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...