Demand Media
Encyclopedia
Demand Media, Inc. is an online media company
and content farm
that operates online brands such as eHow
, and Cracked
, and is known for creating online content through its Demand Media Studios division based on a combination of measured consumer demand and predicted ROI
. The company also provides social media platforms to existing large company website
s and distributes content bundled with social media tools to outlets around the web. The company also owns eNom
, the world’s second-largest domain registrar.
Demand Media was created in 2006 by a former private equity investor, Shawn Colo, and the former chairman of MySpace
, Richard Rosenblatt
.
The company employs an algorithm that identifies topics with high advertising potential, based on search engine query data and bids on advertising auctions. These topics are typically in the advice and how-to field. It then commissions freelancers to produce corresponding text or video content. The content is posted on a variety of sites, including YouTube
and the company's own sites such as eHow
, Livestrong.com, Trails.com, GolfLink.com, Mania.com, and Cracked.com
.
and Shawn Colo. Rosenblatt has a long history of building and selling Internet media companies. As CEO of Intermix Media
and Chairman of MySpace.com, Rosenblatt was one of the innovators of Internet social networking. Colo is a financial acquisition specialist. He worked for 10 years in the private equity industry as a Principal with Spectrum Equity Investors
specializing in media and communications companies.
Demand Media raised more than $355 million in financing over its first two years from investors such as Oak Investment Partners
, Spectrum Equity Investors
, Generation Partners and Goldman Sachs
.
In June 2007 Demand Media hired Charles Hilliard, a former Morgan Stanley
investment banker and United Online
senior executive, as its President and CFO and acquired Byron Reese's how-to website, ExpertVillage.com of Austin, TX, for about $20 million. Reese became the company's Chief Innovation Officer and developed the algorithm that the company now uses to identify topics with high advertising potential. By 2008, Demand Media had acquired more than 30 domain name portfolios
and owned 65 destination websites. Demand Media said that its 2009 revenue
was nearly $200 million and that it was making a profit, but in fact the company had never been profitable.
In July 2008 it was widely reported that Yahoo!
was interested in buying Demand Media for between $1.5 and $2 billion. Sources close to both companies said Yahoo! executives
were attracted to Demand Media’s generation of advertising impressions and its ability to create niche social networks for media sites. Demand Media CEO Richard Rosenblatt later said that the company was not for sale. The deal never got past the talking stage. It was reported that Rosenblatt wanted a price closer to $3 billion for Demand Media.
and BulkRegister. On November 6, 2008, Demand Media Head of M & A Shawn Colo said the company would continue to buy niche, well-trafficked sites because the company is profitable and still has a lot of cash in the bank.
In 2008 Demand Media acquired Pluck
, a company providing social networking and commenting solutions to other websites, for a reported $75 million in cash.
In August 2011 Demand Media announced acquisitions of IndieClick and RSS Grafitti. The latter may allow access to providing content to Facebook publishers.
” search. Demand Media attempts to get visitors to its websites with these long-tail searches. It then tries to retain visitors with related content and social media tools. Their social media platforms get 3 billion interactions per month for clients with already well established brands. Demand Media commissions specific website content that it then distributes to its own websites and others where they have advertising
revenue sharing
agreements. As of 2008 Demand Media owned 135,000 video
s and 340,000 articles
. It is the largest contributor to YouTube
, uploading between 10,000 and 20,000 new videos per month, and gets about 1.5 million page views per day on YouTube.
Content is generated via a process in which Demand Media uses algorithms to generate titles, then posts the titles to a screened pool of free-lance writers or video creators. The list of available titles used to be >100,000 but was severely curtailed in the second half of 2011. Typically, writers can claim up to ten titles and then have a week to submit the articles. Format and length are dictated by guidelines. Submitted articles go to an editor (also a freelancer) who can either clean it up or request a rewrite. After writers submit a revised article it is either accepted or rejected. Payment via PayPal is twice a week.
Demand Media’s acquisition of Pluck.com in 2008 gave it the means to provide specialized content and social media platforms to any website. The content comes with advertising attached. The website owners get free content for their sites and split the advertising revenue with Demand Media. This hybrid Internet publishing model has been referred to as Curated Social Content. It is a combination of Enterprise Generated Media, such as newspapers, and consumer-generated media, such as blogs.
Post-IPO the stock rose to the mid-20s, but by fall 2011 had plateaued under $7.00.
's AdSense
. During autumn 2010 opportunities to write articles for $25 or $30 dwindled, leaving mostly $15 or $20 titles. New content volume also shrank, as Demand Media attempted a transition from "quantity to quality" postings.
From Business Insider Oct 20, 2011: "Demand is still sticking with its aggressive accounting, in which it capitalizes content costs and amortizes them over five years. This practice makes the company look profitable when it isn't. It also gives the company much higher "EBITDA" than it really has, because in Demand's case, "EBITDA" is really earnings before content costs."
Company
A company is a form of business organization. It is an association or collection of individual real persons and/or other companies, who each provide some form of capital. This group has a common purpose or focus and an aim of gaining profits. This collection, group or association of persons can be...
and content farm
Content farm
In the context of the World Wide Web, the term content farm is used to describe a company that employs large numbers of often freelance writers to generate large amounts of textual content which is specifically designed to satisfy algorithms for maximal retrieval by automated search engines...
that operates online brands such as eHow
EHow
eHow is an online how-to guide with more than 1 million articles and 170,000 videos offering step-by-step instructions. eHow articles and videos are created by freelancers and cover a wide variety of topics organized into a hierarchy of categories. Any eHow user can leave comments or responses, but...
, and Cracked
Cracked.com
Cracked.com is a humor website that was spun off the last attempt to revive Cracked magazine. It began in its current form in 2007.-Attempted relaunch of Cracked:...
, and is known for creating online content through its Demand Media Studios division based on a combination of measured consumer demand and predicted ROI
Rate of return
In finance, rate of return , also known as return on investment , rate of profit or sometimes just return, is the ratio of money gained or lost on an investment relative to the amount of money invested. The amount of money gained or lost may be referred to as interest, profit/loss, gain/loss, or...
. The company also provides social media platforms to existing large company website
Website
A website, also written as Web site, web site, or simply site, is a collection of related web pages containing images, videos or other digital assets. A website is hosted on at least one web server, accessible via a network such as the Internet or a private local area network through an Internet...
s and distributes content bundled with social media tools to outlets around the web. The company also owns eNom
ENom
eNom, Inc. is a domain name registrar and Web hosting company that also sells other products closely tied to domain names, such as SSL certificates, e-mail services, and Website building software...
, the world’s second-largest domain registrar.
Demand Media was created in 2006 by a former private equity investor, Shawn Colo, and the former chairman of MySpace
MySpace
Myspace is a social networking service owned by Specific Media LLC and pop star Justin Timberlake. Myspace launched in August 2003 and is headquartered in Beverly Hills, California. In August 2011, Myspace had 33.1 million unique U.S. visitors....
, Richard Rosenblatt
Richard Rosenblatt
Richard Rosenblatt is a serial entrepreneur and the Co-Founder, Chairman and CEO of Demand Media. He has built, operated, and sold over $1.3 billion of Internet media companies.-Early life:...
.
The company employs an algorithm that identifies topics with high advertising potential, based on search engine query data and bids on advertising auctions. These topics are typically in the advice and how-to field. It then commissions freelancers to produce corresponding text or video content. The content is posted on a variety of sites, including YouTube
YouTube
YouTube is a video-sharing website, created by three former PayPal employees in February 2005, on which users can upload, view and share videos....
and the company's own sites such as eHow
EHow
eHow is an online how-to guide with more than 1 million articles and 170,000 videos offering step-by-step instructions. eHow articles and videos are created by freelancers and cover a wide variety of topics organized into a hierarchy of categories. Any eHow user can leave comments or responses, but...
, Livestrong.com, Trails.com, GolfLink.com, Mania.com, and Cracked.com
Cracked.com
Cracked.com is a humor website that was spun off the last attempt to revive Cracked magazine. It began in its current form in 2007.-Attempted relaunch of Cracked:...
.
History
Demand Media was co-founded in May 2006 by Richard RosenblattRichard Rosenblatt
Richard Rosenblatt is a serial entrepreneur and the Co-Founder, Chairman and CEO of Demand Media. He has built, operated, and sold over $1.3 billion of Internet media companies.-Early life:...
and Shawn Colo. Rosenblatt has a long history of building and selling Internet media companies. As CEO of Intermix Media
Intermix Media
Intermix Media, Inc. was a Los Angeles-based Internet marketing company founded in 1998 that owned the MySpace website...
and Chairman of MySpace.com, Rosenblatt was one of the innovators of Internet social networking. Colo is a financial acquisition specialist. He worked for 10 years in the private equity industry as a Principal with Spectrum Equity Investors
Spectrum Equity Investors
Spectrum Equity Investors is a Boston-based private equity and venture capital firm founded in 1994. The firm focuses on business services, entertainment, communications, information services, media, and related growth sectors. The firm currently has a capital base of approximately $4.7 billion...
specializing in media and communications companies.
Demand Media raised more than $355 million in financing over its first two years from investors such as Oak Investment Partners
Oak Investment Partners
Oak Investment Partners is a private equity firm focusing on venture capital investments in companies developing communications systems, information technology, new Internet media, healthcare services and retail....
, Spectrum Equity Investors
Spectrum Equity Investors
Spectrum Equity Investors is a Boston-based private equity and venture capital firm founded in 1994. The firm focuses on business services, entertainment, communications, information services, media, and related growth sectors. The firm currently has a capital base of approximately $4.7 billion...
, Generation Partners and Goldman Sachs
Goldman Sachs
The Goldman Sachs Group, Inc. is an American multinational bulge bracket investment banking and securities firm that engages in global investment banking, securities, investment management, and other financial services primarily with institutional clients...
.
In June 2007 Demand Media hired Charles Hilliard, a former Morgan Stanley
Morgan Stanley
Morgan Stanley is a global financial services firm headquartered in New York City serving a diversified group of corporations, governments, financial institutions, and individuals. Morgan Stanley also operates in 36 countries around the world, with over 600 offices and a workforce of over 60,000....
investment banker and United Online
United Online
United Online is a public company formed by the 2001 merger of NetZero and Juno Online Services. The company's range of products and services has evolved significantly since inception, primarily through a series of acquisitions that have included Classmates Online , MyPoints and FTD Group, Inc. ....
senior executive, as its President and CFO and acquired Byron Reese's how-to website, ExpertVillage.com of Austin, TX, for about $20 million. Reese became the company's Chief Innovation Officer and developed the algorithm that the company now uses to identify topics with high advertising potential. By 2008, Demand Media had acquired more than 30 domain name portfolios
Portfolio (finance)
Portfolio is a financial term denoting a collection of investments held by an investment company, hedge fund, financial institution or individual.-Definition:The term portfolio refers to any collection of financial assets such as stocks, bonds and cash...
and owned 65 destination websites. Demand Media said that its 2009 revenue
Revenue
In business, revenue is income that a company receives from its normal business activities, usually from the sale of goods and services to customers. In many countries, such as the United Kingdom, revenue is referred to as turnover....
was nearly $200 million and that it was making a profit, but in fact the company had never been profitable.
In July 2008 it was widely reported that Yahoo!
Yahoo!
Yahoo! Inc. is an American multinational internet corporation headquartered in Sunnyvale, California, United States. The company is perhaps best known for its web portal, search engine , Yahoo! Directory, Yahoo! Mail, Yahoo! News, Yahoo! Groups, Yahoo! Answers, advertising, online mapping ,...
was interested in buying Demand Media for between $1.5 and $2 billion. Sources close to both companies said Yahoo! executives
Senior management
Senior management, executive management, or management team is generally a team of individuals at the highest level of organizational management who have the day-to-day responsibilities of managing a company or corporation, they hold specific executive powers conferred onto them with and by...
were attracted to Demand Media’s generation of advertising impressions and its ability to create niche social networks for media sites. Demand Media CEO Richard Rosenblatt later said that the company was not for sale. The deal never got past the talking stage. It was reported that Rosenblatt wanted a price closer to $3 billion for Demand Media.
Acquisitions
Since 2006, Demand Media has acquired a collection of relatively unknown sites and relaunched them with social networking features and video capabilities that serve specific niche interests In the company’s first six months it made nine acquisitions, including the purchase of major registrars eNomENom
eNom, Inc. is a domain name registrar and Web hosting company that also sells other products closely tied to domain names, such as SSL certificates, e-mail services, and Website building software...
and BulkRegister. On November 6, 2008, Demand Media Head of M & A Shawn Colo said the company would continue to buy niche, well-trafficked sites because the company is profitable and still has a lot of cash in the bank.
In 2008 Demand Media acquired Pluck
Pluck (company)
Pluck was an American Internet company based in Austin, Texas, that ran a website since 2005 that offered an RSS reader. The company was acquired by Demand Media on March 3, 2008 for US$75 million in cash....
, a company providing social networking and commenting solutions to other websites, for a reported $75 million in cash.
In August 2011 Demand Media announced acquisitions of IndieClick and RSS Grafitti. The latter may allow access to providing content to Facebook publishers.
Business model
Demand Media executives say their websites are content-driven to attract visitors by showing up in multiword search-engine queries. The more words that are typed into a search engine, the more specific the search will be. This is called “the long tailThe Long Tail
The Long Tail or long tail refers to the statistical property that a larger share of population rests within the tail of a probability distribution than observed under a 'normal' or Gaussian distribution...
” search. Demand Media attempts to get visitors to its websites with these long-tail searches. It then tries to retain visitors with related content and social media tools. Their social media platforms get 3 billion interactions per month for clients with already well established brands. Demand Media commissions specific website content that it then distributes to its own websites and others where they have advertising
Advertising
Advertising is a form of communication used to persuade an audience to take some action with respect to products, ideas, or services. Most commonly, the desired result is to drive consumer behavior with respect to a commercial offering, although political and ideological advertising is also common...
revenue sharing
Revenue sharing
Revenue sharing has multiple, related meanings depending on context.In business, revenue sharing refers to the sharing of profits and losses among different groups. One form shares between the general partner and limited partners in a limited partnership...
agreements. As of 2008 Demand Media owned 135,000 video
Video
Video is the technology of electronically capturing, recording, processing, storing, transmitting, and reconstructing a sequence of still images representing scenes in motion.- History :...
s and 340,000 articles
Article (publishing)
An article is a written work published in a print or electronic medium. It may be for the purpose of propagating the news, research results, academic analysis or debate.-News articles:...
. It is the largest contributor to YouTube
YouTube
YouTube is a video-sharing website, created by three former PayPal employees in February 2005, on which users can upload, view and share videos....
, uploading between 10,000 and 20,000 new videos per month, and gets about 1.5 million page views per day on YouTube.
Content is generated via a process in which Demand Media uses algorithms to generate titles, then posts the titles to a screened pool of free-lance writers or video creators. The list of available titles used to be >100,000 but was severely curtailed in the second half of 2011. Typically, writers can claim up to ten titles and then have a week to submit the articles. Format and length are dictated by guidelines. Submitted articles go to an editor (also a freelancer) who can either clean it up or request a rewrite. After writers submit a revised article it is either accepted or rejected. Payment via PayPal is twice a week.
Demand Media’s acquisition of Pluck.com in 2008 gave it the means to provide specialized content and social media platforms to any website. The content comes with advertising attached. The website owners get free content for their sites and split the advertising revenue with Demand Media. This hybrid Internet publishing model has been referred to as Curated Social Content. It is a combination of Enterprise Generated Media, such as newspapers, and consumer-generated media, such as blogs.
IPO
As of second quarter 2010, Financial Times reported that Demand Media is planning on an Initial Public Offering which would mean any acquisitions would be out of the question. IPO filing was completed in August 2010. Shares were initially expected to be offered in December 2010, in an offer that would give Demand Media a value of approximately $1.5 billion. However, due to a Securities and Exchange Commission investigation regarding the company's novel accounting for "long-lived content," the IPO pricing was delayed until January, 2011. On January 12, 2011, the company announced it would price its IPO between $14 and $16 per share giving it a valuation of approximately $1.3 billion. Some blogs have questioned Demand Media's claim to be profitable, given that its IPO filings show that has reported losses for the past several years. Additionally, several news sources claim that the company's accounting practices have recently been the subject of government examination.Post-IPO the stock rose to the mid-20s, but by fall 2011 had plateaued under $7.00.
Criticism
Demand Media has attracted criticism from Internet watchdogs for being one of the largest buyers of articles and videos, purchasing thousands of search engine-driven content from low-paid freelancers to use on its websites to attract advertisers, such as GoogleGoogle
Google Inc. is an American multinational public corporation invested in Internet search, cloud computing, and advertising technologies. Google hosts and develops a number of Internet-based services and products, and generates profit primarily from advertising through its AdWords program...
's AdSense
AdSense
Google AdSense which is a program run by Google Inc. allows publishers in the Google Network of content sites to automatically serve text, image, video, and rich media adverts that are targeted to site content and audience. These adverts are administered, sorted, and maintained by Google, and they...
. During autumn 2010 opportunities to write articles for $25 or $30 dwindled, leaving mostly $15 or $20 titles. New content volume also shrank, as Demand Media attempted a transition from "quantity to quality" postings.
From Business Insider Oct 20, 2011: "Demand is still sticking with its aggressive accounting, in which it capitalizes content costs and amortizes them over five years. This practice makes the company look profitable when it isn't. It also gives the company much higher "EBITDA" than it really has, because in Demand's case, "EBITDA" is really earnings before content costs."
See also
- eHowEHoweHow is an online how-to guide with more than 1 million articles and 170,000 videos offering step-by-step instructions. eHow articles and videos are created by freelancers and cover a wide variety of topics organized into a hierarchy of categories. Any eHow user can leave comments or responses, but...
- Examiner.comExaminer.comExaminer.com is a media company based in Denver, Colorado, that operates a network of local news websites, allowing "pro–am contributors" to share their city-based knowledge on a blog-like platform, in 238 markets throughout the United States and parts of Canada with two national editions, one for...
- Associated ContentAssociated ContentAssociated Content is a division of Yahoo that focuses on online publishing. Yahoo's Associated Content distributes a large variety of writing through its website and content partners, including Yahoo News.-History:...
- Helium.comHelium.comHelium.com, Inc. is a website where active writers are paid for contributing articles, and visitors can read these articles for free. User generated content in a given title is rated up or down by other writers in a form of peer review system. As with social news sites like Digg or Reddit, user...
- HubPagesHubPagesHubPages is a website designed around sharing advertising revenue for user-generated articles and other content on specific subjects.- History :...
- Squidoo.com
- Mahalo.comMahalo.comMahalo.com is a web directory and Internet-based knowledge exchange launched in alpha test in May 2007 by Jason Calacanis...