Spiceworks: Social IT with Advertising – A Winning Combo?

Earlier this week, Spiceworks took a big step in proving that ad-supported network management tools provide a new world of social IT services that are Web-based, free and even well-liked in the IT community. The company closed $16 million in Series CS funding from Institutional Venture Partners (IVP.) The round included participation from existing Spiceworks investors Austin Ventures and Shasta Ventures.

With most online applications, the model works like this: You sign up for a free, Web-based trial. You give it a go for 30 days. If you like it, then you pay for the service on a per-user basis.

Almost every SasS provider we talk to uses this model. The model is so predominant that you could end up paying thousands or tens of thousands of dollars in monthly fees for Web-based services. The best plan is to know exactly what you need so you can be efficient with your use of these services. Still, the costs can become substantial when you consider your business requirements.

That’s what’s interesting about the Spiceworks approach. It’s a free Web-based application that is supported by advertising. You can pay if you prefer and block out the advertising. The model seems to work. IT users get an application that helps manage their networks and in return are served with relevant advertising.

More than 850,000 people have signed up for the service from 196 countries. It’s attracting 1,000 users per day.

Technology companies seem to be interested. Spiceworks has thousands of partners developing plugins such as the Intel power manager released last year.

Does the Spiceworks approach make sense for Web-based application providers serving the enterprise market? Maybe so. If the advertising is relevant and helpful, perhaps application providers can extend past the free-now-pay-later model that is now so predominant.

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