They're free because they're either gathering more data or trying to capture the market.

Which are surely, totally not ingesting every iota of data they can get their hands on (legally or not, including your prompts) for training and the soon-to-be born “embedded ads”.

and who is funding them? how are they paying for their servers? a product can't be free, someone somewhere is paying for it. the main question is why are they paying for it.

No such thing as a free lunch.