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Demand Media Files For IPO
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msg:4183533
 11:00 am on Aug 7, 2010 (gmt 0)

Demand Media Files For IPO [businessinsider.com]

Demand Media, a platform for freelance writers specializing in creating search engine friendly content, just filed for an IPO.

According to the filing, Demand revenues reached $114 million for the six months ending June 2010. That's an increase from $91.3 million over the same period a year ago.


 

Lapizuli




msg:4183672
 6:35 pm on Aug 7, 2010 (gmt 0)

What I really wonder is, is Demand Studios, which is a Demand Media property and sources eHow, which makes about one fifth of DM's revenue, profitable?

What I mean is, they pay lots of money for content - more than just the few bucks to writers - and take human intuition out of the equation of content producing. As I wrote elsewhere, it's like buying all the lottery tickets in town.

Does it work? I don't think it can. And if it did, DM would probably not be going public.

Not to take an off-topic topic too much back on topic, but...I think it's a sign that the rev share business model is profitable for individuals but for big business, not so much.

Sgt_Kickaxe




msg:4183676
 7:01 pm on Aug 7, 2010 (gmt 0)

I was going to say the same, if it was so profitable it wouldn't be going public.

I'd be weary about investing in a company who's claim to fame is "unique content" because if they dominate in any fashion they can and will be copied by people willing to do it for less.

From the filing
Loss from operations over the first half was $4.3 million. A year ago, that figure was $11.4 million.


The company generates "a couple hundred million dollars worth" of unique content a year, just like every other major site is doing. Gotta love the "unique, just like everyone else" factor.

walkman




msg:4183680
 7:16 pm on Aug 7, 2010 (gmt 0)

Revenues mean JACK in this case. How much they have earned (or lost) since day one? Plus, they depend on Google for one way or another for most of their earnings, one algo change and via

Edwin




msg:4183729
 11:49 pm on Aug 7, 2010 (gmt 0)

It's the kind of situation where they can turn profitable any time they like. The content they're producing is "evergreen" much of the time, and they have hundreds of millions of pages of it, so if they switch from "grow" to "maintain" they should suddenly be insanely profitable, since their costs crater to a tiny fraction of what they were, but their revenue should stay up pretty well.

eHow.com alone has nearly 7,000,000 pages indexed, without counting all their other properties. And some of their content is actually pretty-good-to-excellent (it varies, but in general I've found what they produce useful, and sometimes it's a perfect summary of a specific topic/problem and much better than most of the other top results for that query). So it's doubtful they'd get the big boot from the SEs any time soon.

eatcarrots




msg:4183771
 7:42 am on Aug 8, 2010 (gmt 0)

Right - the additional cash from an IPO would just let them scale faster. Maybe it takes 2 years on average for a piece of content to pay for itself. After those two years, everything they make from it is gravy. If that's the case - it seems reasonable want to do this IPO.

On a whole, their content is just average - but, I really do like the way they've setup Demand Studios. Of course, as someone who has some content websites, they just represent more competition, but I do admire them for taking this concept and running with it.

aspdaddy




msg:4183833
 3:00 pm on Aug 8, 2010 (gmt 0)

I wonder if the recent google patent influenced the decision to IPO, or if they had already planned to?

Brett_Tabke




msg:4183834
 3:06 pm on Aug 8, 2010 (gmt 0)

I have found ehow to be as reliable (if not more) than Wikipedia for the searches I run into it. I use it quite often when some new task comes up to figure out how to do a task. I even made a custum search default for eHow. I think the quality of articles is better than what is generally available on the web. For every rare low quality article you can find on ehow – you can two dozen on wikipedia.

The downside to this for me is that it re-enforces the myth that all it takes is content to win in the search engines. Sorry, I no longer believe quality content = quality rankings. That dream has been dying for quite a few years (along with everyones traffic and rankings in Google as competition makes roi on seo an unsustainable endeavor).

What Rosenblatt and the crew have done is nothing short of genius in the SEO space. To qualify algorithmically and engineer daily content is freaking brilliant. To get it to rank and convert in the long tail is even bigger. No wonder everyone is so jealous of their success. They are the top SEO’s on the web. They are without a peer.

Here is a great article from Wired: on Demand Media “The Answer Factory”
[wired.com...]
Interview I did with Richard Rosenblatt (@demandrichard) of Demand Media a few years ago: [youtube.com...]

Sgt_Kickaxe




msg:4183939
 9:22 pm on Aug 8, 2010 (gmt 0)

While I don't share your enthusiasm for their SEO prowess, in my opinion they're doing some things right and accidentally benefiting from some other things, but the fact they can rank so many pages on page one is indeed a tribute.

eHow has some funky rankings love going on, an example is the image thumbnails they have on a lot of pages. Google gives credit for the full sized images to the pages with thumbnails when in fact those are links to other pages, not links to a bigger version of the image.

~ you can dump images on less useful pages and rank for them from the pages you want visitors to "hit".

~ you benefit when a visitor sees the thumbnail and clicks through to read what they came to find (pageviews, more "hits")

Google also seems to be ranking pages based on unique individual browser hits, as reported to them via their various web beacons, browser add ons etc and eHow is harvesting a lot of that well. A+ internal link structure too... but some of it is by pure chance, dig around and you'll see where they get it wrong too.

Anyway, my point is - unique content has legs but when those legs get too big they get knocked off rather harshly, they become the go-to for spammers and that does have an effect, especially when the quality content sinks within the sites hierarchy.

I'd be surprised if Google doesn't manually grant many sites certain levels of status much like they de-rank others, I wouldn't worry about eHow falling out of the serps unless they have a meltdown and use blackhat SEO and I don't see that happening. Getting pressured by wall street however, many have secretly bought links to please investors before.

Great interview Brett, lot's of good stuff in there. To illustrate my point, from the article...
He once spent two weeks in a bird blind in his native Chile to capture striking footage of a rarely seen Andean condor.

Now, if he uploaded that quality image to his website and it went viral how many other sites would re-print the image as "news"? Lots, including every major publication and search engine "trends" pages. It would be mashup fodder, the same happens with good content. Is it easier (and less expensive) to mashup another sites content to benefit yours or to spend two weeks in a bird hut for an image?

Also from the article...
To get there, Demand is using an army of Muñoz- Donosos to feverishly crank out articles and videos. They shoot slapdash instructional videos with titles like “How To Draw a Greek Helmet” and “Dog Whistle Training Techniques.” They write guides about lunch meat safety and nonprofit administration. They pump out an endless stream of bulleted lists and tutorials about the most esoteric of subjects.

I submit that they hope for quality but shoot for speed. Quality isn't the priority, speed is to the tune of 4,000 videos and articles a day.

Lapizuli




msg:4183964
 11:07 pm on Aug 8, 2010 (gmt 0)

I agree that eHow articles rank well, and that they are useful - they've certainly improved since Demand banished the come-one-come-all crowdsourcing model this year and defaulted exclusively to their Demand Studios producers.

But when buying their content, they don't pay based on how profitable they think a title/keyword will be...they pay according to the format. A flat rate. At least for written content. Don't know about video.

So what I'm wondering is...how can the Demand Studios/eHow arm of Demand Media be profitable, if they pay set rates for all content, and they don't do any tweaking of content, and they don't STOP producing content - which, as Edwin says, would probably quickly tip the scales into profit?

I just can't get past the fallacy of the "buy all the lottery tickets in the roll and make a killing" notion.

The automated part of what they do is all well and good, but is it good enough to produce winning content every time? Taking into account the cost of writers, title proofers, copy editors, editorial staff, access to the data for their algorithm, and other overhead? Content producers don't get paid that much, but they don't get paid that little, either (certainly not the penny per word one of the articles covering the IPO said.)

Besides - I just don't think the algorithm's that smart. The titles aren't noticeably different from what comes up in the various keyword tools.

It's the problem of scalability that Matt Cutts is always talking about. Keeping costs low but quality up. Very hard for a single big business competing with millions of individual search engine marketers.

I don't know what else they're doing with their content to make money. I know Demand Media can repurpose the stuff. Besides ad revenue from their properties, they have Pluck on Demand, but isn't that just an armful of duplicate content scattered all over the web? They tried a print book or two of eHows, and I doubt that went over very well, but who knows?

If it is profitable, I'd be surprised, but seriously impressed.

If it's not, I'd expect DS to either hire a team of "tweakers" - people whose job it is to maximize the profit potential of existing content - or stop producing content altogether.

Anyway, it's not all just academic to me. I really believe the Internet has changed the nature of business. Anderson's long tail theory focuses on big business making money off the long tail niches instead of the big "hits."

But I'm of the opinion that he and pretty much everyone are ignoring the real potential for money to be made online - and not just potential, but an inevitable shift.

I think that we're moving away from Demand Media-like centralized monopolistic business, and toward little business. That the main one to profit down the line will be the little guy, the guy who has special skills, special interests, access to all the resources the web has to offer, little to lose, and time on his hands.

If Demand Media Studios and eHow (not all of Demand Media, but the part that's about content production and the profits thereof) can't make money, then it's another sign that the Internet's owned by individuals, not big business.

And if they can...well...I dunno. More of the same, I guess...

Nuttakorn




msg:4184086
 7:52 am on Aug 9, 2010 (gmt 0)

If they filed for IPO, Do they need to disclose all their properties and digital assets? Google may look into it that they create artificial link building or not.

martinibuster




msg:4184090
 8:15 am on Aug 9, 2010 (gmt 0)

I have found ehow to be as reliable (if not more) than Wikipedia for the searches I run into it.


I agree. :)

The writers for eHow are professional writers whose job is to expertise lies in researching then writing content. eHow writers are not generally experts on the topics they are writing about, so the authority of the content suffers.

About.com is head and shoulders more reliable than either eHow or wikipedia. The content at About.com is generated by actual experts. eHow deploys writers who are not necessarily experts to generate content. The content at About.com may not be generated by computer algorithms, but knowing the experts there really are experts make me feel confident about the content there.

Worst of the group is wikipedia. It sinks to the lowest level of authority by relying on anonymous contributors of questionable expertise to generate their content.

Getting back to the topic, how much of the revenue is based on search traffic? How sustainable is it?

bears5122




msg:4184171
 12:00 pm on Aug 9, 2010 (gmt 0)

I no longer believe quality content = quality rankings

I think you're right. The strategy now appears to be build an authoratative domain, and then churn out as much content as you possibly can on topics that are searched a lot.

I contend this is the #1 problem I have with Google results. The same 10 sites seem to rank for every single informational search these days. The same 10 shopping engines seem to rank for every single shopping search too.

Maybe I've picked some bad industries to be running informational searches on of late. But I've gotten into cooking lately and been trying to learn a lot about how to make stuff certain ways. Well every search is dominated by these content mills or answer sites. When in actuality, they should be dominated by sites run by Chefs or cooking forums.

They've really killed off the niche site. The expert site in one field. When I ask a cooking question, I shouldn't be getting Yahoo! Answers, I should be getting a popular cooking forum. Just as when I search about setting up my home theater system, I should be getting a technology site over eHow. That's not a gripe as an SEO either, it's a gripe as one of their users. They need to find a better way to push the authorities in a topic to the top.

aleksl




msg:4184232
 2:22 pm on Aug 9, 2010 (gmt 0)

The writers for eHow are professional writers whose job is to expertise lies in researching then writing content. eHow writers are not generally experts on the topics they are writing about, so the authority of the content suffers.


au contraire. to the first part. true about the second.

I find eHow to be as useless and as spammy as about.com. A bunch of trivial content. Run at them on multiple occasions, just like at the a... site. Always click back disappointed, sometimes even disgusted as if I got a MFA site (as IF?). In many, many times I saw their pages come up and clutter SERPs, off the top of my head I remember 1 case where article was useful.

then again, if you write millions of articles, some of them must be useful by virtue of "can monkey write war and peace" law

What I am wondering though, is this: who's the bunny that purchased useless stock? :)

jmccormac




msg:4184563
 1:50 am on Aug 10, 2010 (gmt 0)

Demand Media history from Wikipedia: [en.wikipedia.org...]

So let me get this straight: these guys have lost money every year they've been in business and now they want to raise more money so that they can lose less money? :)

Regards...jmcc

graeme_p




msg:4184607
 5:25 am on Aug 10, 2010 (gmt 0)

I have got into the habit of never clicking through to certain sites: eHow, about.com etc.

An IPO can achieve two things:

1) Raise money for expansion
2) cash out.

For a high risk business like this, I would say 2) is more like "get out while the going is good". It is high risk - ranking reliant on good SEO, however brilliant they are at it, is a high risk.

So, unless they come up with a good use for the money (and the filing is very vague), it does not look enticing.

As people have commented, the multiples are very high, and assume a lot of growth.

tim222




msg:4184993
 6:00 pm on Aug 10, 2010 (gmt 0)

For a high risk business like this, I would say 2) is more like "get out while the going is good". It is high risk - ranking reliant on good SEO, however brilliant they are at it, is a high risk.

Agreed - I smell a cash-out. The pattern is pretty typical: dump a bunch of money into a site and then wait for deep pockets to come along and buy it.

From the article:
Yahoo acquired Demand Media rival Associated Content for $100 million this spring.

That leaves Google and Microsoft as prime candidates to buy Demand Media.

bears5122




msg:4185130
 12:39 am on Aug 11, 2010 (gmt 0)

Would make more sense for Google. They rank their pages for virtually everything and it would cut out the middle man when it comes to Adsense.

graeme_p




msg:4185162
 3:47 am on Aug 11, 2010 (gmt 0)

Except that Google are not buying, nor is Yahoo or MS. They are trying to sell it to the public.

micklearn




msg:4185247
 8:00 am on Aug 11, 2010 (gmt 0)

The writers for eHow are professional writers whose expertise lies in researching then writing content. eHow writers are not generally experts on the topics they are writing about, so the authority of the content suffers.

About.com is head and shoulders more reliable than either eHow or wikipedia. The content at About.com is generated by actual experts. eHow deploys writers who are not necessarily experts to generate content. The content at About.com may not be generated by computer algorithms, but knowing the experts there really are experts make me feel confident about the content there.


What he said ^^^... especially with *serious* issues/topics. I'll click/rely on about.com in SERP's (and many other sites) long before I give of all of the article sites/Wikipedia pages out there a chance for my click when I'm looking for highly important information (health, finance, taxes, etc.)

I've clicked much less on most of the sites owned by Demand Media when I come across them in SERP's, lately, because much of it appears to be general info and not very helpful. (Just about anyone could have written it with a little research on the topic.)

I'm having trouble seeing the IPO/going public decision making anyone wealthy in the long term, except for the owners/original investors. Or people who might run up the price in the first weeks and short the stock heavily in the weeks that follow...and quite frankly, that really makes me sad. But, in the end, a lot of the outcome depends on what Google decides...is this content helpful? vs. Does it make us money?

aspdaddy




msg:4185446
 4:27 pm on Aug 11, 2010 (gmt 0)

Where can you find out the IPO details, future forecasts, use of money raised etc ?

Before you ask - yes I'v read the eHow article on this subject but it wasnt very helpful :)

Rugles




msg:4185483
 5:50 pm on Aug 11, 2010 (gmt 0)

I have always founds ehow articles mostly useless. I almost never click on their site in the SERPS anymore. Maybe they have changed but I doubt it.

I personally would not invest a single penny.

Hugene




msg:4185573
 8:44 pm on Aug 11, 2010 (gmt 0)

Cashing out on a good idea. I must admit I am jealous, but I also still believe that Demand Media is nothing more but an Internet sweatshop. Automated and algorithmical but still a sweatshop.

Then again a lot of the Internet is a sweatshop...

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