The WSJ has very well researched article about Blog Advertising:

"Gawker Media, one of the biggest brands in Web log publishing, launched a saucy urban travel blog called Gridskipper on Jan. 31. On that day, the logo of the site's sole sponsor, Cendant Corp.'s Cheaptickets, could be found in ads on each page. But by Feb. 3, the company had removed its banners and boxes, leaving empty spaces on some pages.

What happened?

In the intervening days, Gridskipper covered editorial topics such as eating psychedelic mushrooms in Amsterdam's Van Gogh museum and the pricing policies of an escort service in Prague. Cheaptickets declined to comment, but Nick Denton, Gawker's founder, says he thinks the site was "too naughty" for its sponsor.

At their best, blogs are an advertiser's dream: the diary-style Web sites that feature running commentary and reactions are tightly targeted niche markets where avant-garde enthusiasts regularly return to read, post and send in tips. Well-placed blog ads can boost a company's image as cutting-edge. Plus, they're inexpensive: $350 a week, for instance, for premium positioning on Mr. Denton's high-profile inside-Washington blog, Wonkette, which got 2.2 million "page views" last month, a measure of how many times a single visitor looks at one Web site page."

I just miss one company name there :)