And I don't get what difference makes being a free service or not, government will tap exactly the same.
People are the supplier, not the product.
What ads you end up seeing could be based on a whole range of your personal data, usage history, and the subject matter of your own content. In many ways, these details about you make the ad spaces more valuable than if they were just random ad spaces.
Perhaps then, "your life is the product" is more accurate than "you are the product".
It is still ad space what is being sold
The ad space seller arranges a stealthy introduction between ad space buyer and Dave user. Without needing permission because Dave "agreed when he started using our free service, that we could change the terms at any time, do stuff in the background to keep the business running etc" a silent on-going relationship is established without Dave being reminded of that persistent connection.
We now have default permission granted to contact list and personal details when installing some apps. I hope the rumored Android 4.3 selective permissions control per app is true.
What a great day for privacy that will be when we can stop apps bullying their way into our [contact list + internet access] when that isn't needed for the app to work.
The marketing-programming that is entering apps, whereby an impolite, unchecked persistent tracking, ad placement, additional purchase persuasion spamming and infiltration of our private data is happening, you don't need a tin foil hat to justify a few concerns.
as if this were not enough, all of my words were made immortal by means of tape backups. furthermore, i was paying two bucks an hour for the privilege of commodifying and exposing myself. worse still, i was subjecting myself to the possibility of scrutiny by such friendly folks as the FBI: they can, and have, downloaded pretty much whatever they damn well please. the rhetoric in cyberspace is liberation-speak. the reality is that cyberspace is an increasingly efficient tool of surveillance with which people have a voluntary relationship.