it.
But then let's get into this point by point...
You say that your ads are "non-targeted" but that is not at all accurate. Just because you aren't doing anything actively to target it, doesn't mean Google isn't. Google's AdSense network has a TON of targeting on the back-end that is determining what ads to serve. This can be based on the profile of the user, retargeting lists they may be a part of, the category of site Google has you categorized as (possibly health?) etc. Your ads are VERY targeted. That is actually part of the beauty of the AdSense product.
The second point I really take issue with is that you don't seem to think your site falls into the "if you're not paying for it, you're the product" bucket. Or at least that's how I parsed what you wrote there (apologies if I was off on that).
People aren't paying for your product, and so you are making money by serving them ads. By the nature of it, any ad-supported site falls into that bucket. You require more user impressions/eye balls and that is what you are "selling" to advertisers/Google. This is not inherently evil, and I don't think one needs to prey on their users to leverage advertising. That doesn't mean the saying doesn't apply to them though.
Again, I like what you're doing and think the single banner is a tactful approach (although you'd probably make a lot more by recommending sleep/health-related products and using affiliate links). But those two things you said just aren't accurate so I wanted to clarify on those a bit.
> you don't seem to think your site falls into the "if
> you're not paying for it, you're the product" bucket.
> [...]
> People aren't paying for your product, and so you are
> making money by serving them ads. By the nature of it,
> any ad-supported site falls into that bucket. You require
> more user impressions/eye balls and that is what you are
> "selling" to advertisers/Google. This is not inherently
> evil, and I don't think one needs to prey on their users
> to leverage advertising.
There is a lot of value to be had from providing a free web app if you are a lone hacker looking for a job.
I'm not trying to be snarky. Well, maybe just a little, but in a good-natured way - I think you got a good deal that probably met or exceeded your expectations, which is commendable!
But you did not create a sustainable business. To do so with ads is not impossible, but since each user generally gives you way, way less revenue than with something where they pay for it, you really have to parsimonious with resources per user.
(Also, I <3 SleepyTime and I would pay like $1 a month or something :D)
At some point, im pretty sure that you had a notice on the site awhile back that there would be an native mobile version. What happened to that?
A mobile version could probably make a fair chunk of change. I'd buy it.
Source: once worked as an overnight sleep lab technician, collaborated with sleep specialists in next job working for the lab equipment maker.
Also, a timer with 90 minute steps inherently includes 45-minute steps. If you do desperately want the in-between steps, it's a trivial mental calculation on the four steps you do get given at the site.
Anyway, I believe the site should allow "set custom cycle". As you wrote above, it varies between individuals a lot.
I assume you need more cycles than people who have 90 minute cycles?
There are a lot of ways to make actual profit (not just break even) with free applications.
The Hacker News crowd doesn't always show a lot of love for the "small, free application" crowd, and the echo chamber is correct that having a webapp doesn't mean you're a startup.
I know that I don't consider myself the "founder" of my app, because my site is not a company. I'm not trying to make it a business.
That said, though, this write-up glosses over what has been, in my experience, the easiest and most straightforward way to profit from free traffic: non-targeted ads. For me, that means a single banner advertisement served over Google Adsense.
Now, like I said, I'm not trying to make http://sleepyti.me my primary income. If I wanted to charge users, or enter deals with, say, large mattress vendors, that would be different. But that isn't to say that the traffic and feedback I've received hasn't helped me both personally and professionally.
Personally, I've received a lot of attention from my app. It's pretty popular with college students, and it's gained media attention from outlets such as Lifehacker, the Toronto Star, and most recently the New York Times.
I'm not listing these sources to self-promote, but to show that from a personal exposure standpoint, it's opened many doors for me.
The same goes professionally: I had a brief partnership with YC-backed WakeMate, which, although now defunct, allowed me to interact with an early-stage YC company that I otherwise would not have been able to experience. I get between 1.6 and 2 million hits a month, and the financial reward has been steadily increasing through my single banner ad as well.
People always say that "if you're not paying for it, you're the product," but I don't think that that's always true. I don't prey on my users, and I can think of several free apps that operate in a similar--even less obtrusive--manner. Trello, for example, neither serves ads nor sells my personal data (I hope!). Sometimes it's worth it for a developer to create something and truly release it for free, without having the immediate motive of profit.
I always tell college students who ask how to break into an industry--whether it's information security, professional programming, the startup world, or anything else--to do something. Sometimes a free application, such as the one I created as a free weekend side-project, turns into more than what it is. I'm more than aware that my experience is mostly a fluke, though. The take-home message should be that even if it doesn't become some massively-profitable, highly-trafficked app or site, it's still something that you built.
And that has value.