Reaching users is incredibly expensive (once you have the audience, you can charge others to access it - see how it works), conversion rates are low and consumers are reticent to spend.
By being free your product becomes your marketing. You either have a paid product and start paying $50-500 to acquire each user, or you have a free product and pay $0.05-10 to acquire each user.
You can't just cut out the free product part and magically retain the paid part, as this example does with Everpix.
There is also an element of network effects in a lot of consumer business models, with a winner-takes-all (or most) landgrab.
Things are entirely different in the enterprise sector, or selling to people at work.