Shares of Demand Media Inc. fell more than 10 percent on Monday following a consultant’s report asserting that changes to Google search engine algorithms had significantly diminished traffic to the online publishing firm’s flagship eHow information web site.
The Santa Monica company responded by reaffirming its financial outlook for the year.
When Goggle earlier this year altered its search algorithms to de-emphasize what it considered low-quality pages created by so-called content farms, Demand Media said the changes should not hurt its special interest web sites, content for which is created by freelancers with expertise in their subject. But Sistrix, a search engine optimization consultant, maintains that eHow’s visibility has fallen 66 percent over the past two months since the Google changes went into effect.
In a study, Sistrix compared how eHow’s pages rank on various keyword searches and the amount of traffic the keywords generate, which the consultant maintains is a legitimate proxy for actual traffic to a site.
But Demand Media said the study "significantly overstated" the negative impact of the Google changes. Larry D. Fitzgibbon, executive vice president for media and operations, said in a blog post said that some of the company’s sites saw Google search referrals move up, while others, including eHow.com, its largest property, saw referrals go down, but did not specify how much. He noted that organic growth from non-search sources to eHow “continues to grow rapidly.”
“We generally do not comment or speculate on changes by major search engines, as these changes can happen nearly daily,” Fitzgibbon wrote on Sunday, “However, recent third-party reports attempting to estimate the impact to our search driven traffic, including one projecting a two-thirds decline in eHow.com traffic, are so significantly overstated that we decided to comment.”
Demand Media in a Monday release reaffirmed projected 2011 revenue of $310 million to $325 million, and expects page view growth across its current properties to be comparable to, or greater than, year-over-year page view growth in the second quarter of last year. Analysts surveyed by Thomson Reuters on average expect more than $311 million in revenue.
Shares closed down $2.05, or 10.6 percent, to $17.33 on the Nasdaq.
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