Fred Wilson at A VC has a post about how some businesses are making money with free services.
Definitely worth a read, and be prepared to do some thinking once you do read it.
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Befuddled 
In talking about how businesses can generate revenue from the internet, advertising revenue models are not the only ones out there. If you offer a free service to consumers that is objective, free from advertising, and truly helpful in some way, consumers will use the service and benefit. The revenue model succeeds because you can then develop sophisticated tools to analyze the consumer preferences yielded by consumers visiting your web site, and sell the market intelligence about these consumer preferences to manufacturers and service providers who always are in need of up to date information about what consumers want. Go to myproductadvisor.com to see such a site in action. We offer shoppers help in selecting products like automobiles, digital cameras, televisions, laptops and cell phones. It is free and completely honest and friendly for the consumer. And the brand manufacturers learn about consumer preferences and are able to make successful marginal decisions that help them meet demand for their products.