There's all the Redhat / enterprise open-source examples, but I'm specifically talking about consumer web products. Redhat's product is enterprise infrastructure.
There's free as in a trial or limited functionality to get you to buy the premium offering, but then the business model isn't really based off a free product... the free product is a promotion, not a business model.
You can have one group of premium users subsidize all the free users. In social, the main examples would be LinkedIn or Angelist, but again, access to the user data is the product these companies eventually sell.
There's Wikipedia, but that's a non-profit. Nothing wrong with that, people make a living that way and we need more like it, but I'm talking about companies where profits can serve as a strong motivator. This also excludes government services.
Maybe Google Maps qualified as free in the beginning, but any free service that Google makes is pretty much some clever way to acquire more user data to support other parts of the enterprise. HN itself falls under this category: HN is an ingestion pipeline for YC (the YC app asks for your HN handle, hello future YC app reviewer!).
I know it's a trite and a tired saying, but it really is true: if you're not paying for it, you are the product. That's not bad per-se... another way of looking at it is in the same way the sharing economy unlocked underutilized physical assets, these services have unlocked a new source of wealth not measured by our wallets: our attention. Lets describe it as we pay for these services with our attention-dollars.
My point is anything that's a "free consumer service" business model is really some kind of machine that converts attention-dollars into cash-dollars.
I would love to see a discussion of non-cash-dollar, non-attention-dollar business models. If you can think of a way of giving away Something that People Want (TM) for free without the corrupting influence of optimizing for their attention, well, you've found the next genuinely interesting unicorn.
I'm certainly not an expert on this subject but monetizing based on relevant content is reasonable. You can still make money without gathering a tremendous amount of user data.
This was about the other half of the reply that hasn't been explored. Lets make threads here more interesting than an infinite uh-huh!/nuh-uhh!/uh-huh! loop.
You should probably stop using the word "legally" in this context. There have been thousands of companies over the decades that put other things before shareholder value, and somehow managed to not run afoul of the law.
Also, it might help if you provided a citation to this law to bolster your argument.
And there hasn't been a business model that provides a free consumer web product without monetizing user data.
Also false.