How do Internet companies profit if they give away their services for free?

Companies that operate in Internet services have grown in number consistently in recent years as more consumers are utilizing the Internet to purchase products and services, connect with family and friends, search for employment, or gain access to information and news on virtually any topic. The majority of content provided through Internet services companies is offered to users at little to no cost, and consumers have grown accustomed to accessing information found on the Internet for free.

It may seem contradictory, then, that companies that operate Internet businesses are able to make substantial profits each year despite not charging for services. Companies such as Google, Facebook, Yahoo and Twitter have numerous ways in which they can generate revenue while continuing to offer their unique Internet services at no cost to consumers.

One of the most common ways Internet services companies are able to generate profit without charging users for access to content is through advertising revenue. Because site content on search engines and social media platforms are offered to consumers at no cost, millions of users visit and spend time on Internet service websites such as Google, Facebook and Twitter every day. Each of these users represents a potential customer for other businesses that offer their products and services via the Internet.

Companies that want or need exposure to potential customers can purchase advertising space on no-cost content sites in an effort to reach consumers to whom they may otherwise be unable to deliver a marketing message. Sites charge fees to other e-commerce businesses for presenting a specific advertising message to those users, either as a broad or customized advertising campaign. Businesses advertising on free sites can pay for greater exposure to their intended audience through higher placement in search results or targeted messages to specific consumer groups.

Advertising space purchased by e-commerce companies is a profitable endeavor for free content sites such as search engines, high traffic blogs and social media platforms because of its reach to millions of users. However, free Internet service companies are also able to generate revenue through the collection of data from those users and providing that valuable information back to companies who want or need it.

Data is gathered and stored on the millions of users that spend time on free content sites, including specific user location, browsing habits, buying behavior and unique interests. This collected data can be used to help e-commerce companies tailor their marketing campaigns to a specific set of online consumers.

User data is also beneficial to companies offering products and services on the Internet when used as marketing research. This collection of data helps a business understand how well a product or service is received by its consumers, what specific products certain consumers may be interested in, and how well the business is presenting its marketing message. Each of these aspects makes the data collected from free content sites incredibly valuable to e-commerce companies.