*ponders this*
A billboard... taking up physical space... on city property... being rented out...
THAT is a business, definitely.
Hmmm...
A child on a street corner selling lemonade... Why is this NOT a business?
...
The internet provides opportunities to make money, and when adults make money, we consider them responsible for that income. However, restricting the methods of acquiring income can divest the affluent of desires to take risk and engage in innovative behaviors. In this case, the permits necessary to 'do business,' are far higher than those involved would ever make in the process.
What are the solutions?
Reduce the cost of permits for everyone? Well, the state needs that money for services and employee wages.
Create exempt categories? Perhaps, 'artists,' are liberated from these restrictions. However, this business wasn't art, it was the sale of advertisement space based on commission.
Perhaps a rebate system: if the proposed company does not make more per year than the cost of the permit, the cost of the permit is refunded.
Lastly, and perhaps least fair: the bloggers could ditch the advertisements and accept that they cannot earn money for their blogging behaviors without sponsorship.