Fediverse

At the end of the day, there are three ways to finance a server.

1. The server owners do it, by paying from their own pockets. Only viable as long as the server is small and the owners are deeply concerned with the success of the server.
2. A third party does it by sponsorship, advertisement, etc. Bad idea as they will eventually want to meddle with your content - astroturfing, selective enforcement of rules, etc.
3. The userbase does it by donations, membership, etc. Frankly I think that it's the most reasonable solution.

OP raised the concern that most people won't donate. Does it really matter? I don't think so; what matters is the total amount being donated, not who does it. If it is a concern, perhaps a subscription model could work, too, but the instance would need to show some service beyond what you'd expect from a Lemmy/Mastodon/Kbin/etc. instance.

I'm from the belief that "ethical ads" are a trap. 90% won't be ethical, and the 10% left won't pay you much. That's how the cookie crumbles.

Another concern that I see is moderation, as it's part of what makes an instance viable or not. The old Reddit model (let users moderate users) is surprisingly good in this aspect, as it allows the server owners to only address server-wide issues, but IMO it needs to be improved on (for example, letting admins and mods recruit users for specific tasks - e.g. I might trust someone to remove content, but perhaps not to ban users).