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/Peo, FreeWebSpace.net
Word of mouth with the people in your local area is a good start! If you design a site for a company, they will usually give you a nice annual payment for their hosting too!
The best form of advertising is word of mouth, especially free hosting. People will trust their friends when they're saying "it's reliable" not a person who's trying to advertise.
I just started a free hosting business, and since it's a free hosting business, it isn't hurting me any if they go to another host! So, I could trade links with you if you want? I will place a link to your free hosting business on my free hosting site if you'll place a link on your site somewhere that leads to one of my other websites? That would help the SEO of both of our websites too! Not my free hosting site, but maybe one of these>
This is what's always worked for me: listings in free hosting directories, posting on webmaster-related forums (signature link), word-of-mouth. I have found (through trial and error!) that there really is no need to spend money on paid advertising (though it can help jump-start growth).