You have probably seen a lot of internet websites offering free services like a free email account, a free forum or may even offer you a free website. But have you ever wonder why on earth they are offering all these wonderful services for free? If you take a look at the real world, nothing is free. You have to pay for the news, have to pay for the coffee and even for some advice.
I found services that offer you listen to radio stations or watch TV for no money at all. Another service I found lately that sends SMS & Fax for nothing. I am not going to mention any of them here, if you take a search on google.com you will find 10s of providers that will let you use their service for free.
These services cost money right? So how come all these services on the internet are free and how they make money out of it?
They Make Money with Advertisements
Most free internet based services make money with ads. Since they offer a free service or free content, they attract a lot of visitors. Then there are other website owners who want to bring these people to their own website. This is why these other site owners place ads and pay to the first website for these ads. Ads such as banners, text link ads are common among websites. For an example this website that shares funny pictures monetize their website with ads:
They Are Going to Sell a Premium Service
Free accounts offer services and most of the time these services will have a paid upgrade. For an example a free account will let you send 10 SMS every day. A premium upgrade will allow you to send 100 per day. So for a user who is actively using the service and need to send more SMS’s that person will upgrade for the paid plan. This is how most of the internet website that offer services make money. Some of these services offer an upgrade which will remove ads in their account. Webs.com offers ads in their free website. If you pay for an upgrade, they will remove these ads:
They Are Building a List of Leads
It’s an age old marketing practice. When you sign up for a free service you have to provide at least your email address and some of your personal info to use it. Almost every free service provider will require you to sign up for a free account. After you signed up, you will be entered into a list according to your location and other personal information you provided, such as your age, gender, occupation, location, earnings etc.
After that these lists of huge number of people will be sold or rented to banks, insurance companies, credit card companies, dating services and all sort of list buyers. They will then send you offers in which if you buy from them, these companies will make money. So when you sign up for a free service, that service is simply building a list to sell/rent it for profit. However not all website owners build a list to sell it, some of them use it to promote their own product and services.
You must be thinking that most of these emails get ignored or deleted as spam. However this is a numbers game and if it didn’t work, it wouldn’t be there. If they send emails to 100 people and only 1 person purchased a product and that covers the cost –they succeeded. Also then they will put this buyer on a new list and start sending them high priced products. Here is an example of email capture form:
They Are Building a Trust
Internet companies that have a long term goal for business, doesn’t make any money off their users. Instead they look for the long term goals and start ad free. The positive thing about these sites is that they quickly earn the trust of their users and build large user bases. A most recent example is Twitter.com. Twitter started off as a free service and they stayed ad free for few years. Then after they secured a large portion of users, they slowly started to sell promoted tweets.
You must be thinking how they cover up the costs if they are not making any money? These huge companies build the audience first and this helps them to secure investors who will help them to stay alive.
So there you go, now you know why most of the services of the internet are free and what some of the motives behind these websites are.