ASP (Application Server Provider) marketplaces provide a fundamental alternative to the classical business model of software licensing. At this point, it is still unclear why and when customers prefer the ASP model over more traditional approaches. To make ASP more attractive, more knowledge about possible pricing and product strategies is needed. In this paper we describe different business models for ASP marketplaces. We first compare the cost structures of the classical licensing model with the new server-based approach. Then we illustrate how price and product differentiation may improve overall market efficiency. In particular, we show that by selling different software versions for different prices, ASP marketplaces may obtain near-optimal revenues with products that are relatively inexpensive, disaggregated, and customizable. Consumers can thus choose between a wide variety of product lines to fit their differing budgets and requirements.