Glam Media, which is mostly an ad network but also owns a group of sites focused on women, is actively attempting to raise $200 million in a private round of financing. The company previously raised $18.5 million in December 2006.
The company has hired Allen & Company to represent them in the transaction, and has been distributing a private placement document to potential investors. They’ve actually distributed it a little too liberally - we have a copy and have embedded it at the bottom of this post.
Glam has driven revenue aggressively and say they’ll get to $21 million this year, and $150 million next year. Losses this year are expected to be around $3.7 million.
But the company is driving that revenue by selling ads for partner websites, not on their own page views. A minimal amount of research into their business shows that the company is an ad network, not a content site.
In the private placement document, Glam describes itself in the first sentence as “Glam Media is a Web 2.0 distributed media company that is number one in reach for women as reported by comScore Media Metrix.” I believe this is a perversion of the term “Web 2.0″ (see below - any company this deep in SEO shenanigans is very Web 1.0 focused) and the company certainly is not the largest womens site on the Internet. While revenue growth looks good, Glam isn’t really a content site. They’re little more than an ad network that is claiming the traffic for all of its partners to make it look like a huge womens destination site.
Traffic Nonsense
A cornerstone of the company’s argument for raising such a large round is their tremendous growth over the last twelve months. They boast of faster growth than MySpace, and claim to be the no. 1 womens website on the Internet with 19.1 million unique monthly users:
Glam Media has grown from 782,000 unique users in June 2006, to 19.1 million unique users in June 2007. By way of comparison, MySpace grew from 1.6 to 15.6 million unique users the year prior to its acquisition by News Corporation in July 2005. Glam has been ranked as the highest in traffic growth in the Top Web 100 web properties by comScore Media Metrix for the past 6 months. By May 2007, the Company had reached #1 ranking (in terms of traffic) in the women’s category, per comScore Media Metrix, within only 20 months after launch, beating iVillage/NBC which has held the top position for over nine years. Glam continues to be the #1 ranked website in the women’s category with a 23% lead ahead of iVillage/NBC, 85% ahead of AOL Living and 185% ahead of all CondeNast websites combined.
The problem is that it’s all complete nonsense. The growth in comscore numbers has nothing to do with more traffic coming to Glam’s websites. Rather, Glam sells advertising for a number of very large partners (see list of some of the largest to the right) and is able to claim credit at Comscore for their user numbers. So the comscore numbers for sites such as MyYearbook, Kaboodle (recently acquired) and Meez, among dozens of others, are being used to support the 19 million unique visitor number.
Glam also owns a number of pure SEO sites like free-beauty-tips.com, celebrity-hairstyles.org and others. These sites drive a lot of traffic from search engine queries and pump up the Comscore numbers dramatically, but provide, as far as I can tell, absolutely no original content.
In fact, the numbers are so inflated that Glam.com, the main website owned by the company, brings in just 654,000 unique monthly visitors, or about 3.4% of the 19 million the company claims.
We’ve uploaded June Comscore numbers for the entire Glam network that shows where these 19 million users are really coming from - other sites. See Glam’s Comscore breakdown here.
There is no way that this site can in good conscience claim the user numbers that they do in the private placement document. Comscore has long been criticized for allowing companies to “steal” the traffic of others to make themselves look much bigger than they really are. This is a perfect example of how that kind information could be used to mislead the public and potential investors. Glam is an advertising network, and runs a very good SEO operation, but they are not the no. 1 destination site on the Internet for women.
Update: Matt Marshall at Venture Beat writes a very long post coming to a completely different conclusion. I’m not sold, but judge for yourself. Different viewpoints are good.
All I can say is insane…
What the hell could they possibly need $200M from a private round for? If they really are that valuable, why not try the IPO route?
That exactly is the problem. They are very much aware of the construct and would be never able to get to IPO. Sophisticated trap for the investors, who are late comers to the 2.0 bubble.
You expect a company to tell the truth! :O
Seriously though I’m not surprised, what the hell do they need $200m for anyway?
You’re spot on Mike… Glam is an advertising network and not a destination site.
My observations about glam…
They are an ad network for a lot of blogs. The blog sites that have partnered with Glam, have way too much advertising on them.. sort of a turn off.
the Seo techniques they use are similar to squidoo and boxxet. On their site they send link love and page rank for member blogs posts so they rank higher in google…. so these advertising laden blog partners generate more revenue
Yikes. Et tu Tim Draper?
I almost joined the ranks of a top-flight blog advertising network til I got cold feet over the contract terms. Their literature claimed millions+ in monthly uniques, but it was calculated in the same manner as that described above (re: it had only a few mega-hits to its name that accounted for nearly all the millions+ in hits).
That deserved mention. Because it’s one thing to blog for a site that publishes to a base of 1 or 2 million well-targeted visitors. It means another thing entirely to be associtated with a network where only a few sites bring home the bacon, and where its main page (the page that will link you) represents a disproportionately small number of total visits.
Anyway, $200M is just silly. Really… come on, guys.
Good reporting Mike.
heck — I’d be personally going orbital with $200k, nevermind the capital M.
Perception is reality — they are talking the talk.
MyYearbook, who represents half of Glam’s traffic, also advertises all over the place, which inflates their unique numbers on Comscore.
By the way, that’s LOSSES of $3.7 million this year, not profits.
Bottom line is that Glam is a money-losing advertising network with about $20 million in revenue, that isn’t even particularly focused on “glamor” or women given the fact that half of its traffic comes from a shady-looking social networking site geared towards high schoolers.
Glanton - you’re right. my bad. good catch.
@michael
You make a good point. However, they can claim their total pageviews however they want. It is Glam’s responsibility to provide accurate data in an easy to analyze format and it is the investors responsibility to review, analyze, and break down that data to make a decision to invest, so investors should probably tread carefully.
It’s certainly possible that they’re shopping placement only to customers who don’t know to ask that the numbers be broken out in a way that tells the truth. That is, it’s a gambit.
Hopefully these investors are looking beyond the sales prospectus before putting in some cash into this (or any other company). I don’t understand this push for sales as the cost of profits… I would prefer a small company making profits then a big one producing nothing but losses.
Jon
Glanton: the real bottom line is *if* Glam can execute $150.4m revenue in 2008 with positive EBITDA and highly increasing growth.
Then whether they are a “content site” or an “advertising network” is largely irrelevant. Investors wouldn’t care.
Show me the money; the rest is semantics.
Great Job Michael,
Please expose these kinds of cheaters time by time so good guys get funding.
@Michael - the fact that they are an advertising network makes it much less likely that incremental revenue will get to the bottom line. The fact that they are an advertising network as opposed to a content site/network also makes the “growth” that is their main selling point largely irrelevant, at least compared to if they were a destination website.
What has Glam proven so far? That they can generate $20 million in revenue as an ad network at a -15% net margin? There are numerous advertising networks out there in the same boat, and they’d probably be happy to sell for anywhere in the 8 figures.
I do admire the balls on these guys though…
I think the overall feeling on glam has always been a sham from the get go. At least that’s the mindset that I’ve seen/heard from the fashion industry. The tech industry might be another story.
Glam’s always been very forthcoming, in my experience, with it calling itself an ad network, but I think it’s potentially a good example of how analytics suck, how they can be manipulated to make a site look bigger than it is and I wouldn’t be surprised if we all found out later that lots of big social networks actually don’t have that the traffic we all thought.
I look forward to this because the mindset in the market is that every site is going to have Facebook level numbers and it is ridiculous. That’s like saying all print media you see on stands right now will have circulation numbers like Business Week or Time. It just isn’t reality, and more importantly, it shows the sort of ignorance that’s taking place within the current internet market, which makes everything harder.
I’ve often worked with previous startups whereby they buy or exchange traffic with other networks to bump up their traffic statistics to show off to “the money people” that fund them, which evntually leads to getting more money, but in reality the picture is very different behind the scenes.
I guess one good thing is that today overall website measurement is a lot better now than say in the last .com boom and bust, whereby if you do some research you can spot this type of traffic reporting behaviour pretty quickly.
Glam looks to be getting ‘questionable traffic’ from numerous unqualified sources, the most troubling issue is that they even have the balls to ask for that amount of funding. Their in-house reach/audience numbers are “way out of whack” and I would immediately question the actual quality of that traffic they’re touting…
Something is definitely not right, it’s to the point of being very dishonest and I would be VERY suprised if they got funding to anything close of that scale. Glam - You’re a SCAM, nice post TC -$200 million? Come on….
I’m curious - why on earth is Tim Draper lending his name to the document and company (as a director)?
As an early member of the Glam network with a day job in online media, I’ve noticed the ComScore number discrepancies early on and knew it was only a matter of time until it was publicly outed (there has been some chatter online in the past, but nothing like a fat post on TC). My sites and all the others are all under their umbrella in ComScore adding to their totals.
Frankly I don’t see why there would be any shame in being a large, semi-targeted ad network provided the business is healthy and growing. I really don’t understand why they’re so insistent on calling themselves a destination site! Anyone could foresee that it just sets them up for an outing like Arrington just posted, and a bad review on TC can’t possibly be a good thing when looking for $200MM.
Props to Mike for this post. This sort of hard-hitting journalism is where bloggers far outperform mainstream journalists, who often uncritically regurgitate the data in press releases and fail to expose clear idiocy like Glam’s claims. This sort of radical transparency is what the blogosphere is all about, and may have just saved investors a couple hundred million.
I have suspicion that some of their partner sites are driving uniques with very deceptive marketing, namely spy-ware pop-ups. This experiment with done a limited number of machines w/ on a few spy-ware installs:
http://www.benedelman.org/news/050707-1.html
Now thats GOOOOOOD investigative reporting!
Michael, you should do a follow up story on the 70 person weekend startup stunt, they were going to “do it all in 1 weekend”, the site still says coming soon, over a month later…
http://www.vosnap.com/
How is this NOT a sham? Just look at the Alexa stats..
http://www.alexa.com/data/deta.....e-live.com
Just curious, but isn’t Mike an investor/friend of PopSugar which could be considered a competitor?
This is excellent analysis, but I wish you would have hammered into comScore more. True story: I was invited into an advertising network where the umbrella company would provide quality advertising and some javascript to put on my blog. They asked for my traffic stats, etc. I had it running on the website and then they sent me a comScore form that needed to be faxed to them immediately to continue in the ad network.
What was the comScore form? It was an assignment of traffic. You assign your traffic numbers to the advertising partner, and I didn’t realize it at the time, but this seems to be the reason for doing it. You claim an enormous amount of growth, but you do nothing to get it!!
Here’s the clincher - if you haggle with comScore, they will allow the blogger to “assign” traffic numbers to more than one company. It’s sheer madness right now.
oh hai nvestrs!
i has komskor numbrs, i can has 200 mln dolrz?
k thx bai!
This company is a joke and Allen & Co. isn’t far behind. Does ANYONE actually believe that they can go from $21M to $150M in one year? They would need to be at or near $10M (this very month) in order to reach these numbers in 2008. What idiotic VC is going to invest in this sham? Someone needs to come clean here.
it would be great to get their side of the story!
Interesting to note, iVillage does much of the same thing - I know they “own” a slew of site on ComScore, some of which they don’t advertise on at all.
Amazing journalism here by Arrington (or TC staff?). I think the real scandal here is that two very prominent financial instutions, Allen & Co. and Bank of America, are behind this misleading offering. Heads should roll.
Lots of VCs love Glam and want to duplicate their ’success’ because lots of VCs are money guys and numbers guys, not actual web guys. Glam’s numbers are compelling but only if you don’t scratch the surface.
Glam’s response to this kind of questioning is to say that they aren’t just an ad network, they’re more along the lines of an “advertorial” network. They don’t just sell ads on other sites, they syndicate their content, bundle it with an ad, and put it on other sites. They then sell ads at a higher rate to advertisers who, clueless as they are, like the fact that their ads are always surrounded by “quality” content and not “blog content”.
Old school retarded media buyers love crap like that, but it has major problems in at least two regards. One is that blogs are successful and popular precisely because they’re different. The other is that i’m not convinced people read advertorial on blogs.
It’s funny to watch all of you criticize Glam when 99% of the things featured on TechCrunch would take the opportunity to lie and boast in the same way Glam has done.
Glam raising $200 MM is tantamount to paying hundreds of millions for retarded companies like Last.fm.
The hypocrites on this site crack me up.
whoa juicy details. love it.
they should make a youtube movie, call it Glamgarry Glam Ross - “we have an incredible private placement deal for you, i am in town just tonight, 1 night only”.
boo!
It’s pretty obvious why they want to raise $200MM - so they can buy their top publisher partners and keep all the ad revenue. I’m sure USVP and First Round would love a quick 10x exit on MyYearbook.
I was just doing some more thinking and my guess is that the $200MM would most likely be cash to buy out some of the bigger sites in their network to make the inflated metrics a little more legitimate. I can’t imagine that they’d need that kind of cash for staffing up or technology investments alone…
On a story on the failings of iVillage in tomorrow’s NYT, Glam receives a postivive mention: “The more stylish Glam.com started courting iVillage’s advertisers.”
http://www.nytimes.com/2007/08.....lage.html?
P.S. TechDumpster: you doing something you hate (reading TC) so frequently seems uh…hypocritical. But it’s not that funny really.
writing on the blackboard 100 times: I will edit my TC comments before posting.
>>Just curious, but isn’t Mike an investor/friend of PopSugar which could be considered a competitor?
Let me say this–people who produce sites in this niche know that PopSugar is a legitimate and robust content network, and that Glam is, well… something else. Lay off of Arrington on this one… what he’s saying is well known among those in the know.
>>It’s pretty obvious why they want to raise $200MM - so they can buy their top publisher partners and keep all the ad revenue.
That’s what I would do.
Joe_r:
yes sugar publishing is in fact competition with glam… at least according to techcrunch
http://www.crunchbase.com/company/glammedia
“Competitors include Sugar Publishing.”
I think this raise is for a roll-up. And its allen & co. that raised crazy inexplicable $ for ning - if clownco can raise $100m without a discernible product or service, trust me, glam will find a bunch of suckers too. Lots of big players who don’t want/need 10x, partic when they only want to play in $50m increments - when you deploy that kind of cash, getting 2x aint half bad.
And I do agree w/ an earlier comment, glam aint that different from ivillage when it comes to ‘aggregating’ traffic.
What semi adnetwork doesn’t request one of these Traffic Assignment forms these days? I’ve got an inbox full of them.
************************************
comScore Networks TAL: Traffic Assignment Request for comScore Networks Reporting
I, _____ Name__________________, ___Title_____________of ( your site ) , certify that ( your company )
a) is the majority owner of the URLs listed below
b) enjoys a legitimate business relationship with ___________. justifying the aggregation of this traffic, and
c) requests assignment of the traffic to these URLs from ( your company ) to ___________. in the comScore Networks syndicated audience measurement reports.
In requesting this assignment, I understand that ( your company ) will not receive credit for traffic to these URLs in the syndicated audience reports for those entities where __________. elects to include these URLs. These URLs may not be assigned to any other company. In the event that comScore Networks receives multiple requests for assignment of the same URL, comScore will review and honor the request most recently received.
I understand that this request is subject to review by comScore Networks to determine that the assignment of traffic is consistent with comScore Networks reporting rules. comScore Networks retains the right in its sole discretion to refuse the requested assignment if such assignment would in fact be inconsistent with comScore Networks reporting rules. If necessary, comScore Networks may require additional documentation to verify ownership of the URLs before granting this request. For example, if ( your company ) is not the named registrant of the URLs listed below, you must provide documentation demonstrating that the registrant of those URLs is (1) owned or (2) employed by (your company) ].
I understand that acceptance of this letter by comScore Networks, Inc. imposes no legal liability whatsoever on comScore Networks, Inc. for damages, whether actual, incidental or consequential, relating to the maintenance or reporting of the attached URLs. I understand that ( your company ) is fully responsible for timely notification to comScore Networks, Inc. of any updates to the list below, including, but not limited to, changes in ownership of any of those URLs.
( your company ) shall indemnify and hold harmless comScore Networks from and against any claims, liabilities, costs and expenses of any kind (including reasonable attorney’s fees and expenses) arising out of any allegation of improper assignment of the URLs pursuant to this letter.
When you think some CEOs go to jail for changing the date on some employee’s options… At least give credit to Samir Arora for having balls!
Truth is: he’s done an incredible job at raising money, and it looks like he’s not done yet.
As an online media buyer, perhaps I have a different opinion then most of the outsiders commenting on the sidelines. I use comScore and NetRatings on a daily basis for planning media spends targeting large audiences online. Sorry to burst your bubble…but this just in…..Alexa is not an accurate tool for measuring online audiences. Sure you can usually tell if one medium-sized site is larger than a small one — as for engagement, demographics, unique visitors, etc..forget about it.
iVillage is a collection of many sites just as Glam is. The same can be said for EverydayHealth/Waterfront Media. The only way to measure the audience that any large media property reaches is through a panel based media measurement tool like comScore. How does iVillage come out squeaky clean with sites like ScienceDaily.com and BookRags.com under their umbrella? It remains to be seen what they plan to do with Sugar because as of yet their is no iVillage branding or content and they still continue to run non-brand CPA ads. Everyone appears to be jockeying for position. Glam seems to be doing it best and it looks like the investors have noticed.
Glam Media is a platform for reaching women through many different integrated online touch points. It does not matter if they own a site or have a partnership with them. Glam is the entry point for reaching this audience across many different sites representing over 20.6 million unduplicated unique visitors. They have proven to have strong relationships with their partners, innovation behind their programs, content distribution tools, and increased success with attracting new advertisers and publishers. They must be doing something right.
I’m having trouble figuring out why you guys are associating glam.com’s web traffic with the blog network traffic, which is what actually makes the company money.
I’d use common sense to estimate that it costs more money for Glam to deliver an ad on their own website than it does on a blog in their network. So really, the company is even more profitable for partnering with the blogs than it is for directing traffic to its own website.
What do you think the person with a $200m check to cut is really concerned about? Do they really care if Glam has a million monkeys on typewriters tapping out content ? The fact is the company has contracts with 300+ popular blogs and all advertising dollars go through them. Those blogs are seeing way more money than they would from their best alternative (ie Google), and the advertisers are seeing way more targeted eyeballs.
I would bet more money on that arrangement than I would on an archaic Gawkeresque model such as *-Sugar.
Take a look at Google. Would TechCrunch say Google was overvalued because much of its revenues came from other sites (ie: Google’s ad platform)?
Sorry Michael.. Banking the value of a web property based on what you see in your browser’s location bar is the true perversion of the phrase “web 2.0″
bubble trouble
EBITDA is a b/s metric.
“earnings before interest tax depreciation and amortization”
Some kind of earnings those are.
And for this year, according to that chart, even the EDITDA is a loss.
This is perhaps the best journalism content piece I’ve ever seen.
We’ve had a similar case in Israel once, I remember, when a porn company went public (in 1999?) based on a dating site front. Check it out, it might still be active, porn sites run forever.