The Pajamas Media Meltdown + Political Advertising For 2009
When Pajamas Media first came on the scene, I wrote several articles about them, most of which were skeptical about their advertising model. Since then, I’ve developed a good business relationship with Pajamas and have written columns for them, but given that their advertising network went belly-up this week-end, I feel like I’d be remiss in my duties as a blogger if I didn’t take the time to write about PJM.
First off, I was always very skeptical of the business model of the advertising network. Here’s something I wrote about that back on November 16, 2005:
On other hand, if they’re looking to be the next Blogads, then again, their approach is a little puzzling. They did manage to capture about — oh — I’m going to say half, maybe a little more, maybe a little less than that — of the conservative blog traffic out there. But, there are very few liberal and “other” types of blogs involved. So, if you look at demographics and the actual volume of impressions that they can sell to advertisers, they’re small and limited compared to Blogads. Moreover, given that we’re talking about long contracts every time a new blogger is added, they seem unlikely to ever catch up.
Furthermore, unlike most group blogs, OSM (Hawkins’ note: This was the original name for PJM) must have some very high fixed costs. They’re paying salaries out to all the bloggers at OSM. On top of that, they have a New York office, a LA office, and a staff of 8 people plus the 2 owners, none of whom are likely working for peanuts if they have to make a living in LA or New York.
Can they make enough off of tower ads in order to break even with that kind of overhead? Given what I know about the kind of ad rates that are being paid out right now on the net and the number of impressions they’re going to be able to serve, my gut instinct is no, they can’t even get close.
That’s why this whole venture seems to be a head scratcher. It’s sort of like back in the internet boom days. You saw large amounts of money changing hands and people getting all excited, but you didn’t see the “there there,” and you had to wonder what was really happening behind-the-scenes.
It turns out that I was more right about that than I realized. According to PJM owner, Roger Simon, their advertising network NEVER made money (The last line was a surprisingly nasty shot at all the bloggers who had just been given their walking papers):
Actually that part of our business (the advertising network) 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. Didn’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.]
To be honest, the surprise isn’t that the ad network went down, it’s that it took this long given that they have been in the red from day one, which was over three years ago.
One of the reasons I realized that this type of ad network was going to have difficulty flying was because I had seen it before.
Back before I ran Right Wing News, I used to run a humor blog called Brass Knuckles Webzine. BKW got up to about 2,000 readers a day, but I could never really get it over the hump. In fact, I’m not sure that I ever sold advertising on it.
That being said, I knew people who were making a bundle selling advertising. There were blogs and plenty of websites that were raking in the money. They were getting contracts that flat out paid them $5 per thousand impressions — or even more — month in and month out. (There are websites that still get those kind of rates, but it tends to be for premium space targeted at very narrow audiences).
Well, back then it was all rainbows, cookies, clouds and unicorns farting multicolored love squirrels until the economy went south and, of course, the first thing to be cut in a bad economy is usually advertising. Worse yet, because advertising on the Internet was much newer back then, it was the first type of advertising to be cut.
Within a few months time, advertising networks were collapsing left and right and there were people that went from making $10-$20k a month down to zero within a 90 day span. Some people even claimed to be owed — and never paid — as much as $100,000 by these busted advertising networks.
Today, internet advertising isn’t as sparkly and untested as it was back then — but there are three big problems for those of us who rely heavily on internet advertising.
#1) There’s a recession going on and although internet advertising isn’t the gamble it was back in 2000, it’s still advertising, and thus is destined to see a cutback.
#2) Because there are fears that this recession may be particularly harsh and can conceivably go on much longer than the typical recession, people are even more reluctant to spend than they would be normally in economic down times.
#3) Political websites produce more traffic and draw in more ads in an election year. Because we’re in an off year, we wouldn’t be likely to see the same sort of revenues we saw back in 2008 even if the economy were good.
#4) There are simply more viable options out there for internet advertisers than there were a few years back, starting with the social networks — Twitter, Facebook, Myspace, etc., etc.
#5) Political advertisers have taken to paying people to get links placed on blogs instead of actually buying the ads on those blogs. For example, at one point, I literally had 3 different people trying to get me to feature anti-card check articles on RWN behind the scenes. Undoubtedly, all 3 of those people were getting paid a significant amount of money that could have been used to just buy ads on RWN.
Put it all together and it will probably be a rough year for those of us who are dependent on online advertising to pay the bills.
PS: If you’re so inclined, there’s a Paypal button on the left hand side you can use to donate to RWN.
PS #2: I don’t think it’s impossible for PJM to make a go of it by building up a large traffic base and then selling it for mucho bucks. Of course, if they were going to go in that direction, I’m not sure why they would have dumped big traffic blogs like Little Green Footballs and Hot Air.