VentureBeat

updated significantly

Sugar Publishing, a network of woman-focused blogs, has acquired woman’s social shopping site ShopStyle, the latest deal in a fierce competition by a triad of companies hoping to become the leading woman’s Web destination. The amount of the transaction was undisclosed.

San Francisco-based Sugar is a relatively small network of content-oriented sites, but is backed by NBC and the respected and ambitious Silicon Valley venture capital firm Sequoia Capital. Previously, we’d assumed Sugar trying to make inroads against two giants: incumbent iVillage, and the fast-growing upstart Glam. Glam, also of Silicon Valley (Brisbane, Calif.) has accelerated past iVillage and now claims it’s the largest woman’s network, at 21 million unique viewers. That compares to 1.2 million uniques for a combined Sugar and Shopstyle, according to MediaMetrix. iVillage has 15 million.

However, Sugar chief executive Brian Sugar now says he no longer sees Glam as a competitor. The two have continued to move in opposite directions, with Sugar focused on publishing content, and Glam focused on becoming a large ad supplier, he said. By selling ads on multiple sites, Glam is understandably going to have larger user numbers. It counts users from sites it doesn’t completely own, but which take advertising from Glam.

Sugar’s numbers have, in fact, declined from 1.3 million to 1 million in August, while ShopStyle declined from 206,000 to 188,000 uniques in August, according to Comscore. August is a slow month for many Web sites, becaus of summer vacation, so it’s too early to say whether the sites have stalled, or whether its just a blip on a path toward further growth. See graph below.

Sugar has continued to dismiss Comscore’s numbers, however, saying his internal data show the combined Sugar and ShopStyle attract more than 5 million unique users monthly. He says Comscore doesn’t include some of his sites, and that his internal numbers show traffic up in August.

The controversial Glam, led by entrepreneur Samir Arora, says it’s the fastest growing network on the Web. We just reported on its redesign, which includes a Digg-like feature. It has focused its efforts more on ad sales lately, hiring new sales executives like Karin Marke, who ran Fox/MySpace’s west coast sales, and Jennifer McLean, from Fox and DoubleFusion.

Earlier, we reported Sugar would soon announce its own network with advertising firm Federated Media. The thinking for that network was because Sugar didn’t have its own ad network, nor a significant shopping component — both areas where Glam is strong. By buying Shopstyle, another Silicon Valley company (Los Altos, Calif.) which lets women browse fashion products and create style books, Sugar also puts a stake squarely in the shopping-branding arena.

However, Sugar’s deal with FM, which was to have been called Sugar Network, has been scuttled. Sugar tells us that while the plans had once been firm, Sugar reconsidered several weeks ago after concluding the industry doesn’t need another network. It has become “commoditized,” said Sugar, meaning there is less money in the ad network model than meets the eye. “There’s a lot of hype,” he said. “It wasn’t going to move the needle.”

Insiders tell us that Sugar, FM and Glam have been “in play” recently. Large companies are looking to buy the private companies before they become too big. Glam, which is raising a warchest of $200 million, has been approached by several large companies. Glam itself had once considered acquiring both FM and Sugar. Meanwhile, Time Warner has reportedly been in talks to buy FM. FM chief executive John Battelle declined comment about Glam’s offer, and about talks with Time Warner. Arora won’t comment on acquisition talks, either.

Separately, Sugar also said it will change its name to Sugar Inc.

Sugar said it will soon add ShopStyle “widgets” on Sugar’s blogs that allow readers to shop.

Sugar also said his company will hit “cash-flow” positive this month.

Shopstyle had angel backing, but the names and amount invested were undisclosed.

One notable anecdote: We first wrote about the four companies — Glam, iVillage, Sugar and Shopstyle — as being in a race back in June. Sugar tells us that VentureBeat story sparked a conversation between Sugar and Shopstyle which eventually led to the acquisition.

updated

In an era when Web advertising networks are red hot, Glam lays claim to being one of the hottest.

Focused on gathering up female-oriented Web sites, and then selling advertising on their pages, Glam says it is the fastest growing property on the Web, and is about to sign a whopping $1 billion advertising deal.

But Glam is becoming a magnet for controversy. While investors appear ready to invest at high valuations (see our past coverage), Glam has also sparked ire from jealous competitors, who claim it is a sham. They say Glam is not a destination site, and just a network. Glam, meanwhile, says it never claimed to be a destination site — but spins the message differently: It says it has the largest “reach” among women on the Web.

To start with, Glam is now getting 20 million unique viewers, up from 782,000 about a year ago – a faster growth than even MySpace during the frenetic year before it was acquired by News Corp. Comscore, the traffic measurement company, backs up Glam’s claims. Now, Glam also is raising $200 million more in venture capital, and some insiders say Glam could be valued at $600 million or higher – something VentureBeat first reported earlier today. [See the full confidential memo here. Update: The memo is an early draft. We're told four banks are now on the deal, including Allen & Co., Deutsche Bank and Credit Suisse.]

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Tomorrow, Glam will announce a new deal with Google to provide Web results on Glam’s Web sites. Most significantly, however, Glam is about to close a $1 billion-plus advertising deal for its sites, VentureBeat has just learned. Glam will get between $500 million and $800 million in revenue from the deal over the next three years. We’re told negotiations are still under way, but that there have been at least two bids by major advertising companies.

All rosy, right?

Well, Glam has fierce critics. VentureBeat has spoken with at least three of its competitors. To them, Glam isn’t a Web property, so much as an ad network. Glam progress, they say, is driven by smooth, dapper chief executive Samir Arora, who tends toward ping-red shirts, Italian suits and French shoes — and has a riveting marketing spin. If you look at the sites Glam claims to “own,” they look very different from the sort of high-end professional female demographic Glam’s Arora likes to associate Glam with, these critics argue.

We obtained a copy of Glam’s Comscore breakdown of sites; it’s shown below. Note the sort of sites that show up prominently. Half of Glam’s page views, it turns out, come from MyYearbook, a social networking site. Some 6.5 percent come from Meez, an avatar site. There’s Dogster – a social network for dogs — and other questionable sites (see red arrows in graphic below). Take Free-Beauty-Tips.com, for example. At first glance, the site looks like a spam site. It features lists of links to articles loosely related to the theme of beauty and tips. The site’s name, together with links, allow it to feature highly within Google’s search results for “beauty tips”; it therefore draws all sort of traffic. Moreover, Glam has reportedly guaranteed sites such as Meez $200,000 a month in order to have its business. Says one critic, an anonymous competitor to Glam: “To me, Glam is Boo 2.0,” he says referring to Boo.com, the hyped fashion site of the late 1990s that crashed and burned after the Internet bubble burst.

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Competitor iVillage/NBC was until last month the largest woman-oriented network, until it was overtaken Glam, based on the number of unique visitors. IVillage executives say Glam’s claim that it enjoys $20-$30 CPM advertising rates on its core properties is bogus. Glam’s Arora, who says he can’t say much publicly these days because of his fund-raising mode (there are SEC regulations that govern what you can say) has insisted in past interviews that Glam is indeed getting those high rates.

Sugar Publishing and Federated Media Publishing (disclosure: Federated handles much of VentureBeat’s advertising), meanwhile, are about to announce the launch their own network to compete with Glam for its business, VentureBeat has learned. The network will be called the Sugar Network, and will be powered by FM, two inside sources said.

With Boo.com during the first Internet boom, there were clear signs of hype. The site itself was fraught with problems.

With Glam, however, it’s much harder to claim it’s a sham; it’s pulling in major revenue. One competitor begrudgingly conceded Glam appears to be doing a great job building a network. That’s what makes this an interesting story. A site network is a powerful concept, but also can be amorphous. If you turn a network into one like Google’s – where advertisers have an incentive to do business with you because you are the biggest, and offer the best targeting technology – then your lead can snowball. This is the so-called “network effect,” something that eBay perfected. However, right now, it’s too early to tell how vibrant Glam is. It doesn’t actually formally own the sites it has in the network. These sites can leave for other networks, usually with a notice of between a few months and a year. One site in its network, Kaboodle, for example, was just sold to Hearst, and so Glam will lose the right to sell ads exclusively for Kaboodle. Glam’s momentum, therefore, may be fleeting if it can’t convince sites in its network to stay.

One thing is clear. Glam’s Arora knows how to sell. He has founded and helped sell multiple businesses, including NetObjects. Arora’s message is slick. He’s offers sites a technology edge, with new search and advertising targeting technology, which we’ll get to in a minute. He also responds to critics of the sites in his network. MyYearbook, for example, features quizzes that produce highly valuable results for advertisers, he says. Quizzes engender a depth of engagement with readers that is core to Glam’s model, Arora says. He learned the value of quizzes from his time as a board member at Tickle, the dating site that was later sold to Monster. MyYearbook also is popular among young woman, part of the Glam’s targeted audience.

As for Free-Beauty-Tips.com, Arora says Glam bought it not for the links, but to acquire the skills of the site’s owner, a specialist in search engine optimization (SEO). Making the sites in Glam’s network more sophisticated about SEO is a service Glam wants to offer the sites, Arora said. Moreover, Free-Beauty-Tips is a recent acquisition, and Glam will be rolling out real content on that site by the end of the month (Glam showed us screenshots of the new design). Arora also insists the existing site is not a link farm, saying the links go to real articles. On Arora goes, down the list of questionable sites, explaining the logic behind why Glam has taken interest in each one of them (Meez, the avatar site, is desirable because it has young readers, and advertisers tell Glam they want to reach the “Y” generation, Arora explains). Finally, he makes no excuses about owning business of sites that may not be focused on woman. He plans to diversify Glam further in the future.

In most cases, Arora says, Glam has exclusive agreements in place to sell 100 percent of advertising on the sites in its network. The same isn’t true of competing sites like iVillage. IVillage claims it is the largest “destination” site for women, but that may not be true. IVillage lists Sugar Publishing as one of its sites, and Comscore counts Sugar’s traffic as belonging to iVillage. However iVillage neither owns Sugar nor runs 100 percent of its advertising. In fact, Sugar Publishing currently runs no advertising from iVillage. We contacted Brian Sugar, owner of Sugar Publishing for comment. IVillage ads will start showing up next month, he said, because the relationship with iVillage was agreed to only recently (last month). However, even then, Sugar’s sales staff will control major sponsorships, Sugar said – a strong indication that Sugar really shouldn’t be considered part of iVillage’s traffic. IVillage also appears to rely on Fastclick and Doubleclick to serve ads on some other sites. IVillage, reached for comment, said it controls 100 percent of the ad-sales on the sites (see partial list below). However, we’re told it does not control the business of Care2, BooksRags and TestCafe. Like Glam, IVillage has odd properties, such as Astrology.com, which makes up 2.5 million of its uniques; and iWin.com, a promotion/coupon site. Other promotion and questionnaire sites include Promotions.com (just bought by TheStreet, so iVillage will lose that property from its Comscore data), Smartsource.com, Webstakes, and TestCafe. IVillage, for its part, says these are all useful properties.

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Meanwhile, Glam’s Arora says Glam will succeed because it has a technology edge, stemming form its Silicon Valley roots. It has developed new ad-serving technology for its 350 sites, which allows advertisers to not merely target Glam’s multiple woman sites, but also to target sites depending on the depth of engagement. Entertainment sites, for example, will have less engagement than certain social networking sites, where woman are performing daily tasks. Moreover, Glam can tell a sporting advertiser which Glam sites are focused on sports. Finally, if ads aren’t performing very well (in other words, woman readers aren’t clicking on them), those ads will be retired, and be placed on better performing sites. While other networks talk about having such technology, Arora says no other network has the woman-focused Web properties Glam does. Finally, Glam is launching a search widget (see details here) for sites so that users can search for content related to that specific site. For example, if it’s a beauty site, Glam lets users search articles within Glam’s beauty channel of sites. It is partnering with Google to offer full Web search. Glam has said it has an average CPM of $8 to $15 on its network sites, and about $27.5 CPM on the sites it owns outright, or those on Glam.com.

Finally, Glam is winning a poaching war. Jennifer Salant left iVillage/NBC to lead Glam’s business development efforts. Glam also just hired Karin Marke, head of MySpace’s west coast sales, and also hired Myspace’s lead performer of East Coast sales. Glam has poached execs from IAC, three from iVillage, and others from AOL, Elle, CNET and Conde Nast.

Finally, below is the traffic for PopSugar, the site that is about to launch its own ad network in conjunction with FM Publishing.

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Mike Arrington at Techcrunch has just posted a critical piece about Glam, making many of the same points of the critics. Numbers are being thrown around that make this all a big game of smoke and mirrors, and every player is wrapped up in this. Note, for example, that Sugar claims 4.5 million unique visitors a month, as reported by Techcrunch. Brian Sugar tells us these numbers are based on Google analytics. However, Comscore, which is what advertisers rely on, shows a much lower number.

Other reading: See NYT tonight on iVillage challenges.

Glam Media, the network of women’s online lifestyle, fashion and other blogs, has surged past iVillage in overall global unique visitors, according to Comscore’s latest data just released.

Glam has scrounged up 30 million unique visitors in a single year — an accomplishment that only MySpace, Google and maybe one or two others have done before it (see table below).

We already mentioned Glam passed iVillage on a national basis in May. The global data shows Glam still surging ahead.

The fast growth of women’s sites has sent industry players into a furious bout of acquisition, merger and partnership talks. Yesterday, iVillage, and its parent, NBC Universal Digital Media, announced it had signed a deal with another media network, Sugar Publishing, a San Francisco company backed by Sequoia Capital. They will share content, and NBC will sell ads for Sugar’s content, exclusively.

We’re hearing more, potentially very large acquisition deals are under way.

Brian Sugar, founder of Sugar Media, said his company had 4.5 million unique visitors this month, and that he wants that number to jump to 25 million in coming months. Those numbers sound a tad high, however, since Comscore reported Sugar had only 1.1 million uniques last month (though that number was for U.S.). The deal included an investment by NBC, amount undisclosed, to help Sugar hire editorial staff to produce more content. It is still not profitable.

We’ve been talking with both Glam and iVillage lately about the true status of Glam, its ad and content network and the extent to which its relationship with independently owned sites is strong enough to justify them being included in Glam’s traffic numbers. iVillage suggests Glam is more of an ad network than a content site, and that its ad rates are not as high as Glam claims. However, we’ve done some researching, and we’re not certain this last assertion about ad rates is true. Moreover, leaked statistics last week purporting to show weak revenue at Glam were partial and somewhat misleading, we’ve come to understand after several talks with Glam and others. Jury is still out, but we think we’ll get more clarity at the end of next month…stay tuned.

Finally, ShopStyle, a Los Altos, Calif. start-up focused on social shopping for women, has emerged as the latest company in this area. It lets women browse brands and favorite items, and create style books. The company tracks these styles books, and thereby gets early insight into fashion trends. It then broadcasts these fashion alerts to its front page. This lets its users dictate fashion trends, rather than letting the industry dictate the, the company says. It also offers information about where to get special prices on the trendy items. However, this site is not advertising based, and so is quite different from the companies above. It has angel backing, but names and amount are undisclosed.

Real Girls Media, a new San Francisco start-up that wants to publish content for women, has raised $6 million in a first round of funding.

We reported earlier how another company, Sugar, had raised $5 million, led by Silicon Valley high-profile venture firm Sequoia Capital, after that blog site for women showed considerable traction. So this effort by Real Girls comes is somewhat predictable: You have to raise more than your competitor to lure talent, and because Web 2.0 is bubbly right now, you can do it pretty easily.

The company hasn’t launched yet. Rather, it is constructed in the opposite way to Sugar: top down. This should be a great case study of two polar strategies: Sugar was launched with the grit of a founder’s own money; Real Girls is formed from the comfort of a venture capital firm’s arm-chair: It is founded by Kate Everett Thorp (pictured below), who was a venture partner at San Francisco venture firm Walden VC. Her job was to look for ideas, and so formed a vision on an entirely reasonable idea in this environment — of targeting women of all age groups, offering them ways to submit and publish their views and stories.

Thorp is accomplished, so we don’t want to judge this company until it launches next year. She comes from the advertising side. She launched and sold Lot21 Interactive Advertising Group for a profit — and so her project at Real Girls will likely be advertising driven, as opposed to content driven.

The backing comes from WaldenVC, and another firm, 3i.

The first Web site, DivineCaroline.com, is due to launch in early 2007, is targeted for women aged 25 to 54. Additional sites aimed at other age groups will follow in 2007, and so the multi-blog format is also similar to Sugar’s.

If you detect a note of skepticism here, it’s because we moderated a panel last night at the East Bay SVASE, in which some VCs expressed excitement about online advertising, even though we’ve seen so much activity in this area lately. Sure online ads are roaring, but the hype is causing a bevy of me-too start-ups. See the chart below (via Battelle) for why there’s something real going on. But remember, 1999 was real too.

Every day, new ad-based network start-ups are sprouting up. Did you see our piece on SeeSaw, of San Francisco, which wants to put ads in monitors in train stations? Maybe there really are people sitting around in train stations with nothing better to do than peer at ads.

Final tip to RGM: Might want to replace the grey/beige acronym logo.

Michael Moritz (pictured below), venture capitalist with Sequoia Capital, and backer of Google and Yahoo, is apparently funding a blog company called Sugar Publishing, which runs four popular blogs, including flagship PopSugar, that caters to young, hip women.

The San Francisco start-up, which has a social networking component, says it is already getting 13 million monthly page views (or so it said in August), and 1.5 million unique visitors.

Rumor of the investment appeared here first. The amount is $5 million, as reported by Om Malik this evening, though we haven’t confirmed any of this.

Sugar Publishing was founded in April by 32-year-old San Francisco software entrepreneur Brian Sugar with $250,000 of his own money.

It doesn’t expect to earn any money until the end of next year, but just two months after it was founded, it was already getting a bountiful offer from a Boston VC firm in the $10 million valuation range, or so the company said. So this investment from Sequoia should be a bit higher, if the rumor is true. Banana Republic bought out the company’s entire ad inventory for a week in July, the company said.