Google likely benefits hugely from providing the service for free. The massive amount of data it provides about user behaviour across the public Internet must be hugely valuable to them.
I always thought the real goal of Google Analytics was to upsell me into using Adwords, and to prove once and for all that there's no point in optimizing for any search engine except for google.
the real goal of free Google Analytics is to get people to place the javascript tracking snippet on their webpages so they can collect data for Ads and now paying customers.
