Until September of last year, the tried and true revenue model for consumer Internet services was on-line advertising. The model - page views, unqiues, and CPMs - is well understood and sites looked to use direct sales and ad-networks (read Google) to monetize traffic and impressions.
The cooling of the on-line ad market, flight to quality for advertisers (ESPN, etc), and the realization that ad revenue may not scale forced many consumer services to consider charging their users for access to functionality and value.
While SaaS is a well-defined success story in the enterprise space, it was considered a virtual truth that on-line users would not pay for on-line services. Why? - free substitutes, ad-funded business models, and a general end-user belief the web should be free, etc.
Today, "freemium" is on the rise and there are great teams across the valley working to monetize via micro-payments and subscriptions.
LogMeIn's IPO provides insight into the power of direct-to-consumer subscription services, as have traditional success stories such as anti-virus (SYMC, MFE).
However, there are many good examples of the consumer SaaS trend
I expect to see more services looking to move to charging users and to significant innovation in optimizing subscription revenue.
Here at Widgetbox, we use a AAA model to manage the business:
- Acquisition - driving new registered users
- Activity - driving activity, conversions, and value per user
- Ads - monetizing "free usage"