Can you provide some real world examples where this has worked? I'm not saying it's not possible, but I haven't ever witnessed/heard of it working just like that in any scenario I can recall.
Viral word of mouth is nice, but it usually takes years to get there.
Let's not gloss over your success with soft (useless) phrases like "hard work" and "passion."
You launched Pinboard to a crowd which already knew & loved you, at a time when everybody thought Delicious was about to fall over and die. Furthermore, you had novel marketing features - the "the price increases per user" thing, which was clever enough that people checked Pinboard out JUST to see it in action.
That is marketing -- and if you subtracted how much those early customers paid from the amount newer customers pay, that is your advertising cost. A discount is still a marketing expense.
And as for the Bedbug Registry, it's not a product - it's free. Furthermore, you serve desperate and angry and frightened users. They are much more likely to seek you out by Google than any other kind of customer. There is no equivalent level of desperate users for most software.
Viral word of mouth is nice, but it usually takes years to get there.