There has been a lot of discussion in the blogosphere about just what the heck Pajamas Media is up to. I have no intention of recapping that debate/discussion, though you can start over at Althouse to get an idea of who's talking about what.
A couple of the questions people have been asking: What's their business plan? (IE, how do they intend to make money?) And, relatedly, "what are they doing with that venture capital funding?" (reported variously as $3.5 million and $7 million). The funding isn't showing up on the PM web page, which isn't as bad as some folks have said but which certainly doesn't represent any kind of expensive web design. And finally, "where are the ads?" Folks have noted that all the blogs running PM ads are running ads for...Pajamas Media, rather than Sony or what have you.
I think I've figured out all three elements.
Their business plan is to create a Pajamas Media brand identity in the general blog-reading market. They will then use that brand value to promote their own sites and make them a more valuable networked advertising resource.
They are creating the brand identity (or at least starting to) by running lots and lots of ads for Pajamas Media on some very popular web sites. The reason that we aren't seeing ads for Sony on PJM sites is that PJM is, right now, in the business of advertising PJM and creating awareness.
And that also explains where the money is going. They're burning through their startup capital to pay PJM bloggers to run PJM ads. The bloggers don't care; they're getting paid. And the ads probably have very good response rates, because they are very well targeted. If I am at Instapundit and I see an ad for a blog symposium on the Patriot Act starring Instapundit, well, I'm pretty likely to click on it - certainly more likely than I would be to click on an ad for a TV or a book or what have you.
To see what kind of return the PJM centrum should be getting on its ad buys, I ran some numbers on the kind of revenues that non-PJM blogs are getting, at least theoretically, from their BlogAds. I've got a bunch of data points here and a curve and everything, but for purposes of this brief blog note, let's use PowerLine as a representative. They fall right into the middle range on my curves.
PowerLine sees about 71000 unique daily visitors. Their blog ad panel, bought on a monthly basis, would appear to generate approximately $20,600 per month. (Less if bought quarterly, more if bought week-by-week.) So to make it economically sensible for PowerLine to go to PJM, PJM would need to be offering them around $20 grand per month. That's a workable starting assumption for what PJM is paying bloggers for this ad space.
Taking PowerLine as a useful median, the $3.5 million in PJM venture capital will buy them the equivalent of about 170 months of advertising on PowerLine. That comes out to 362,100,000 ad impressions. Clickthrough rates vary wildly, of course, but as noted above, PJM ads are pretty well-targeted: bloggy subjects for a bloggy audience. Let's give them the benefit of the doubt and say they're getting a 2% CTR. That's pretty good according to my internet marketing experience. With that CTR, they're bringing about 7.24 million visitors to the PJM centrum, and its costing them a little bit less than fifty cents per pair of eyeballs.
Those numbers aren't particularly great, but they aren't crap, either. If they're getting a better deal from their bloggers than the BlogAd community would provide, the numbers could be better. Whether the plan adds up depends on what Roger Simon et al intend to do with the eyeballs once they hit PJM. If they're able to make the site sticky, and/or keep eyeballs in the PJM blog circuit, then this plan may end up looking very astute indeed.
UPDATE: Glenn Reynolds e-mails and says: "It's not for me to comment on [the business plan], but in fact, not all of the ads on PJ blogs are PJM ads -- there are lots of paying ads on my site for Circuit City, Nokia, Radio Shack, Verizon, etc. I think that's true for most of the PJM blogs that are running ads, though they're phasing that in gradually for technical and design reasons. They're quite anxious to avoid ads that offend blog-readers, and technical problems with blog load-times."
I appreciate the clarification. Clearly PJM isn't entirely self-promoting; they're streaming ads for commercial purposes as they come in.