The PJM Ad Network is no more, and when you do the math it doesn’t really make sense.
First, to understand why people are so upset right now you have to know that PJM forced their bloggers to accept NO other advertising dollars if they wanted to be part of their ad network. So BlogAds, AdBrite, Google Adsense all had to be stripped from their sites. Only PJM ads could show up.
And so many conservative bloggers bought in and agreed to collectively display ads across their blogs and split the profits based on some sort of distributed model that paid out percentages of the total money made based on monthly traffic.
PJM founder Roger L. Simon addresses the situation today and in doing so attempts to put the blame on the bloggers for not creating enough value:
Actually that part of our business has been losing money from the beginning, so the people getting their quarterly checks from PJM were getting a form of stipend from us in the hopes that advertisers would start to cotton to blogs and we could possibly make a profit. DidnÃ¢â‚¬â„¢t happen. No wonder those people are kicking and screaming now that they are off the dole. I might too. [What's their beef? I thought most of them were free marketeer libertarians or something.-ed. Go figure.]
So is Simon actually claiming that he paid bloggers more money than was coming in?
I’m sorry folks, but this explanation doesn’t add up.
If you’re not familiar with how advertising works, the most popular ad models on the internets are Cost Per Click (CPC) or Cost Per Impression (CPM). They’re pretty self explanatory and PJM’s ad network was CPM. And with CPMs, ad rates are determined for every 1,000 impressions. So let’s say Donklephant gets 100,000 page views (impressions) in a month and the ads I’m serving up pay an average of a $1 CPM. The math is pretty easy at that point. Divide 100,000 by 1,000 and multiply that number (100) by the CPM rate ($1). Result = $100. Not a lot of money, but at least it covers hosting.
Well, PM claimed they had 29,000,000 impressions a month, and their “Above The Fold” ads have a CPM of anywhere from $7 to $4. So let’s just split the difference and say the average PJM network ad made a $5.50 CPM.
Take 1,000 into 29,000,000 and you get 29,000. Multiply that by $5.50 and you quickly see that PJM was pulling in $159,500 a month or $1.914M a year. Now, that assumes 100% ad capacity utilization, and that’s not realistic. But even at 50% capacity utilization you’re still looking at almost $1M a year.
And this is where things start making less and less sense.
Because here’s what you do when money isn’t coming in…cut back on how much you pay your bloggers. It’s a pretty simple formula and one that every other ad network online has figured out. Also, very few of the PJM network bloggers were actually making a living off of this thing, nor did they expect to. So instead of shuttering the entire operation, Simon could have easily just cut back on how much money he was paying out.
And sure, there had to be operating costs, but running a site like PJM and an ad network is not a massive operation. The staffing model is distributed by its very nature and can easily be managed by 5 key staff and a network of part time contractors. And even if their operating costs were $500,000 a year, with the 50% capacity utilization I was talking about before they’d have a nice tidy sum of $250,000 of profit and $250,000 left over to pay out to their bloggers.
So going back to why this doesn’t add up…either Simon paid bloggers more than they actually made, which is INCREDIBLY dumb, or he’s lying and just wants to focus on PJTV, which I think is probably a lot more likely. Also, the PJM news portal will remain as is with staff to support it. So where do you think the money to start up PJTV and keep PJM going came from? It doesn’t make ANY financial sense to shut off the ad network and keep the other sites going.
Going forward, will this have a chilling effect on the right-wing blogosphere now that many will be left without enough income to justify blogging? It seems to be that way for Jeff Goldstein because he’s claiming he’s out of work and will need to do something else. Still, I think conservatives were blogging before PJM and they’ll be blogging after.
Oh, and about the whole PJTV fever dream…this from the highly conservative Atlas Shrugged:
And so now the focus is Pajama Television. Have you seen the line-up? Can you rattle off the VLOG talent? Are they still charging for it?
Agreed. Especially if you’ve seen the stuff they’re cooking up over there. The content is AWFUL, as is evidenced by the recent JoeThePlumber/Gaza epic fail. Why anybody would pay to watch it is beyond me.
Regardless, even though I don’t agree with many PJM bloggers, I do feel bad for them. This wasn’t fair, and Simon’s incongruous explanation and then slamming them for not accepting his decision given that they’re libertarians is really classless. Because the reality of business is that when you enter into an agreement with people that states they have to give up ALL of the other revenue streams and now only rely only on you for income, well, they actually believe you’re going to manage funds correctly. Not only that, people start counting on the money you give them to plan their lives. Go figure!
But hey, now this will force them to pick themselves up by their bootstraps and find other avenues. I mean, I’m sure there are plenty of blogging jobs out there, right?
The free market will provide.
This entry was posted on Saturday, January 31st, 2009 and is filed under Blogging, Business, Conservatives. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.