How Do VPN Companies Make Money?

How Do VPN Companies Make Money?

How Do VPN Companies Make Money?

If you’re an avid internet user, you’ve probably used a VPN. These services come in handy when you’re trying to remain anonymous or bypass censorships and geo-restrictions. There are several VPN providers across the globe, some free and others paid, but have you ever wondered how these companies generate revenue?

VPN companies make money in different ways. Paid VPN service providers make money from subscription fees users pay. However, free VPN service providers have to get creative. These companies make money by, e.g., imposing limits and restrictions, selling your data to third parties, and advertising.

You won’t be pleased to hear this, but some of these free VPN service companies make money at your expense. So, you should think about how the free VPN you’re about to sign up for makes its money. Keep reading for some insightful information on how these companies make money, why premium VPNs are better, and when it’s safe to use a free VPN provider.  

Why Do VPN Companies Charge Fees?

VPN companies provide different services. However, the best service providers will allow you to bypass censorship and geo-restrictions and keep you completely anonymous while maintaining fast browsing speeds. If you think about it, it’d be ridiculous to get all these incredible services for free. 

The VPN companies incur certain costs to provide these services. For starters, running a reliable VPN service requires that you manage a global server network, provide user support and bandwidth, among other things that cost quite a fortune. Therefore, it only makes sense that these companies need to make money. 

So, how about free VPN companies? How do they generate their money?

For a free VPN company to offer reliable services, they need to find other ways to earn money from their customers. Some of these ways compromise your security and privacy when using the VPN. Here’s a list of seven of these ways:

Provide Freemium Limitations and Restrictions

In most cases, free VPN providers will also offer paid services. The free VPN option will provide limited features and capabilities. The developers will lock the advanced features so that users have to pay to use them. Therefore, the free option acts as a lure to convince you to pay for the other elements. 

Some service providers will tell you from the beginning and ask you to upgrade to the paid options. However, if you’re unlucky, your service provider will manipulate you into getting the premium version. Most limit the internet speed, server choice, and data use for users on the free plan so they can pay for a better browsing experience. 

For example, Hotspot Shield limits traffic to 500 MB per day, despite being among the best free VPN providers. On the other hand, ProtonVPN offers unlimited data with slow speeds due to fewer server locations.

By creating these limits, free VPN companies can get more people to pay for the premium services, and hence they can make money from the subscription fees paid.

Track Your Browsing History

The most common offense of free VPN service providers is that they track your online activity. Before signing up for a free VPN service, read through the privacy policy, and know what you’re getting into. 

Most free VPN services will keep their connection logs. Although they do this to keep everything running securely, companies can use the records to track your browsing activity. 

Service providers mostly do this by attaching cookies, web beacons, and pixels. Cookies track your activity even without you knowing about it. Beacons use a clear picture file to track your internet usage. Tracking pixels work quite similarly to beacons but appear differently. Pixels are 1×1 dimension graphics loaded on each website or email you visit and help track specific activities. 

All these three types of trackers are ideal for analyzing data and monitoring users’ online behavior.

Free VPN companies allow advertisers to insert the trackers and log your online activity, and most of them won’t tell you that. With paid VPNs, the companies have to disclose this information in the privacy policy. 

Going for a VPN company that tracks your data beats sense. If the VPN is one of the 14-eyes countries, they can share this information with any member countries’ governments, putting you in a risky position if anything goes wrong. 

Show You Ads

Have you ever downloaded a free app before? We bet you found the ads quite annoying. 

The case is similar with free VPN service providers. These companies don’t only allow advertisers to insert trackers to the VPN, but they also make money by showing you ads from the advertisers. 

The ads in a free VPN are usually quite intrusive. Although they may not be too bothersome, they can make the browsing experience terrible, especially if there are many, and you have to keep scrolling to get past them. 

The worst part is that they are often unclosable, so you have to wait for the entire ad to be done. The ads vary in length, with most of them running to even a minute. 

Sell Your Data to Third Parties

This is probably the scariest thing your VPN service provider could do. The VPN companies sell the data from their users to third parties, which could be quite dangerous as it threatens their privacy. 

Usually, VPN companies will mine data from their users’ devices. They then create separate files for each customer, which they then keep in their connection logs. 

So, what kind of data do these companies collect from you?

Anything from the device’s location and information data to emails, phone numbers, messages, and anything stored in the memory is data that VPNs can sell to third parties. Some VPN companies even get full and unrestricted control over their users’ devices, such that they can edit, modify, and even delete media from the said device. 

Give Your Email to Business Partners

For free VPN companies to stay afloat, they need to bring business partners on board. Most of these are either advertising or data companies after mass email addresses. Your VPN service could agree to give its users’ email addresses to the business partner in exchange for something else. 

If this is the case with your provider, you’ll need to contend with tons of spam emails. What’s worse is that this move puts you at risk of some popular cybercrimes like ransomware, cryptojacking, and phishing emails.

You’re probably wondering why all this isn’t illegal. 

Well, most free VPN users never go through the privacy policy when signing up. However, if the provider mentions in the policy that they can share the information you provide in any way, then it isn’t illegal. Most VPN service providers rip their customers off by taking advantage of this loophole. 

Use Your Computer as an Exit Node or Botnet

Although VPN service providers’ methods to make money may be annoying, none is as dangerous as this one. If your provider creates exit nodes using your computer, you could get in trouble with the law. 

As we’ve earlier mentioned, most free VPN service providers also include paid services. This setup is not usually a problem if they use the free option as a stepping stone to get people on the premium plan. However, if the company provides free and paid options separately, it could be a significant problem. 

Exit nodes act as the ‘scapegoat’ in a secure network. All the traffic that passes through the end node server looks like it came from the exit node. Therefore, the companies make money from the paying users and then use the IP addresses of free users as the exit node. Any search and browsing history will appear to be coming from your computer, which could land you in trouble if illegal activities are involved.

Alternatively, the company can make money by creating botnets using these IP addresses. A botnet allows users to connect to the IP address. The most infamous case of this nature was when hackers got control of all the free accounts in Hola VPN’s network. They created a massive botnet from these accounts, which they used for malware attacks across the network. 

Sell Your Bandwidth to Other Users

Most of the ways through which these companies make money exploit the users on the free plan. However, this has to be the most extreme since they make free users suffer for the benefit of the paying ones. 

This problem is common with VPN providers that have free and paid services on the same platform. Free users will sign up for an unlimited internet connection without having an idea of the catch that benefits the paying users. 

The most common technique is having the companies limit the free users’ processing power, which they then transfer to the paying subscribers. The companies make a profit by selling your bandwidth to the paying users. 

Most of the time, VPN companies won’t let you know if they plan to do this. The only way to avoid this problem is by signing up for a reliable paid VPN plan. 

Why You Should Go for Paid VPN Services

Now that you know the different ways free VPN companies make money, you’re probably wondering if you should consider a paid VPN service. No free service providers offer all the qualities you need for a quality VPN, which brings us to the next question:

Is a paid VPN worth it?

Here are seven reasons why you should pick a paid VPN service provider over a free one: 

Genuine Anonymity

When using a VPN, your internet session data should disappear once you disconnect from the web. Free VPN providers keep connection logs, track your activity, and share your data. Using a premium VPN service will help you avoid this problem. You get to remain anonymous during your entire browsing session. 

No Speed and Bandwidth Limitations

The last thing you want is buffering speeds and slow downloads when you’re using a VPN service. Most free VPNs will have you struggling with this, but premium VPN service providers let you browse without any data caps. 

If you’re using the VPN for gaming, stream, or other P2P activities, you’re better off with a premium service. Additionally, the best providers offer customized servers for any of these activities, making your browsing experience even better. 

Topnotch Security

If not for anything else, you should go for a paid VPN for the security benefits that come along with it. Service providers who offer paid services need to stay in business and cannot afford any failures because of security. Most premium services provide end-to-end encryption, which offers ultra-secure OpenVPN. 

High-end providers include extra security features such as split tunneling, kill switches, and leak protection. Even if you’re suddenly disconnected from the server, your data remains secure.

More Server Locations

Service providers usually have their servers in different areas across the globe. The more server locations a company has, the more efficient the service it provides. Paid VPN providers have gigantic server networks that cut across the entire world. 

By subscribing to these paid services, you get to use the entire network, which allows you to access more geo-restricted services and websites. Besides, a larger number of servers also means faster browsing speeds and better internet connectivity. It also allows you to access the VPN from just about anywhere on the globe. 

More Premium Features

Besides all these benefits listed above, a premium VPN service provider also offers several other useful features. For example, most of these companies allow you to use one account on multiple devices simultaneously. 

Other fantastic features include P2P servers, dedicated IPs, and malware and ad blockers. Additionally, most offer user-friendly interfaces to help you navigate the dashboard. 

They Offer Customer Assistance

Free VPN service providers need to cut costs, and one of the ways they do this is by excluding customer service. Setting up your VPN may be an uphill task, especially if you are a beginner. You may need some technical assistance at some point, and your free VPN provider can’t help you with that. 

Premium VPNs have to keep their customers happy, which is why they must have a customer desk. The most reliable ones offer 24/7 assistance and different ways to get in touch with the support team. You can either use live chat, emails, and ticket systems to contact the support team. In this way, premium VPNs are more convenient. 

They Unblock Netflix

Unblocking Netflix takes quite a lot, as does getting past China’s firewall. Both of these use complex VPN detecting software, making it challenging for most paid VPNs to get past. 

However, the best premium VPN providers allow you to unblock Netflix and get through the filtering system in locations like China, Russia, and Turkey. You can also access BBC iPlayer using these providers.

Constant Upgrades

Premium VPN providers have to deliver top-notch service to its users. Therefore, they need to ensure they are always ahead of their competition. One of the ways they achieve this is by continually upgrading their services. You don’t get this option with free VPN service providers. 

When Can You Use a Free VPN Service Provider?

So, are all free VPNs a no-no?

Despite all the disadvantages they come with, you don’t have to write-off free VPNs completely. Most of the free VPNs come in handy when you’re only interested in some light browsing. You can use these VPNs to remain anonymous on public Wi-Fi or access a geo-blocked site while on vacation. 

Choosing a free VPN provider can seem scary, especially now that you know your privacy and security will be in jeopardy. However, there are some decent providers you can choose from, especially if you don’t mind the limitations. These simple tips will help you separate the wheat from the chaff. 

  • Stay away from free VPNs that claim to offer unlimited services. 
  • Find providers who offer restricted free plans. 

Most of the plans that offer restricted free plans usually offer their paid services on the same platform. Although these companies will limit your server access, bandwidth, and speed, they will provide better privacy and security services than free stand-alone VPNs. 

As expected, these companies cannot meet all your needs, and you’ll probably have to upgrade for better services.

To be on the safe side, always go through the fine print in the privacy policy. Most users don’t bother to read it, which gives the VPN companies an upper hand.  

Parting Shot

Well, there you have it—a comprehensive list of how VPN companies make money from their users. 

Here’s a recap of how VPN companies generate money:

  • Placing restrictions and limitations
  • Tracking your online activity
  • Placing intrusive ads
  • Selling their users’ data
  • Sharing users’ emails with their business partners
  • Creating exit nodes and botnet
  • Selling the free users’ bandwidth 

If you’re looking for a fantastic browsing experience with a VPN, your best bet is going for a paid one. After all, the convenience, privacy, and security are worth the few bucks you have to part with.


Mark Lewis

Security nerd with a Data Privacy First mindset!

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