How VPN Companies Make Money
Servers Cost Millions. Who Pays?
Hey, Ech here. Maintaining thousands of encrypted servers across 100 countries is expensive. Extremely expensive. If a service claims to be "Free" or suspiciously cheap, they are finding that money somewhere else. Understanding how a VPN works financially is the first step to protecting yourself. Here are the 7 ways these companies generate revenue.
Model #1: Recursive Subscriptions (The Honest Approach)
This is the most transparent model. You pay a monthly or yearly fee, and the company uses that money to maintain servers, pay developers, and provide customer support. Because the user is the paying customer, the VPN has a financial incentive to protect your privacy. If they fail, you cancel.
Top-tier providers offer varying plans. While monthly plans are pricey ($10-15), long-term commitments (1-2 years) offer significant discounts. This predictable revenue stream allows them to offer features like high-speed VPN streaming servers and unlimited bandwidth without selling your data.
The Math of Privacy
A reputable VPN charges roughly $3.00/month if you buy 2 years upfront. This revenue covers the high cost of bandwidth. If a service has zero subscription fees, they must find that money using one of the darker methods below.
Model #2: The Freemium Upsell Funnel
This is the classic "try before you buy" strategy. A company offers a free version of their VPN, but it is heavily restricted. You might have a 500MB data cap, throttled speeds, or access to only 3 server locations. The goal isn't to give you a free service; it's to annoy you enough that you upgrade to the paid plan.
This is generally a safe model if the company also has a strong paid product. They use the paid users to subsidize the free users, treating the free tier as marketing cost. However, be wary of limits that make the service unusable for heavy tasks like online gaming with a VPN.
The Frustration Factor
You download a free VPN. It works for 10 minutes, then cuts off right in the middle of a movie. A popup appears: "Upgrade to Premium for Unlimited Data." That frustration is the primary feature of the free tier.
Model #3: Selling User Data & Logs
This is the most dangerous model. Many "free" VPNs—especially obscure ones on mobile app stores—admit in their fine print that they collect "metadata." This can include your browsing history, your device ID, and your location. They package this data and sell it to third-party advertisers and data brokers.
In this scenario, the VPN is effectively acting as spyware. Instead of protecting you from your ISP tracking you, the VPN is doing the tracking itself. This is why knowing how to protect your online privacy involves reading the Privacy Policy, not just the price tag.
The Hidden Log
In 2013, a study of free Android VPN apps found that 75% used third-party tracking libraries. You save $5 a month, but an advertising profile containing your health searches, political views, and location history is sold for profit.
Model #4: In-App Advertising & Injection
If you aren't paying with money or data, you are paying with your attention. Many free mobile VPNs monetize by forcing you to watch ads. Before you can connect to a server, you must watch a 30-second video. Want another hour of connection time? Watch another ad.
Even worse, some unscrupulous VPNs practice "Ad Injection." They inject their own ads into the websites you browse, replacing the site's legitimate ads with their own. This not only steals revenue from content creators but often breaks the website layout and slows down your experience.
The Ad Fatigue
A user tries to connect to public Wi-Fi quickly. Instead of security, they get a loud, unskippable video ad for a mobile game. By the time the ad finishes, the moment has passed. This is common in mobile VPNs.
Model #5: The "Lifetime Subscription" Cash Grab
You may see offers for a "Lifetime VPN Subscription" for a one-time fee of $40. Avoid these. Running servers costs money every single month. A one-time payment is not a sustainable business model. These companies need a constant influx of new users to pay for the bandwidth of existing users—effectively a Ponzi scheme.
Eventually, the cost of supporting thousands of "Lifetime" users exceeds the revenue from new sign-ups. The company then shuts down, disappears with the money, or sells the user database to cover debts. Check our guide on whether cheap VPNs are safe before falling for a lifetime deal.
The Exit Scam
A provider offers a $20 lifetime deal. 10,000 people sign up ($200k revenue). The server bills are $10k/month. After 20 months, the money runs out. The service "suddenly" shuts down, and the lifetime subscription becomes worthless.
Model #6: Corporate B2B & Dedicated IPs
Many consumer VPNs have a separate "Business" arm. They sell enterprise-grade solutions to companies that need to secure their remote workforce. This includes features like Dedicated IPs (a static address just for that company) and team management dashboards.
This is a highly lucrative and legitimate revenue stream. Business clients pay a premium per user and sign long contracts. This revenue often helps subsidize the infrastructure for the consumer side of the business, leading to a more stable overall network. See the best VPNs for businesses to see who targets this market.
The Enterprise Whale
While a consumer pays $5/month, a business client might pay $10/user/month for 500 employees. That is $5,000/month from a single client. This stability allows the VPN provider to invest in better hardware for everyone.
Model #7: Affiliate Marketing & White Labeling
Some VPN companies maximize their server usage by leasing their infrastructure to other brands. This is called "White Labeling." A security software company might want to offer a VPN but doesn't want to build towers; they rent the network from a major provider and slap their own logo on it.
Additionally, the entire industry runs on Affiliate Marketing. When you read a "Top 10 VPNs" list, the site usually earns a commission if you click a link. This incentivizes VPNs to offer high commissions to get better coverage, which fuels their user acquisition machine.
The Infrastructure Rent
Company A builds a massive network. Company B rents it. Both profit. This ensures the servers are always running at capacity, maximizing the return on investment for the hardware.
Frequently Asked Questions
Are all free VPNs selling my data?
Not all, but many do. Reputable "Freemium" VPNs (like Proton or Windscribe) utilize the free tier as a marketing tool and do not sell data. However, completely free VPNs with no paid tier have no other way to make money, making data sales highly likely.
Why is running a VPN so expensive?
Bandwidth is the biggest cost. Every time you stream 4K video through a VPN, the provider has to pay for that data transfer. Add in the cost of physical servers, developers to update the encryption protocols, and legal teams to handle international compliance, and the overhead is massive.
Is a Lifetime Subscription ever worth it?
Almost never. The economics simply do not work. If you buy a lifetime subscription, you are betting that the company will go out of business before you get your money's worth. Stick to yearly plans from sustainable companies.
Do VPNs make money from government surveillance?
There is no evidence that major commercial VPNs are funded by governments, though conspiracy theories exist. However, in authoritarian regimes, state-approved VPNs almost certainly share data with the government as the "cost" of being allowed to operate legally.