Chrispcritters - 8:40 pm on May 10, 2010 (gmt 0)
You're making a number of assumptions in knocking their advertising choices:
1) Their CTR can't be that great
2) Ad in the worst possible spots
3) They make decent money
(I don't see any published stats concerning the above)
Having a website entirely supported by on-page advertising is a tight-rope walk. Too few ad locations may result in too low income. Too many ad locations may result in poor user experience (resulting in less traffic and less $$$). Too many ad locations may also drive down the value of the ad location (supply and demand). Ads in traditional locations may result in banner blindness.
You also have to look at the type of visitor a website may draw. High disposable income, low disposable income, corporate, end-user, likely to buy, not interested in buying...
You also have to look at the advertiser objectives. Is it a branding campaign where they are looking to get their name associated with other well known brands. It may be low CTR but very high conversion rates, which would drive up the value of the ad location. (high ctr and low quality would drive down the value of the ad location).
Having run a number of sites that are 100% ad support I've found that none of them behaved the same.
Making assumptions is dangerous in the business world. The nice thing about the web is the ease in which you can A/B test to see what works best.