More Misplaced Glam Exhuberance

Next Story

I, For One, Welcome Our Android Overlords

Ad network Glam got a glowing review from Jeff Jarvis today. And he’s not the only person out there that likes them – word is they closed the big round of financing they’ve been trying to raise, at a $450 million valuation.

I mentioned that they were raising money in an August post. In that post I heavily criticized the company for trying to claim it was the largest womens site on the Internet, as well as the fastest growing U.S. web site. In their offering document, they said “Glam Media is a Web 2.0 distributed media company that is number one in reach for women as reported by comScore Media Metrix…Glam Media is the fastest growing web property in the United States…”

But Glam isn’t really the largest women’s site on the Internet – not by a long stretch. Rather, it’s a collection of a few sites that they own that generate some page views, plus a big ad sales team that sells ads for 600 or so other blogs and websites. In August the company claimed 19 million monthly visitors, but just 3.4% of them (654,000) actually visited Glam.com. The company will lose about $3.7 million this year on $21 million in revenue.

The company still claims to be the largest women’s site on the net, and still talks about those big unique visitor numbers. But their real position is much different – they rely completely on their partners for page views and advertising inventory.

Jarvis says Glam only had to “fire” one content partner this year. That suggests the power in the relationship sits entirely with Glam, when in fact the opposite is true. For now, many of their partners have few choices in selling ads.

But competition is clearly coming (Sugar, Inc. is going in this direction, for example). And when publishers have multiple choices for ad networks, they’ll start asking for guarantees and better margins. That will cut into Glam’s already unprofitable business model.

Not only will competition hurt Glam, but their network partners will leave them once they grow to a certain size. As soon as it costs less to simply hire a salesperson instead of paying Glam 40% of revenue, they’ll leave.

So while I think Glam is great, i don’t see them as the redefinition of new media and I do see some real problems with their business model. Whoever creates the content and the page views owns the real assets. Whoever sells their ads for them is little more than a service provider.

blog comments powered by Disqus