Why can Robinhood offer trading without commissions?

All discount brokers offer a commission structure that is based on the average kind of order that their target audience will make. Different brokers advertise to different target audiences.

They could all have a lot lower commissions than they do.

The maximum commission price for the order ticket is set at $99 by the industry securities regulators. When discount brokers came along and started offering $2 - $9.99 trades, it was simply because these new companies could be competitive in a place where incumbents were overcharging.

The same exists with Robinhood. The market landscape and costs have changed over the last decade with regulation NMS, and other brokerage firms never needed to update drastically because they could continue making a lot on commissions with nobody questioning it.

The conclusion being that other brokers can also charge a lot less, despite their other overhead costs.

Robinhood, like other brokerage firms (and anyone else trading directly with the exchanges), are paid by the exchanges for adding liquidity. Not only are many trades placed with no commission for the broker, they actually earn money for placing the trade. If Robinhood was doing you any favors, they would be paying you. But nobody questions free commissions so they don't.

Robinhood, like other brokerage firms, sells your trading data to the highest bidder. This is called "payment for order flow", these subscribers see your order on the internet in route to the exhange, and before your order gets to the exchange, the subscriber sends a different order to the exchange so they either get filled before you do (analogous to front running, but different enough to not be illegal) or they alter the price of the thing you wanted to buy or sell so that you have to get a worse price. These subscribers have faster computers and faster internet access than other market participants, so are able to do this so quickly.

They are also burning a lot of venture capital like all startups. You shouldn't place too much faith in the idea they are making [enough] money.

They also have plans to earn interest off of balances in a variety of ways and offer more options at a price (like margin accounts).

They make money off you by increasing the spread you buy and sell your stocks through them.

So for example, if the normal spread for a stock was $10.00 for a buy and $10.02 for a sell, they might have a spread of $9.98 for the buy and $10.02 for the sell. So for an order of 1000 shares (approx. $10000) they would make $0.02 per share which would equal $20.00.

They mostly make money off of the spread between your order and the spread of the buy and sell currently in the market. As others have previously explained, their buy/sell spreads are a little lacklustre.

Robinhood does offer premium products that they charge for-I suspect we will see more of that in the future. They do not change the bid/ask spread as some have said because they have to give you the NBBO.