Internet Capital Group (NASDAQ:ICGE) has the misfortune of being in two out-of-favor spaces: enterprise software and holding companies.

The company does continue to grow. In the second quarter, revenues increased from $9.8 million to $16 million. However, there was also a net loss of $7.8 million, or $0.21 per share, which was off from a net gain of $1.1 million, or $0.03 per share in the same period a year ago.

ICG has major ownership positions in nine core companies, with an average ownership rate of about 48%. One of those companies is StarCite, which develops software that helps companies to manage meetings and events. Clients include biggies such as Akamai Technologies (NASDAQ:AKAM) and Merrill Lynch (NYSE:MER).

Another of its companies is ICG Commerce, which develops procurement software. Nordstrom (NYSE:JWN) uses this software to automate its large supplier purchases and has saved $25 million over the past two years as a result.

ICG's companies primarily use the on-demand model, which means the software is delivered through a Web browser and has a business model of ongoing subscription payments, rather than upfront licensing fees. Upstart companies such as (NYSE:CRM) and NetSuite have made the on-demand approach popular.

Still, ICG's model has a variety of problems. First, while several of its core companies are generating operating profits, ICG has been buying early-stage companies that take time to reach critical mass and require large investments. The result is that the main company has a tough time reaching sustained profitability.

The ICG model also relies on realizing gains from a sale or IPO. True, this approach can certainly ramp things up from a financial standpoint. For example, the company has $92.5 million worth of holdings of Blackboard (NASDAQ:BBBB), GoIndustry, and But the downside is that such monetizations are unpredictable. And the IPO market has been lackluster lately, as have mergers and acquisitions in the tech sector.

The model may result in strong gains over the long term -- in the next three to five years, perhaps. But that's just too iffy for investors, who believe they have waited too long to see profitability. Until ICG demonstrates that its model can produce consistent profits, expect the stock to do as it has done for a year now -- trade in a range of $8 to $9 a share.

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Fool contributor Tom Taulli does not own shares of companies mentioned in this article.