Business model on free services

How those companies work? if their services are always free?

[explorador]

Hi webmasters, been curious about this for years. There are apps and webservices on the web that are not only useful but also FREE as in zero costs, absolutely nada, free 100%. Ok, and they don't show ads, zero advertising, won't send you emails with brands or offers, etc. You just log in and use it for free.

I understand many web services begin this way, but they expect to charge you a fee at some point, or show you ads and thus monetizing their service, and if they can, they will. But what about those who won't do it? not even adding a premium service (not free). I've seen cases where that kind of companies is bought by larger ones, sometimes they change the business model, but then again

what about the ones who don't? and stay free, 100% free?
So, big company A puts US$500K into some other new company, but everything stays free... why? how? I know it's been said that when the product is free, then you are the product. But what if they are promising never to sell your data?

Read it Later was recently bought by the guys at Mozilla / Firefox, that's just one example. I've been reading on "success stories" where start ups have received money to grow but their services stay free, I just don't get it.

[graeme_p]

Lots of things: dotcom boom style "we will work out how to make money later" thinking in some caes.
Some services are cheap for most but charge others a lot: Gmail for example. Look at the prices if want in on your own domain.
Information collected: the worst of "you are the product". Facebook, Google Analytics and others

[Dimitri]

"Speculations", some business models are based on the concept of building the largest community / user base, no matter how, and no matter at which costs. The idea being that one day, they'll find a way to monetize it. That's why Twitter, Facebook , etc... were loosing billions of dollars, and still attracting investors.

Also, as mentioned, a success story, doesn't always mean you created a profitable business. It can be you gain lot of popularity, or simply you sold your business to someone bigger for big money.

Also, it's not because they are not sending you newsletters or promotional emails that it means they are not monetizing your information. They can sell your information to other marketing companies, or things like that.

[explorador]

Thanks, besides being "you" the product, Dimitri brings has a solid point on speculation and supposed value of those companies.

[NickMNS]

Data data data. Many such services are collecting enormous amounts of user data. When the company is sold all that data become the property of the acquirer, to be used for their own purposes.