The first freebie site saw the light approximately 4 years ago. Since then, millions of users have signed up for them and business owners have multiplied their offerings a thousand fold. The industry continues to show tremendous growth as browsers cant get enough of these sites and the people that run them are capitalizing big time.

The basis of this business model is a simple one: incentivized, or forced leads. Lets try and make those industry terms clear for the layman. It all begins with online advertisers of the CPA variety. Advertisers in all shapes and sizes offer a CPA or Cost Per Acquisition payout to affiliates that promote their offers. When a user signs up for one of these offers, the affiliate makes a commission.

Here is where the incentivized part comes in. The affiliate, in this case a freebie site owner, shares this commission with the user that generated it. This sharing takes many forms including gifts ranging form the original free iPod to free Xbox 360s and just about anything in between. Cashback rewards have also become increasingly popular and some users have made over $10,000 in easy money just by completing various affiliate offers on freebie sites.

Beyond the opportunity to make free money or earn a gift, these sites have something else working in their favor that make them spread like wild fire: viral marketing. Word of mouth for these literally spreads like a virus, from one person to their social network and so on. The reason for this is that freebie sites offer rewards to users who refer new users.

On one side of the business model, users are required to complete one offer themselves and refer a set number of friends to do the same so they can earn their free gifts. On the other side, users earn a fixed cash bonus for every person they refer to the site.

Thats all well and good from the users perspective, but what makes this model so attractive to the business owners that run these sites? The simple answer is of course money. Here is how these earnings break down.

In this first example, the site owner is offering a Video Ipod for 8 referrals. This means the user has to sign up to the site, complete one offer and refer 8 of their friends or family to do the same. Once this process is complete, they receive their gift. Here is the catch: 90% of users can fill an offer and refer one, two, three friends. Then it gets hard and unless the user in question has a huge social network or knowledge of how to get more referrals through forums or advertising, it pretty much stops there. In this case, the site owner has generated an average of $25 to 30 per completed offer and has not shipped a gift. Thats $25 to $120 in profit without doing a thing.

For this second example, the site uses the revenue share principle. When a user completes an offer, they get 60% of the commission money. With thousands of dollars in offers up for grabs, the site owner is pocketing 40% of hundreds of dollars per user.

Both models have a third stream of revenue which is more or less exploited according to the knowledge and savvy of the particular site owner. Freebie sites can generate thousands of signups per week. That means thousands of optin email addresses that can then be marketed to. Smart site owners will choose the right offers to present to this ever growing list and be on their way to opening up another extremely viable source of income.

Here comes the dark side. Spammers have caught onto this principle and instead of using lists wisely, have thrown every offer in the book at their users until they turned away in disgust. Some of the largest operations have even sold customer lists with millions of names to known spammers in exchange for a quick buck.

As the industry forges ahead, the sites that promote integrity and originality in their offerings will reap long term rewards while seeing steady growth for years to come.