You notice a gap in a commoditized market, the current market leader isn't satisfying its users and a growing majority are complaining about how hard their product is to use and how annoying the ads are.
You start small, a simplified interface that emphasizes function over form, no ads to annoy your users and a liberal use policy that makes it easy for your users to fit your product to their needs. People start talking about you, and more importantly, they start using your product. A small but growing group of users can't get enough and start telling their friends about how great your product is over all the other products in the market.
Every month more users keep coming, favoring the ease of use and no hassle simplicity of your product over your competition, not to mention the lack of ads your product currently has. You hire more people, you add more servers, and people just keep coming, they love your product.
After a while, you're huge, you're now the main product on the block and all your competition has faded away into obscurity and also-rans. Some Venture Capitalists take notice and approach you to see if you can turn your product into a real business.
You believe what they are selling you and raise a huge round of funding. You're different, they say, you're special. Sure, your product is free and commoditized, but you've built an audience. You're going to transform all those eyeballs into revenue.
In order to do that though you'll have to make a few changes. You remove a feature here, tweak a policy there. All necessary changes in order to lock down your product for advertisers. A small group of users start to complain, but you don't pay attention. Your changes are working, you're monetizing your audience. You knew some would leave, but everything is going according to plan.
Fast forward an unspecified time in the future. Some random person notices a gap in a commoditized market, the current market leader isn't satisfying its users and a growing majority are complaining about how hard their product is to use and how annoying the ads are...