Web 2.0 properties or free websites/webpages used to be a cornerstone of many SEO's campaigns especially when they are just starting out back in the early 2000's and even in the late 2010's. But with the all the google updates its made them far less effective than before so the question remains.
Are they still useful now, if so how, and will they be going forward?
These days there are many supposed experts who claim that they are a complete waste of time. But I think that entirely depends on how you look at it and what its purpose is. So let's look at the reasons why someone would use a free domain as well as the pros and cons.
Why use them?
1) SEO benefit- The back-links from the web 2.0 site to the linked site could potentially help the site that you are linking to get ranked better. This assumes that back-links help at all which we still know to one of the factors that help sites rank. You also need to take into account anchor text and do-follow or no-follow links as well.
2)Traffic-You can potentially get traffic from the web 2.0 sites through getting them ranked by Google on their own. Since they are on subdomains or pages within domain they can potentially get ranked easier due to the domains authority. Medium is a good example of this as well as quora or Reddit. Doing any number of queries that are questions will inevitably bring up one of these sites that are regularly ranked on the first page of google. If you have a brand new site that has no rankings this can be a shortcut to getting SEO traffic faster because we all know that SEO traffic takes time and is never a guarantee.
Pros
1)No cost to test out ideas- If you are new and starting out with little to no budget and you aren't sure if this is even for you then this provides almost no cost to test things out. The only cost is your time. I like to use them to test out back-linking strategies or software that may or may-not be Greyhat/Blackhat type stuff.
2)Ease of use. You don't need to hassle with hosting issues and the majority of the theme design is good enough to get the job done.
3)You can make money from these free websites. I have made more than 6 figures with free websites.
4)You can use these free websites to help rank other more authoritative websites
5)You absolutely can get traffic including seo traffic to free domains. I can literally show you 1000's of examples of Facebook groups, FB pages, Medium.com, WordPress.com, Blogger.com etc etc ranking either #1 or in the top 5 for many kw terms that are getting decent amounts of traffic.
In fact I currently have a ranking in the 2nd position for a term that gets roughly 4000 uniques a month. In another case I have a WordPress blog ranking for over 2000 kws terms. About 20% of them are directly buyer kws and in total its getting around 5k a month uniques across all those rankings. It only took me 12 months to get all those also. I have gotten on the first page for terms within a week and stayed there for literally years. Of course the landscape of the search engines changes over time and it will bounce around. There is also always the potential that Google could banish them or penalize them.
Frankly I focus on other traffic methods and seo comes last just because it takes so long and its so unpredictable. Oftentimes I'll run a paid campaign first to test out the potential to make money, if it passes then I'll start finding ways to rank for that term although some are obvious buyer kws and there isn't always a need for that.
Cons
1) You don't own it so it could just disappear overnight with no warning if for some reason the company shuts down. Squidoo comes to mind. At one point I had several hundred lens that all disappeared and I lost 1000's of visitors a month because of this. The company might do something to piss off Google and then all subdomains go along with it. And believe me the attrition rate of websites is very high over a 5-10 year period. This is easily countered though by backing up your work( content) onto your hard-drive. If course the back-links will be lost or need to be changed
2) They don't look as professional. Anyone who knows anything about websites will know right away that its a subdomain. Likely even know its a free website. This could hurt your credibility. I would argue that this only could happen though for first timers coming to your site/blog though. Some people have no idea though. I literally ran ppc campaign to a squeeze-page on a blogger account and split tested it with a regular website with a legitimate .com. There was very little difference in conversion rates between the 2. Of course that depends on many factors like the market you are in but still it makes the point that this can work I would argue that the quality of your content will win them over in time.
3)Can be Harder to get monetized on free domains- I say harder but it really isn't that much harder. Some cpa programs and display program won't allow their ads on free subdomains as they view it as being spammy or unprofessional.
4) Can be harder to get back-links on free domains- I say harder but again it really isn't that much harder. Again many directories and even in comment sections of websites wont allow back-links to free subdomains.
5)And a big one. It can be harder to rank in the search engines with free domains than primary domains. But yet again you can still get ranked for lower competition kws with free domains.
6)You can't sell these later except maybe on the black market to another webmaster and even if you can they won't fetch as decent a price as a nice .com domain usually does.
This webpage that you are reading this right now is on a blogger blog. Its free. I paid nothing for hosting. The fact that you are reading this right now should tell you that I found a way to reach an audience. Think about how you got here. What link and where did you click on to get here?
In conclusion
If you are new and want to test out this internet thing then i would argue this is the best way to go until you've decided to go all in. You can transfer most of these free blogs like blogger blogs to real web-hosting and pay for the domain transfer later or just start over fresh.
If you have some experience and already have a domain then These are still useful in providing back-links. Just make sure the content is original and non spammy. Update them regularly. I normally will make 12 articles then schedule them to be posted 1x a month for each of those sites the set them up to automatically get pinged . They can be good as so-called feeder sites to get rankings for long tail kw terms and then send traffic to our main site. These backlinks can be very good long term as well.
You can find a list of free domains here