if you have enough money, it's a common strategy to make a free product to attract users. Once you have an important user-base, your company has a value
Even if you don't have a lot of money, you can probably run a niche product like that for little money, as long as it doesn't get too popular.
So the upsell comes later?
Of course!
not always. i'd be happy to throw a little money at hosting a ton of stuff if it served as a load-test for my work. unfortunately, trying to find something to give away that other people will use isn't as easy as one might think