The process is ably helped along by the Wall Street Journal, which breathlessly and inaccurately describes Glam both as a network with "450 partner sites" and as a destination site, in fact "the most popular women's site in the U.S." By glossing over the difference between a low-margin ad network and a Web publisher, the Journal serves as a mouthpiece for Glam's slick chairman and CEO, Samir Arora, who ends the article with a self-serving quote: "This will be the year that Glam goes global." Has he run out of suckers domestically so soon?

Namely, that Glam might be talking to European private equity firms. The kind, our source explains, that has more capital than sense, an eye on the sinking dollar, and a tendency to start funding conversations with American entrepreneurs by asking, "What would you do with $80 million?"

The theory goes that a European firm would buy Glam, pump a couple hundred million dollars into inflating its traffic with guaranteed revenues for new partners for its ad network, tighten the revenue share on older partners to get them thinking of selling out, buy those blogs to increase Glam's owned traffic from about 3 percent of its network to maybe 30 percent, and then flip the whole thing to an old-media behemoth desperate to make an online advertising splash with Glam's coveted female demographic.

Don't believe the bit about Glam lowering the CPMs it pays out to its partners in order to make them vulnerable to buyouts? Some Glam partners worry it's already happening. A partner tells us Glam used to pay $20 to $30 CPMs for premium ads and $7 to $10 for run-of-network ads. Now they pay $7 for the premium stuff and $2 for run-of-network "garbage." For Glam's publishing partners, these sources say, it's getting harder to sustain a business on Glam ads, and it's getting ever more tempting to sell out.

We hear that many Glam partners who want to sell have to offer themselves to Glam first, under right-of-first-refusal clauses. Industry watchers say Glam learned these tactics when it hired Richard Rocca from hardballing ad network Gorilla Nation.

Take the conspiracy theories with a grain of salt. Some of the CPM shrinkage is the result of Glam's increase in size. Selling inventory, it used to be able to go straight to marketing departments, which tend to spend more for less. But now a run-of-network buy on Glam costs so much that it exceeds the amount marketing departments are allowed to spend. Buys have to go through agencies, whose media buyers watch out for clients like Procter & Gamble by refusing to pay more than a $7 CPM. Just business, in other words — but Glam signed up those websites on the promise of better economic terms.

Even if Glam's partners are wrong in their suspicions, the very fact that some believe Glam's business model is so flawed it has to cheat to win begs the question: Who — other than more investors who want in on the shady action — is going to pay $1.3 billion for that kind of company?

Publishers rarely stick with ad networks when they reach a certain size, and Glam has a reputation for signing up new sites with expensive guarantees. (A Glam spokesperson claims it's not seeing sites leave after the guarantees expire.) Ultimately, though, Glam's sites have two fates: Either they never get large enough to matter, or they grow too big for Glam to justify its cut of sales. At that point, they'll likely leave or get bought outright by Glam — a considerable future liability for shareholders.

None of this means Glam won't sell. Glam CEO Samir Arora sold a majority stake in his startup NetObjects to IBM in 1997. Four years later, IBM sold the company off in parts for a pittance. Glam backer Tim Draper of Draper Fisher Jurvetson profitably sold similar lemons — Hotmail to Microsoft, and Skype to eBay. We doubt Glam's viability. We don't doubt Glam's backers ability to sell the company. To suckers.

One StyleMob cofounder, Adam Souzis, already works as an executive director of Glam Lab. Only Sasha Cagen remains with StyleMob. The Souzis connection between the companies and the fact that StyleMob was already a Glam Media publishing partner, however, lend credibility to the rumor.

It's also not surprising to hear that Cagen isn't happy to be acquired by Glam. Glam claims to be "largest women's network" on the Web, but it's really just an ad sales team looking to buy similar-looking inventory low, bundle it, and then sell it higher. It's a poor business model, because to survive in the long-term, publishers have to be able to sell their own inventory at premium rates.

Glam has a hefty publisher client list — websites it doesn't own, but for which it provides ads. (The list includes some sites which compete with Jezebel, owned by Gawker Media, the publisher of Valleywag.) Glam is also now the "largest women's network" according to ComScore, with nearly 45 million "readers."

Impressive? Not really. ComScore allows publishers to "assign" their traffic to another organization, letting ad networks pool the traffic from all client sites. If a widely used ad network like Google AdSense used this system, Google's network would be by far the largest. But, it's a disingenuous statistic, especially since Glam likes to pretend it's not an ad network.

Glam does have an argument that it's more than a network: That's because, like Microsoft has done with Facebook and Digg, and Google has done with MySpace, it buys up some sites' inventories at a guaranteed rate. That means the profit — or more likely loss — from those ad buys is entirely Glam's. But it's a very risky model. In a recent earnings call, Google executives complained that ads on MySpace weren't performing well. Google can afford that kind of risk. Can Glam? With only $84 million to play with, Arora hasn't raised the kind of bankroll that speaks well to that question.

What does an online-ad company have to do with an energy concern? Like Enron, Glam's true business isn't selling; it's arbitrage. Glam grows its revenues, rivals say, by acquiring ad inventory from websites and then attempting to sell it to media buyers at higher prices. Buy low, sell high is a time-honored business model. But it's not a recipe for exponential growth spurred by viral marketing, as Hotmail and Skype were.

Nothing in Glam's business encourages a Glam advertiser to sign up other advertisers; nor does it spread from publisher to publisher unbidden. All Glam has going for it is the size of its wallet, which is why it's so desperate to raise money. Only with fresh capital can Glam continue its ad-buying spree, providing the illusion of growth that will allow it to gather more money, preferably in an IPO. At some point, investors will be left holding the bag. Maybe that's where Draper sees a connection: He unloaded Hotmail to Microsoft and Skype to eBay long before their buyers figured out there was no money in them.

The diminished financing must be a disappointment to Arora. But it also could be a comedown for the crowded ranks of investment bankers working the deal: Allen & Co., Bank of America, Credit Suisse, and Deutsche Bank are all involved, we hear. Split four ways, the commission on the shrunken deal likely won't pay many bonuses. (Note: Glam represents some sites which compete with Jezebel, a women's blog published, like Valleywag, by Gawker Media.)

Talking up the ad-network business has had an unintended consequence for Arora: Drawing fresh competition from the companies Arora is seeking to displace. NBC Universal has quietly launched its own ad-brokering operation, the NBCU Extended Network, which places ads on NBC Web properties and third-party sites. Just like Glam, in other words, but without the established brands and sales force NBC has on offer.

Glam's Arora blathers on to Folio about exploiting the "mid tail" and operating a "hub and spoke model." To the extent that there's meaning behind those buzzwords, NBC and other established media operations have figured it out. Which leaves Glam, which is seeking to raise $200 million in financing, with little besides Arora's skills as a salesman to justify its valuation.

First, the comparison to MySpace: Glam is an online-advertising network, not a destination site, and so it doesn't control the traffic it claims. More than half of its pageviews, according to ComScore, come from MyYearbook.com, a social-networking site that Glam doesn't own, and that could, quite conceivably, drop Glam at any point in favor of a rival or its own ad-sales team.

The billion-dollar advertising deal, if true, would explain Glam's otherwise unbelievable revenue-growth projections:

Glam's own websites, according to a ComScore report (PDF), account for less than 10 percent of its unique visitors and about a seventh of its pageviews. If Glam's counting ads sold for third parties as gross revenues, then most of that money will be flowing to websites it represents, not Glam's own coffers. And if Glam takes too generous a cut, it risks losing those sites altogether. Without MyYearbook.com, especially, Glam wouldn't have nearly as much inventory to offer. (Note: Gawker Media, the publisher of Valleywag, also publishes Jezebel, a competitor to some sites owned or represented by Glam.)

Glam's latest move, launching a search engine for its network of sites, may prove an answer of sorts. Lately, the company has been dabbling in search-engine optimization, the questionable practice of designing websites to rank highly in Google's search results rather than in users' affections. By driving traffic from MyYearbook.com and its handful of other popular sites to those sites designed to lure in Web searchers, Glam could actually capture more traffic from the network of sites it reps. Until, that is, those independent sites protest the naked grab at their users.

Samir Arora, Glam's CEO, is a slick sort. In 1997, he managed to sell a controlling stake in Web-authoring startup NetObjects to IBM; four years later, the company was broken up for parts. Given his history of salesmanship, and the current mania for online-ad networks, it's likely that Glam will draw deep-pocketed investors. But buyer beware.