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    How Tech Companies Make Billions from Free Apps and Services

    Andrew BeckBy Andrew BeckJune 3, 2025
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    How Tech Companies Make Billions from Free Apps and Services
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    Ever wonder how Google, Facebook, and all those gaming apps make billions while letting you use their stuff for free? They’ve built a whole new way of making money that’s changing how business works online.

    From search engines to social media, the internet has made an economy where “free” doesn’t mean “no profit.”

    Your Attention Is Worth Billions

    Online advertising has become a trillion-dollar industry. In 2024, global ad revenue surpassed the $1 trillion mark for the first time, with tech giants Google, Meta, ByteDance, Amazon, and Alibaba grabbing more than half of it. That shows you just how much the way businesses reach customers has changed.

    Google made $238 billion from ads in 2023, which is 77% of everything parent company Alphabet earned. Google Search alone brought in $175 billion, which is more than what most entire countries produce in a year. Such numbers are building the global economy.

    Meta (Facebook and Instagram’s parent) isn’t far behind. Facebook’s ad revenue will likely pass $100 billion in 2024, making it only the second media brand after Google to hit this mark. In just the first three months of 2024, Meta made $35.64 billion from ads – up 26.8% from the year before.

    So, why does this model work so well? It’s like reaching billions of people with laser precision. When you search, post, or watch videos, these platforms show you targeted ads. They know what you like, where you live, and what you might buy – so advertisers can reach exactly who they want, exactly when they want.

    Why Free Games Make So Much Money

    Free-to-play games have turned gaming into a money-making machine. Mobile games made $67.1 billion in 2020, with free PC games adding another $23.1 billion. But what’s the secret behind it? The “freemium” model – a strategy so successful that nearly every service now uses some version of it.

    Look at games such as Fortnite, Candy Crush, or newer sweepstakes casinos like SweepSlots. They use a clever dual-currency system. You can play for free with virtual currencies like Gold Coins, which are fun but can’t become real money. But some also have premium currencies, such as Sweeps Coins, that you might change for actual money.

    But here’s the fascinating part – only about 1.5% of players ever spend money on free games. But those who do – the industry calls them “whales” – can spend thousands. Research shows that 50% of revenue usually comes from just 10% of paying players. An even tinier group of super whales (0.15% of players) might contribute half of all revenue.

    Games also make money from ads. They show banner ads, play videos between levels, offer rewards for watching ads, and even slip brand logos naturally into the game. Mobile users click on in-app ads 2.8 times more often than on mobile websites, making this incredibly profitable.

    Your Data Powers the Whole System

    Google and Meta say they don’t sell your data directly, and that’s true. But the information they collect drives their entire business. This data lets them show hyper-targeted ads that advertisers pay top dollar for. Every search, like, video, and click helps build detailed profiles that make advertising work better.

    But data is way more useful than just target ads. Companies use it to improve services, build new features, and spot trends. Machine learning crunches billions of data points to improve everything from search results to what videos YouTube recommends. Better user experience leads to more engagement, which creates more data, which brings in more money.

    Privacy laws such as Europe’s GDPR have made things more complicated, forcing companies to tell users what data they collect and get permission first. But the basic economics haven’t changed – user data still powers the whole advertising machine.

    More Than Ads – How Else Do They Make Money

    Smart internet companies don’t rely only on advertising. Even though Alphabet gets 78% of its revenue from ads, it also makes money from Android fees, cloud storage, apps, and subscriptions. Google Cloud brought in over $10 billion in just the second quarter of 2024, showing how these companies build multiple income streams.

    Subscriptions work especially well alongside advertising. Companies give premium tiers that remove ads, add features, or unlock exclusive content. YouTube Premium gives you no ads plus exclusive content and music streaming. Users who value their time or privacy can pay directly, while others “pay” by watching ads.

    Virtual goods and in-app purchases bring in huge money as well. Players buy character skins, power-ups, extra lives, or game currency. The global market for in-game purchases should exceed $74.4 billion in 2025. Virtual goods cost almost nothing to make after the initial creation – companies can sell them forever without extra production costs.

    Psychology Behind “Free”

    Free services get what they want because they remove the biggest obstacle – upfront cost. So, when people can try something without paying, they’re much more likely to use it. That creates huge user bases valuable in several ways.

    Big user bases attract advertisers who want to reach lots of potential customers. They also create network effects – services become more valuable as more people use them. Facebook gets better when your friends join. Games get more fun with more players.

    The model uses clever psychology – once you’ve invested time in a game, you’re more likely to keep playing (sunk cost fallacy). Limited-time offers trigger fear of missing out. Also, bringing new paid features gradually makes users more likely to eventually spend money after they’re already hooked on the free version.

    What’s Coming Next

    Artificial intelligence will transform all free services and how they make money. Meta says over a million advertisers used their AI tools in just one month, with AI-powered campaigns showing much better returns. Google’s AI tools helped Audi increase website visits by 80%.

    Virtual and augmented reality represent the next frontier. Meta’s Reality Labs loses nearly $4.5 billion per quarter right now, but they’re betting the metaverse will become the future platform for content and advertising.

    AI assistants have new money-making possibilities as well. Nearly 1 billion people use Meta’s AI assistant monthly. Companies are exploring sponsored AI responses, AI shopping recommendations, and premium AI features.

    Nothing’s Really Free

    Next time you use a free service, remember you’re part of a complex money-making system. No matter if you’re Googling something, scrolling Instagram, or just playing a mobile game, such platforms have found creative ways to make money without charging you directly.

    The new model has given billions of people access to information, entertainment, and communication tools that would have seemed impossible decades ago. It’s also created some of the world’s most valuable companies and completely changed how businesses reach and bill their customers.

    In the near future, we can expect even more creative answers to the old question – how do you make money giving things away for free? Turns out, the answer is worth trillions.

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    Andrew Beck

      Andrew Beck is a 28-year-old writer who enjoys playing football and reading books. He is smart and creative, but can also be very sneaky and a bit lazy.

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