All that glitters isn’t Glam

First reported by Valleywag, female oriented advertising network Glam Media has laid of 14 of its 200 staff in a restructure, with most cuts being made in the sales department.

It’s an interesting move from a company that in its most recent round took $80 million and was said to have turned down a $1.3 billion takeover offer in May. A sign of the economic downturn, or something more serious?

Glam has always been an interesting model. At its core it’s a blog network, running some moderately successful sites, but the big money came in as it expanded into advertising on other sites where most of its advertising inventory now resides. I had some experience with Glam years ago at b5media, and they were spending some serious money on getting inventory then, offering well above what most other advertising networks were offering at the time. It’s a model they continued to use, signing up more and more sites, the latest being WomensForum.com in July with 6.7 million monthly views. And yet, things started to go wrong earlier this year when word leaked that Glam was savagely cutting minimum pay rates for many in the network, with some reporting cuts of up to 80%. The cuts could only mean one thing: that Glam wasn’t able to profitably sell advertising above the minimum rates they were promising, undermining their model of acquiring inventory at high base rates.

As the US economy does slow, and online advertising growth declines (I’d note that the overall spend is still growing, but at slower rates this year), the Glam model will only face more pressure. Couple the financials to the Federated Media problem, where successful sites in the network can easily walk away when they’re big enough or confident enough to do their own direct advertising sales (a trend that will accelerate as advertising money gets tighter) and the future isn’t quite as positive for Glam as it once was.

Glam

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