Amy Wohl offers ideas on how to make money through software-as-a-service:
Advertising: Consumer-oriented SaaS generally is given free to customers. The idea is to build huge volumes of users and then to make money by directing paid advertising to them as the “fee” for using the “free” software. This model has already been perfected by Google and Yahoo and Microsoft is eager (might we say anxious) to join them. While some would call Microsoft late to the market, others, such as tech writer David Coursey thinks the market is so nascent that Microsoft could still come in (as it did with the Internet Browser market) and take over. You can read his thoughts here http://www.eweek.com/article2/0,1895,1885565,00.asp
A Two-tier Model : ISVs who are offering consumer or small business software for free against an advertising model often hope to convert some of their users to a premium SaaS. This could be as low-key as a small monthly fee for an advertising-free version of the software. But it might be a much more feature-rich version of the product, with lots of goodies,as well as better support reserved for paying customers.
Subscription Models: ISVs who offer sophisticated software to larger businesses are generally not interested in advertising models. They expect to charge for their software on a subscription basis. There are, however, so many varieties of subscriptions that choosing the right one(s) to offer is quite a trick.