In this case, I expect the ad-revenue driven model will work, because the ads aren't ridiculously disruptive. You don't need to do anything extra to use them; just go about your business as your peripheral vision takes in an advertising message. (You're not going to use a Firefox plugin to disable those ads, are you?)
Plus Google is providing a service that's more difficult to come by for free. Remember: It's not just the applications; there's the management UI and customizeability.
Ad revenue also works for media sites like, say, InfoWorld.com. Those flashing squares and rectangles you see to above and to the right? They're not there simply for your entertainment. But they're (generally) not disruptive.
I do apologize to the good people at SpiralFrog for my gloomy take on their still-unborn service, though I'm not the only person to have made one. And hey, SpiralFrog won't release the service until December, so it has some time to refine its plan, if necessary.
What do you think? Is Spiral Frog a good model for an ad-revenue driven business?