Many oft used online services are offered for free and consumers implicitly accede to tracking for customized services. Targeted ads are a part of the emerging revenue/profit model for such service providers (SPs), especially those offering free services. Consumers are delighted by free services until they begin encountering privacy violations on a daily/frequent basis. As a step to address consumer privacy concerns, this work addresses the competitiveness of free online services providers (SPs) to offer privacy- and quality-of-service (QoS) differentiated services. Building upon the classical Hotelling model for markets, a parametrized model for SP profit and consumer valuation of service is presented for both the two- and multi-SP settings. It is shown that when consumers place a high value on privacy, it leads to: (i) a lower use of private data by SPs; (ii) a larger market share for those SPs providing untargeted services; and (iii) SPs with smaller untargeted revenue offering lower privacy risk to attract more consumers.