Dan, this does indeed change a lot and I’ll be sharing an extensive breakdown of this situation tomorrow morning. The post is extensive, but I think it proves my previous assertion that for PJM to be running at a loss from day one is almost inconceivable from a business standpoint.

What this means is that sites like IP and Malkin consumed an awful lot of the money. Good for them, bad for the rest of us.

One network I talked to offered $3 CPM, guaranteed, but if you read through the contract, it didn’t quite work that way. They estimated the # of impressions you could serve for a year, and wrote you checks in four installments at that impression amount times the $3 CPM. You agreed to send them at least that many impressions throughout the year.

But that check was as an advance against a rev share. So unless the network was able to consistently sell ads at >$5 CPM ($3 to publisher after share), there’d be unused parts of that advance after the threshold impression number lapsed. As this was an exclusive contract save for direct sales sourced by the publisher, all impressions after the threshold one had a value of $0.

That may sound onerous, but for larger publishers, it isn’t. If I’m doing 10MM impressions a month, guaranteeing $30k in monthly revenue is probably a huge win for me. And the odds of me having a month with 3x impressions is virtually zero.

On the other hand, for small publishers, it’s a big risk. Let’s say you’re doing 150k impressions/month. Guaranteeing yourself $5k in annual revenue is great. But you could very easily have a day where one of your posts goes absolutely crazy and draws 250k itself. Or maybe your blog traffic grows and suddenly you’re doing 500k imp/mo. All that growth just lowers your effective CPM. Kinda sucky.

Whoa. :-)

Yeah, who wouldn’t want to pay $25 a month to see those all-stars?

I didn’t say they were paying out $4-$7CPM to their bloggers. I’m saying they were charging $5.50 CPM to their advertisers and most likely selling 50% of their space and then giving a portion of that to their bloggers. But your numbers are sobering if they did indeed guarantee payment, which I think we both can agree would have been HIGHLY foolish.

I’ve followed the Glam situation very closely, but I’ve also followed Break Media, which had a banner year. Either way I think the shop was obviously mismanaged in some respects.

If you need evidence of that, check out the history of Glam, a fashion/lifestyle network, and specifically http://www.techcrunch.com/2008/03/29/glam-makes-big-cuts-in-publisher-payments-up-to-80-drop-in-revenue/

The basic idea behind these networks is to buy exclusive rights on a blog at a premium (that is, at a loss for the network) in order to get to scale. You aggregate millions of unique visitors per month, targeting a specific demographic. Once you hit scale, everything is easier, including selling ads and finding ways to get more impressions for a lower CPM from publishers — that’s the sweet spot. Then, and only then, are you going to profit.

Given the numbers — $4 to $7 CPM and only 29MM pv/month — I’d be shocked if PJM were running anything other than a horrific loss. Let’s say they had a well-optimized remnant chain ($1 CPM) and in a below average month, sold 50% at $3 CPM. (I think those assumptions are on the high end, for what it’s worth.) Let’s also assume that they paid out $4 CPM that month, also assuming best case scenario for PJM’s profitability. That’s a loss of 29k*$2 = $58,000 that month. One could imagine that happening 4x a year, with few if any significantly profitable months. Even conservatively, PJM was probably running a loss in the hundreds of thousands of dollars **just to acquire ad space**.

http://bloggerinterrupted.com/2009/01/tom-blumer-just-lost-a-few-pennies-pajamas-media-dies