With $85 Million Infusion, Glam ShinesWith $85 Million Infusion, Glam Shines

With a whopping $84.6 million in new financing announced earlier this week, Glam Media set a new benchmark for the exploding online ad market and set itself up as a potential competitor to Google. The question is, does Glam's business model have legs or is it just skin-deep?

Glam, which claims to power a "distributed media network" of more than 450 sites related to fashion, healthy living, beauty, hair, and women's issues, sells ads on both its own Web pages and on partner sites including Entertainment Tonight, the Rachael Ray Show, and Premiere.com. Glam Media CEO Samir Arora claims that his is the largest female-oriented set of properties on the Web, with 44 million unique monthly visitors -- a figure disputed by some of Glam's competitors, who point out that the company counts viewers of partner Web sites as well as ones it owns and produces in-house.

The new investment, led by German magazine publisher Hubert Burda Media along with GLG Partners and Duff Ackerman & Goodrich, plus Glam's original Silicon Valley venture funders, Accel Partners, Draper Fisher Jurvetson, Walden Ventures, and Information Capital, puts the value of Glam Media at around $500 million, The Wall Street Journal reported earlier this week. Launched in 2005 and based in Brisbane, Calif. and New York City, Glam had taken in $30 million in previous financing.

Along with U.K.-based Adconion, which itself announced an $80 million funding round this week, Glam is among a new crop of companies attempting to build specialized versions of Google's online advertising platform Adsense. Glam's new online ad-placement system, called Evolution and scheduled to go live in the next few months, uses a proprietary algorithm to assign values of different ad pages to advertisers based on a range of metrics including ad placement, context, "mode of user engagement," brand proximity, and editorial quality. Glam Evolution, for instance, presumes that consumers are more engaged when viewing professionally produced content, and so assign a higher value to those pages than user-generated content like blogs and YouTube videos, for instance.

The companies hope to make inroads into Google's dominance in online advertising. The search giant's share of the U.S. online ad market slid to 23.7% in the fourth quarter of 2007, down from 24.2% in the previous three months, according to research firm IDC. It was Google's first such drop in two years.

Arora says his hybrid model, combining wholly owned Web properties like Glam.com with ads placed on partner sites across the Internet, is inherently more powerful than such proprietary content-only properties like iVillage, the women's site acquired in March 2006 by NBC Universal for $600 million.

Glam, however, takes in a large cut from the ads its serves on partner Web pages -- up to 50% of the revenue from advertisers. It's not clear that such margins are sustainable with rival advertising platforms appearing rapidly. It's possible that the percentage charged by ad platforms like Glam will subside as the online online ad market matures.

Meanwhile, Arora says the company will bring in revenue in the range of $100 million in 2008.

Editor's Note: This story was edited on March 3 to more accurately reflect the company's revenue projections for 2008.