Now that it has $85 million safe in hand, Glam Media is cutting off a key revenue stream to its publisher partners, TechCrunch's Michael Arrington concludes. To us this feels like a bait-and-switch, and seems to support our suspicion that Glam is too good to be true. (*Glam response, which appears to be a denial of TechCrunch's assertion, below).

Until now, Glam has run $3-$5 CPM "house ads" on any unsold inventory through the network, which has generated significant incremental revenue to partners (and cost to Glam). The company has just announced that it will replace these ads with a variety of low- or no- revenue options: One Glam publisher:

While they're spinning this as positive news, it sucks for publishers. Publishers were previously guaranteed $3 - $5 CPMs for house ads. By no longer running any house ads, that revenue dies. And, given Glam's fill rates retwork wide are only 30%, that's 70% of traffic (for most publishers) that's no longer earning revenue from Glam It'll basically cause a 30 - 80% drop in revenue for publishers'

Why would Glam eliminate a significant stream of publisher payments now? We agree with TechCrunch's analysis:

First, they need to get costs down. Last year the company lost $3.7 million on $21 million in revenue. They've promised investors that 2008 would bring in $150 million in revenue with $40 million in profit. The only way to get there is bring in a lot more publishers, sell a lot more ads, and keep a larger share for themselves.

Second, Glam really needed to keep all those bloggers happy last year while they were raising capital. There's no better way to do that than to send them big checks every month. Now that Glam has raised the big round, they don't need the small bloggers at all, and they certainly aren't going to be losing money on them.

Third, Glam is actively acquiring many of the blogs that they currently sell ads for, and they want them cheap. By cutting their revenue dramatically and quickly, many of those blogs will immediately be in a very tight cash position. They may be forced to sell. And with revenues down, Glam can pick them up for a song.

Some commenters in the TechCrunch post point out that at least Glam has paid something for remnant house ads, which many other networks don't. To us, however, this feels like a bait-and-switch.

We've been skeptical of Glam ever since we saw one of the company's early pitchbooks to investors, which in our opinion misrepresented the company's business (it drew no distinction between sites Glam owned and sites Glam sold ads for).

Glam has done an extraordinary job marketing itself, and its valuation in its recent round--$500+ million--speaks for itself. We are still not sold on the Glam business model, however, and can't imagine how it will post the 25% profit margin this year that Arrington reports above (we'd be shocked if it ever posted this margin, at least in its network business.)

Upon receiving this latest email from Glam, we imagine that some Glam publishers are also now wondering if Glam is too good to be true.

*UPDATE: Glam responds:

'Glam will continue to be the main seller of premium ad inventory for its Publishers. Minimum guarantees under contracts to its Publishers are not effected by this change and Publishers will continue to place paid for Glam house ads on Publisher web sites. Glam is rolling out a more flexible ad inventory option in addition in to house ads that allows Publishers to better mange their ad inventory using Glam's Ad Serving Platform. For Glam, Publishers are the heart and soul of everything we do, and they expect Glam to run a company responsibly, yet provide them with options and choices. The business model of Glam helps bring power to unique and independent voices and will continue to provide the best services to them.

Further, Publishers make more with Glam than with any other network on the web for Women's premium sites-even after this change. Other networks like Federated Media have never offered a non-sold ad solution-Glam does and will continue to increase remnant options for its Publishers.'